Time: essential, critical or desirable?

A contract for the completion of goods, works and services often states an agreed works period or completion date.

But is that period/date essential, critical or desirable?

An essential term is one without which there is no contract. Under English law, if the parties do not agree a period or date for completion of the goods, works or services then it will generally still be certain enough to be a contract. The law will then imply that those tasks have to be completed within a reasonable time.

A critical term is one which is a condition of the contract and which entitles the client to terminate and not pay for those goods, works or services if they are late. In the context of a works period or completion date the jargon you might see if that time is ‘of the essence‘.

A desirable item is one which the parties want to aim for but which may change as the project progresses and which, if missed, will allow the client to claim damages (compensation) for any delays but does not allow them to terminate or avoid all payment. In most construction contracts we include a right to extend or adjust the works period/completion date, as well as pre-agreed damages for any unavoidable delays.

Time of the essence

Even as far back as the mid-19th century the English court reviewed the completion date in a contract to build some new cottages. The contract said the cottages would be built by 10 October 1836, but completion did not occur for another 5 days.

The client, who had issued changes to the works, refused to pay for the cottages, despite living in them! The judges said:

It never could have been the understanding of the parties, that if the house were not done by the precise day, the [contractor] would have no remuneration: at all events, if so unreasonable an engagement had been entered into, the parties should have expressed their meaning with a precision which could not be mistaken.

…[the work] was not completed till the 15th of October: but the completion by the 10th is not a condition precedent; it does not go to the essence of the contract; and any inconvenience occasioned by the deviation might have been compensated in an action for damages.

It is now more widely understood that a contract for a construction project is not one in which time is ‘of the essence’ as the client will receive a substantial benefit (so should pay for that) and there are other remedies for delay (that are more appropriate than termination).

What should you do?

If late completion of tasks would render them utterly worthless, then you can include words to state that time is a condition precedent (eg time of the essence).

However, in all other contracts, agree a change management process and suitable remedies for delay and add them to your contract.

Case: Lucas v Godwin (1837) 132 ER 595

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