Get More TLC: #26: It’s not that simple

Simplifying contracts is not simply a matter of taking each sentence and rewording it into plainer language. We really need to understand the jargon used and whether it is even appropriate in the type of task for which the contract will be used.

Time... a Legal Condition?

When I started to review the FMB suite of construction contracts, scattered among the plain language was legal jargon: counterparts, set-off, abatement, good faith, warrant etc. Worse still, their small works quotation stated time is not of the essence without any explanation!

‘Time of the essence’ means that performance of a specific contractual obligation by a specific time is critical and delays will entitle the buyer to end (terminate) the contract. 

A contractual obligation will only be considered subject to this restriction if one of these applies:

  1. The contract sets out a specific time period to be strictly complied with, or
  2. The project is one where time should be considered critical, or
  3. The party in unreasonable delay is given notice that time is now critical.

In my workshops, I often give the example of a ship of fresh oranges. If that order arrives late, mouldy or liquid then the buyer should be able to refuse to pay for them. But construction projects are not oranges. If they are completed late, then money (delay or liquidated damages) is often sufficient to act as compensation. 

Although none of the UK standard form construction contracts include this phrase it can still be spotted in the wild. In a construction contract for the construction of a new apartment, the contract included a clause that in relation to the time limits specified in this agreement, time shall be deemed to be of the essence. The Court of Appeal held that – as with most construction projects – the time for completion of the project was not ‘of the essence’ and that the client did not have a linked right to terminate for delays.

Essentially, for most contracts the time for performance is not critical – even for getting paid! English law provides some remedies for late payment such as interest instead of allowing termination. In construction contracts, extensions of time and liquidated damages undermine the concept further. 

Whilst researching content relevant to this, I stumbled across a law firm with a great resource for explaining clauses such as time of the essence or the use, meaning and effect of other boilerplate clauses.

Making time critical can cut both ways: