A study on essence of time with reference to Indian Contract Act. 1872
A common feature of construction contracts is a clause stating that "time is of the essence". In some instances the clause will be inserted as boilerplate or from a precedent without discussion, while in other cases one or both of the parties will expressly request the clause be inserted into the contract. Either way, in the majority of cases little thought is given to the clause or it is often inserted without a clear understanding of its meaning and effect. Contract drafters should take care as "time is of the essence" clauses may not operate in the same manner in a construction contract as they do in other situations, potentially leading to unexpected results during the project
1. Explicit stipulation of delivery times is practically universal in contracts. Examples include labour contracts within firms, sub-contracting of parts of a larger project to other firms and procurement contracts for large-scale projects such as weapons systems and infrastructure. In some of these cases, a deadline is determined exogenously. For example, if a production process involves the use of a perishable input, failing to meet a production deadline might mean the loss of the input in question. Another example is a situation in which one of the parties is bound by a contract with a third party. But in many situations, a deadline is imposed endogenously by one of the parties2
. "Time is the essence" is a term in contract law which indicates that the parties to the agreement must perform by the time to which the parties have agreed. In the business matter generally time is essence. The business matters depend upon the intention of the parties. Even where "a specific date is mentioned of the completion for the contract" time schedule also very essential in the construction contracts because construction is a commercial service .In a joint venture agreement, one of the clauses was that the defendants were to perform certain formalities within 5 years, and that, on failure to do so, the agreement was to become null and void. In the sale transactions time factor is essential to performance. In the sale transaction the importance of time factor. Time is also an essential part of any contract related to the land and Property. The parties may make time of the essence either expressly in terms which unmistakably provide that they intended to do. Alternately, making of time as the essence of a contract may be inferre. It is designed to protect buyers and sellers alike, since if one party fails to meet a deadline the whole contract can be void. When the promise is to be performed on a certain day, the promise‟s duty in such a case is to perform the contract during the usual business hours on such day. If the goods to be delivered are supplied after the usual closing time, the buyer may reject them. When time is essence of the contract, non performance of the contract in time would frustrate the purpose which the parties have in mind, and, therefore, if in such a case, there is delay in the performance by one party, the other party has a right to avoid the contract.
Scope of time and its importance in each valid contract
A common features of construction a valid contract stating that "Time is the essence of Contracts"
Time is very essential and importance aspects related to the each valid contract. It is the basic and importance ingredients of valid contracts. But in the present scenario the time of valid contracts is depend on the each cases and situation. In some cases the time is prescribe in the terms and condition of a contract but in some cases the reasonable time is also play a very important role. The reasonable time is depend on the nature of the contracts. If a contracts does not specify the time for performance the law will imply that the parties intended that the obligations under the contract should be performed within a reasonable time and the question „What is a reasonable time ‟is in each particular case, a question fact.
If in any case when party to a contracts promise to do certain things at any time or before specified period of time and fails to do the promise before the period of time or at a specified time , the contracts become voidable if the intention of the party that the time is the essence of the contracts.
Contracts of all sorts specify date for performance various obligation and even an some absent of some specify date there is some usually an implied term calling for performance within a reasonable time. "Time is of the essence" clauses are used with regularity in other areas of the law, particularly real estate and sale of goods where the courts generally apply a strict approach in enforcing this clause.
If any agreement states that a particular act relating to the furtherance of a contracts is to be done in a particular manner or time , it should be done in that manner or time and it is not open to the parties to chalk out his own manner or time performing the his part of contracts.
2.1 Meaning of Time:-
Time is the very important fact in the contract. The basic meaning of time is the period or a limit in which the contracts is fulfil. In the absence of the any expressed time by the parties to an agreement or contracts, the contract is perform within a reasonable time
2.2 Legal Provision :-
Time and place for performance (Ss.46-50)
Sec.46 . Time for performance of promise, where no application is to be made and no time is specified. –Where, by the contract, a promisor is to perform without application by the promisee, and no time for performance is specified, the engagement must be performed within a reasonable time
4.e Explanation.-The question "what is a reasonable time" is, in each particular case a question of fact.
Sec.47. Time and place for performance of promise, where time is specified and no application to be made- When a promise is to be sperformed on a certain day, and the promisor has undertaken to perform it without application by the promise, the promisor may perform it at any time during the usual hours of business on such day and at the place at which the promise ought to be performed.
A promises to deliver goods at B‟s warehouse on the 1st January. On that day A brings the goods to B‟s warehouse, but after the usual hour for closing it, and they are not received. A has not performed his promise.
Sec.48 – Application for performance on certain day to be at proper time and place-
When a promise to be performed on a certain day, and the promisor has not undertaken to perform it without application by the promise, it is the duty of the promisee, it is the duty of the promise to apply for performance at a proper place and within the usual hours of business.
Explanation. - The question "What is a proper time and place" is in each particular case, a question of fact.
Sec.50 – Performance in manner or at time prescribed or sanctioned by promisee.-The performance of any promise may be made in any manner, or at any time which the promisee prescribes or sanctions
.Indian Contract Act,1872.
This section is says about that whole question as to the time and manner of performance upon the choice of the promisee. It says that the performance of any promise may be made in any manner, or at any time which the promisee prescribes or sanctions. This illustration appended to the section deserves to be noted. If a person owes another a sum of money and the creditor tells him to pay the amount into his account in a bank, which is done; and afterwards, before the creditor comes to know of the fact of payment, the bank fails, so that the creditors does not get the benefit of the payment; even so the debtor is discharged from his liability. Where two persons are mutually indebted and they agree to set off their debts discharged from their respective liability .Where the creditor accepts goods form the debtor in payment, the debtor stands discharged to the extent of the value of the goods. Where the creditor desires the debtor to send the money by the post, the debtor will be discharged as soon as he posts a properly addressed and stamped letter containing the money.
Sec.55-when a party to a contract promises to do a certain thing at or before a specified time, or certain things at or before specified time, the contract, or so much of it as has not been performed, becomes voidable at the option of the promisee, if the intention of the parties was that the time should be of the essence of the contracts.
If in case of a contract voidable on account of the promisor‟s failure to perform his promise at the time agreed, the promisee accepts performance of such promise at any time other than that agreed, the promisee cannot claim compensation for any loss occasioned by the non-performance of the promise at the time agreed ,unless, at the time of such acceptance he gives notice to the promisor of his intention to do so.
. After study the some of the cases this is the some point which makes the time is the essence of a contracts.-
1. Where the parties have expressly agreed to treat it as of the essence of the contract;
2. Where delay operates as an injury.
3. Where the nature and necessity of the contracts requires it to be so construed, for example, where a party asks for extension of time for performance.
He was held entitled to recover as the parties intended that time should be of the essence of the contract. "This conclusion is confirmed by the circumstance that the defendant obtained an extension of the time; if the time were not of the essence of the contract, he need not have asked for extension of time .
2.3 Case Study:-
In the case of Bishamber Nath Agarwal v. Kishan Chand 6 ,
. It was held that if any agreement states that a particular act relating to the contracts is to be done within the particular time or manner , it should be done in that manner or time and it is not the rights of the parties to perform it is own his manner or time according to them.
In the case of Haryana Telecom Ltd. V. Union of India7
, it was held that one of the clauses of contracts stipulated that deliveries made after stipulated delivery period will not deprive party of its right to recover liquidated damage, reading of all clauses showed that time was essence of contract.
In the case of Swarnam Ramchandram v. Aravacode Chakungal Jayapalan 8
, it was held that the parties , may make time of the essence either expressly in terms which unmistakably provide that they intended to do so. Alternatively, making of time as the essence of a contract may be inferred from the nature of the contract , the property or the surrounding circumstances.
The well known authority is Bhudra Chand v. Betts 9 (.In this case The plaintiff stipulated with the defendant to engage his elephant for the purpose of Kheda operations (to capture wild elephants). The contract provided that the elephant would be delivered on the 1st October ,1910; but the defendant obtained an extension of time till the 6th October and yet did not deliver the elephant till the 11th
.The plaintiff refused to accept the elephant and sued for damages for the breach.
In the case of Mahabir Prasad v. Durga Rungta Datt 10 the Supreme Court held on the facts of the case that time of payment was of the essence of the contract. The facts of the case were that a transport coal from a colliery to the railway station. The colliery-owner had to keep the road in repair and to arrange for petrol. He had also to pay for the transportation of the 10th
of the next month. It was alleged that these things were not go on with his work. The transporter rescinded the contract and brought an action for damages. It was held that in commercial transactions‟s time is ordinarily of the essence of the contract. In this contract time of payment and of arranging other things was, particularly, such an important condition
of the contract that section 55 could be invoked by the aggrieved party and the transporter was entitled to rescind the contracts.
In the case of Trailakyanath Maity v. Provabati Santra 11
,, the Calcutta High Court observed: "…..Whether or not the time is the essence fo the contract must depend on the facts and circumstances of each case having regard to the provisions of section 25 of the Indian Contract Act. It is well established that the intention of the parties together with the circumstances has got to be looked into to ascertain whether the parties intended that in the agreement for sale in question in a given case the time would be essence of the contract.....even though the cancellation of the contract is not embodied in the document in so many words, by the terms provided therein for forfeiture of the earnest money the agreement for sale in case of such forfeiture would automatically lapse by necessary implications".
In case of sale of immovable property, the general presumption is that time is not the essence of the contracts. In
Mangalram Namasudra v. Permanand Namsudra 12
, wherein the contract was relating to the sale of land , the Assam and Nagaland High Court while holding "time was not the essence of the contract" observed.
In the case of Devender Singh v. State of U.P.13,
, where an application for extension of time was rejected after a long gap, the contractor was not allowed compensation for the waiting period. In hire installments is of the essence.
In Present Scenario:-
In the present scenario time of the contract play very wide and important role. In the present there are several type of contracts in which time is very essential. It is understand by the matter of several kind of transaction.
In Business of matter time generally essence
– Businessmen attach Importance to Time
The matter depends upon the intention of the parties. Even where "a specific date is mentioned for the completion of the contract, one has not to look at the letter but at the substance of the agreement in order to ascertain the real intention of the parties. "In commercial contracts time is ordinarily of the essence of the contracts". This is so because the business world requires certainty and also because "merchants are not in the habit of placing upon their contracts stipulations to which they do not attach some value and importance.
.It may also be noted that , simply a mention of specific date completion of contract including the default clause imposing penalty in the agreement do not by themselves indicates the intention of parties to make time of the essence. Such intention may be gathered the following :-(1) the language of the agreement, (2) the nature of the property to be sold ,and (3) conduct of parties and surrounding circumstances at or before the contracts.
"From an analysis of the above case law it is clear that in the case of sale of immovable property there is no presumption as to time being the essence of the contracts. Even if it is not the essence the court may infer that it is to be performed in a reasonable time if the condition are:
1. From the express terms of contracts;
2. From the nature of the property; and
3. From the surrounding circumstances.
Above given 3 points are very essential in the matter of the sale of immovable property related to the importance of time in the contracts.
Time schedule in a construction contract is likely to be of the essence because construction is a commercial service. Where 24 months time was given to the builder with a stipulation that if he failed to deliver within the stated time, he would pay 10% per annum of the purchase price measured by the period of delay, time was held to be of the essence entitling recovery of the stipulated amount.Similerly, where a builder‟s commitment with a bank was that he would make their building ready within six months, but could not do so, the bank was allowed to terminate the contract. The fact that the bank exercised this right after about two months after the expiry of the stipulated time did not amount to an extension of time.
The court would have to see on the facts of each case involving a sale transaction weather time factore was essential to performance or not
.In a contract of sale of goods, the time of shipment is of the essence. There is a considerable authority in support of this rule and it has been recognised and accepted in Bowes v Shand (1877) .Here in a contract of sale of rice to be shipped at Madras during March on April, 1874, by a ship of the name of Rajah of Cochin the stipulation in regard to shipment was held to be a condition of the contract and the contract was held to be not satisfied by shipment a month earlier,that is, in February.
So the analysis of these cases it is found that the time is the very essential also in the sale transaction.
Carriage by Air
A complainant under the Consumer Protection Act alleged that his cargo was not airlifted by the carrier within the time –limit. The National Commission agreed with the airliner that weighty cargo blocks could not be carried in time because the safety of the aircrafts was an important factor at all times. The complainant had failed to establish that time was of the essence of the contracts.
But the time is also important essential in the contracts of carriage by the air.
"In cases other than commercial contracts the ordinary presumption is that time is not of the essence of the contracts". Accordingly, "In contracts for the sale of immovable property, time would not be regarded as of the essence unless it is shown that the parties intended so. The importance of essence of time in the transaction of immovable property depends on the intention of the parties.
Extension of time
The contract was to provide a rig for a certain period which as to be extended in case of any breakdown in working .The rig broke down for some time and, without taking this into account, the owner of the rig wanted to withdraw it on the expiry of the period. The court said though there cannot be unilateral extension of time, in this case, there was the agreement that the period would be extended so as to cover the breakdown period. The owner of the rig could not say that he should be permitted to withdraw the rig subject to his liability for damages. The machinery in question was rare and not easily available. Compensation would have served no purpose.
So the extension of time in the contract is depending on the nature of the contract and situation of the contracts.
In this research project the research is found his hypothesis correct. In all the cases which discus above the researcher found that time is very important aspect in each and every valid contract. The essence of time is depending on the nature of the transaction and the situation and circumstance in each case. The importance of the time in the contracts is depending on the intention of the parties. The parties either expressly or by their conduct can make time as essence of the contract. If the parties have not expressed their intention, then it depends on the nature of the contract.
If the parties have intention related to the time, the parties of the contracts cannot delay in the transaction. But if the parties knowingly commit mistake the other parties have a right to claim compensate to the others. If in the contracts it is not possible to perform the contracts within the prescribed time, the other party must perform it‟s in a reasonable time. But the reasonable time is depend on the each cases and circumstance and surrounding of the contracts. If in the terms and condition of the contracts the parties have no intention that time should be of the essence of the contract the contract does not become voidable by the failure to do such thing at or before the specified time but the promise is entitled to compensation from the promisor for any loss occasioned to him by such failure .when the time is the essence of the contract, non performance of the contract in time would frustrate the purpose which the parties have in mind and therefore if in such a case , there is delay in the performance by one party, the other party has a right to avoid the contract.
When the time is the essence of the contract, it is expected that the promisor would perform the contract within the stipulated time. On his failure to do so, the promisor has a right to avoid the contract. The time is the very essential in each contract it is found after the analysis of several case laws.
1. Phillip J. Scheibel, TIME IS OF THE ESSENCE, January, 2009 accessed on 27th,2012-07-30
2 Flavio Toxvaerd, Time of the essence, Journal of Economic Theory 129 (2006) 252 – 272, accessed on 27th july,2012-07-30
3. The reasonable time of the any contract is depend on the nature and circumstances of the contract and situation of the contract.
4 Indian Contract Act,1872.
6 AIR1990 ALL70.
7 AIR 2006 Del399.
8 AIR 2000.
9 (19150)22 Cal LJ566:33 IC3347.
10 AIR 1961 SC990
11 AIR 1947.
12 AIR 1972.
13 AIR 1987 All 306.
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