INDEX

Chapter Number Chapter Name Page Number

1 Research Methodology 5

2 Introduction 6

3 Legal Analysis 7-12

4 Role Of Judiciary 13-15

5 Comparative Study 16-19

6 Conclusion 20
7 Bibliography 21

1
 LIST OF CASES

 SHAIK MAHABOOB SAHEB Vs. K.N. RAO

 K.S. VIDYANADAM Vs. VAIRAVAN

 SURAJ SING Vs. NATHI BAI

 WASOO ENTERPRISER Vs. J.J. OIL MILLS

 M/s VENKATESWARA Vs. JUGALKISHORE

 PUNDI GOOMDARAJAN Vs. SUBAS CHANDRA SAHU

 VAIRVAN Vs. K.S. VAIDYANANDAM

2
 LIST OF ABBREVIATIONS

U.K. United Kingdom

ICA Indian Contract Act

SGA Sal e of Goods Act

RSA Republic of South Africa

H.C. High Court

A.I.R. All India Reporter

S.C.C. Supreme Court Cases

RESEARCH METHODOLOGY

3
RELEVANCE OF THE TOPIC

The Indian economy is continuously growing. The number of economic transactions are a on the
rise. Every day, millions of transactions take place, and contracts play a major role in
performance of these transactions. In this world of globalization and westernization, contracts
and agreements have become part and parcel of people's lives. From purchasing of a pen to
paying of rent, everything involves contracts.

In many of these contracts, time plays a very important role. Most of them have a stipulation as
to time i.e. the conditions have to performed on or before a given stipulated time. Even if time is
not a stipulation, the promise has to be fulfilled in a reasonable time.

Thus, the provision of time as an essence plays an important role in the contract law.

OBJECTIVE OF THE STUDY

To study the provisions regarding "time as an essence to contract" in the Indian Contract Act
1872 as well as the Sale of Goods Act 1930.

To study the various principles involved in various important cases regarding "time as an
essence."

RESEARCH QUESTIONS

What are the provisions in the Indian law regarding the "essence of contract?"

LIMITATIONS

The research carries with itself a few limitations, like, as it’s restricted to the secondary research
so, the quality of research is affected as the origin of the information may be questionable.
Secondary research never meets the specific needs of researcher because all the information,
data, statistics have already been generated. Hence, I would suggest further researchers to
critically evaluate and validate the reliability and credibility of the information gathered.

CHAPTER - 1

4
 INTRODUCTION

EVOLUTION

"Time as an essence" arose as an issue when the goods and services that should be supplied or
delivered as per the terms and conditions of the respective contracts. Thus, it was necessary for
inclusion of this provision for the aggrieved parties.

UNDERLYING PRINCIPLE

The question whether time is essence of contract is a mixed question of law and fact and has
been decided by the courts of the country in the basis of facts of each case. The research intends
to describe the various provisions of "time as an essence" in the Indian Contract Act and the Sale
of Goods Act and the stance taken by the Apex Court in different judgments on the issue of
whether time is essence of a contract.

CHAPTER - 2

5
 LEGAL ANALYSIS

1. REVOCATION OF OFFER AND TIME

A proposal is revoked by the lapse of the time prescribed in such proposal for its acceptance, or,
if no time is so prescribed, by the lapse of a reasonable of time, without communication of the
acceptance.1

Sometimes the parties may expressly fix time up to which the offer will remain open. For
example, it may be stated that the offer is open till 15th January, 5.00 P.M. Such an offer lapses
automatically if it remains unaccepted till the stipulated time and the same cannot be accepted
further thereafter.

Even if no time has been prescribed within which the acceptance can be made, the offer stands
revoked on the lapse of a reasonable time. Non-acceptance within a reasonable time means an
implied refusal by the offeree to accept the offer

2. TIME FOR PERFORMANCE OF PROMISE, WHERE NO APPLICATION IS TO

BE MADE AND NO TIME IS SPECIFIED
2
"Where, by the contract, a promisor is to perform his promise without application by the
promisee, and no time for performance is specified, the engagement must be performed within a
reasonable time.

The question "what is a reasonable time" is in each particular case, a question of fact."

The above provision makes it clear that even though no time for performance is decided by the
parties, the contract is not rendered void for uncertainty. The performance, in such case, has to be
made within a reasonable time.

1
Section 6(2) of The Indian Contract Act, 1872
2
Section 46 of The Indian Contract Act, 1872

6
Section 36(2), of the Sale of Goods Act also contains a similar provision and provides when the
seller is bound deliver the goods, but no time for sending them is fixed, the sender is bound to
send them within a reasonable time.

3. TIME AND PLACE FOR PERFORMANCE OF PROMISE, WHERE TIME IS

SPECIFIED, AND NO APPLICATION TO BE MADE.
3
"When a promise is to be performed on a certain day, and the promisor has undertaken to
perform without the application by the promisee, the promisor may perfotm it an any time during
the usual hours of business on such day and at the place at which the promise ought to be
performed."

When the promise is to be performed on a certain day, the promisor'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 it.

4. WHEN THE PROMISEE IS TO APPLY FOR PERFORMANCE, HE MUST DO

SO AT THE PROPER TIME AND PLACE.
4
"When a promise is to be performed on a certain day, and the promisor has not undertaken to
perform it without application by the promisee to apply for performance at a proper place and
within the usual hours of business."

The question "what is a proper time and place" is, in each particular case, a question of fact."

5EFFECT OF FAILURE TO PERFORM THE CONTRACT IN TIME

When one party fails to perform the contract in time, the question may arise as to what remedy
the other party can have in such a case.

Section 55 mention two different remedies: one in case when the time of performance, is the
essence of the contract, and the other when the time is not the essence of the contract.

3
Section 47 of The Indian Contract Act, 1872
4
Section 48 of The Indian Contract Act, 1872
5
Section 55 of The Indian Contract Act, 1872

7
1. WHEN TIME IS THE ESSENCE OF THE CONTRACT

When 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 case, there is delay in the
performance by one party, the other party has a right to avoid the contract.

Determining whether time is of the essence of contract or not

Whether time is the essence of the contract or not depends 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. In a
contract of sale of goods, "unless a different intention appears from the terms of the contract,
stipulations as to time of payment are not deemed to be the essence of a contract of sale. Whether
any other stipulation as to time is the essence of the contract or not depends on the terms of the
contract.6

When the time of performance is the essence of the contract and the same is extended, the
extended date is also the essence of the contract. When the prices of the goods are subject to
rapid fluctuations, the time of delivery is deemed to be the essence of the contract.

In case of sale of immovable property, the time is generally not the essence of the contract. In
contracts for the sale of immovable property," mere incorporation in the written agreement of a
clause imposing penalty in case of default" does not by itself evidence an intention to make the
time the essence. Intention to make time the essence, if expressed in writing must be in language
which is unmistakable; it may also be inferred from the nature of the property agreed to be sold,
conduct of the parties and the surrounding circumstances at or before the contract.

Where agreement in clear terms had specified that it was to be performed within six months else
earnest money would stand forfeited. Time was said to be the essence of contract.

6
Section 11, Sale of Goods Act 1930

8
It is clear that in the case of sale of immovable property, there is no presumption as to time being
the essence of the contract. Even if it is not of the essence, it is ruled that the Court may refer that
it is to be performed in a reasonable time if the conditions are evident -

i). from the express terms of the agreement;

ii). from the nature of the property; and

iii).from the surrounding circumstances for example the object of making the contract.

When performance within specified time not insisted

If the agreement does not insist performance within a specified time, the time may not be the
essence of the contract.

Extension of time

The promisee in a contract may make certain concessions to the promisor under Section 63 and
one of such concessions is to extend the time specified for the performance of the contract. But
there cannot be any unilateral extension, i.e., the extension of time occurs only by the agreement
of the two parties.

In a contract for the supply of goods if the buyer has allowed extension of time to the seller, the
seller should then supply the goods within a reasonable time. In such a case, the buyer can refuse
to grant extension beyond a certain time.

When time is the essence of the contract, mere extension of time may not affect his stipulation,
and the extended time may now be the essence of the contract instead of the time originally
fixed.

It has thus been held that although the time of performance may be originally fixed, the same
could subsequently be extended. Performance in accordance with the extended time is deemed to
be proper performance.

Right to avoid contract if delay in performance

When 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 the right to avoid the
contract.

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"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 times, and fails to do any such thing at or before the
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 the essence of
the contract"7.

Right of compensation - an alternative remedy

In the event of delayed performance, although the promisee has a right to repudiate the contract,
but he is not bound to do so. If he so likes, he may avail of the alternative remedy. Instead of
avoiding the contract, he may claim the compensation for the loss which results because of the
performance at a different time.

8
The remedy of claiming compensation is available only if, while accepting performance at a
different time, the promisee gives a notice to the promisor of his intention to claim
compensation. If no such notice is given, no remedy is available to the promisee in spite of the
fact that the performance has not been made at the proper time.

2. WHEN TIME IS NOT THE ESSENCE OF THE CONTRACT

When the time is not the essence of the contract, it must be performed within a reasonable time.
The delay in the performance of such a contract does not make the contract voidable, but the
remedy available to the aggrieved party in such a case is to claim compensation.

"If it was the intention of the parties that time should be 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
promisee is entitled to compensation from the promisor for any loss occasioned to him by such
failure."

7
Section 55 (1)
8
Section 55 (3)

10
ISSUES/ CHALLENGES

The problem with time as an essence provision arises in cases of contracts related to immovable
properties. This is because the prices of immovable properties such as real estate are
continuously rising.

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 CHAPTER - 3

ROLE OF JUDICIARY

1. WHEN TIME IS THE ESSENCE OF THE CONTRACT

DETERMINING WHETHER TIME IS OF THE ESSENCE OF CONTRACT OR NOT

SHAIK MAHABOOB SAHEB Vs. K.N. RAO9

The respondent agreed on 9-7-1981 to sell three plots of land and a part of consideration was to
be paid on or before 10-10-1981. However, no consequences were provided in the event of any
default on the part of the appellant. A mediation was held in September 1982 wherein the
respondent expressed his willingness to receive the balance within 15 days from the date of
mediation. In such circumstances, the A.P. High Court held that he time could not be treated as
the essence of contract in stricto sensu.

K.S. VIDYANADAM Vs. VAIRAVAN 10

In this case the Apex Court explained that while exercising their discretion, the Court should also
bear in mind that when the parties prescribed certain time limits for taking steps by one or the
other party, it must have some significance and that the said time limits could not be ignored
altogether on the ground that the time had not been made the essence of the contract relating to
immovable properties.

WHEN PERFORMANCE WITHIN SPECIFIC TIME NOT INSISTED

SURAJ SING Vs. NATHI BAI11

The respondent no. 1 was compelled to sell the suit house to repay the loan which she had taken
from others and also for meeting her day to day living expenses. The agreement stipulated that

9
A.I.R. 2008 A.P. 55
10
A.I.R. 1997 S.C. 1751
11
A.I.R. 1990 M.P. 323

12
the sale deed must be executed by 5.3.1983. It was held that the normal presumption of time not
being the essence of the contract in sale of immovable property was dislodged in the instant case,
and the time in this case was the essence of the contract. On default of the buyer to fulfill the
promise by the promised date, the Defendant No. 1 was held to be justified in treating the
contract as having come to an end and selling the property to other persons.

WASOO ENTERPRISER Vs. J.J. OIL MILLS12

There was a contract for the supply of 50 tons of groundout oil with a stipulation that the
shipment must be affected during August,1954. By a subsequent agreement, the time of supply
was extended up to 10th September,1954. On failure of the sellers to send the goods by the
stipulated date, the buyers were held entitled to reject the goods. It was observed that "a
stipulation as to time is shipment contained in a commercial contract is a part of the description
of the goods sold and is a condition precedent which must be fulfilled". If the contract mentions
the date of the shipment and the name of the ship, both are deemed to be essential conditions for
the fulfillment of the contract. Thus if the agreement provided that the rice should be shipped at
Madras per Rajah of Cochim during March and/or April, or the stipulation is for shipment in
August, 1954, per S.S. Hakuya Maru, both the stipulations as to the time and the ship have been
regarded as essential conditions for the proper performance of the contract.

EXTENSION OF TIME

M/s VENKATESWARA Vs. JUGALKISHORE13

In this case a specified date for the supply of red oxide had been fixed and it was emphasized
that the time was the essence of the contract. The performance not having been made in time, B
wrote to A that he was prepared to extend the time finally by one week and on failure to supply
the goods by the extended date, the offer of the extension of time would be withdrawn. Neither
the letter was replied by A note was the performance made by him even during the extended
time. It was held that the purported extension of time by B was not agreed to by A and hence

12
A.I.R. 1968 Guj. 57
13
A.I.R. 1986 Kant. 14

13
there was no extension of time. B could, therefore, sue A on the basis that there had been no
extension of time.

RIGHT TO AVOID CONTRACT, IF DELAY IN PERFORMANCE

PUNDI GOOMDARAJAN Vs. SUBAS CHANDRA SAHU14

In this case a date was stipulated in agreement to sell for execution of sale deed and it was
specifically mentioned that if the vendee fails to obtain sale deed after payment of the
consideration on or before that date, agreement would stand canceled. The Court held that iT
could be said that time was essence of the contract. It was further noticed that the vendor was
always ready to execute sale deed and receive sale consideration. But the vendee never expressed
his readiness at any time before filing of suit for payment of sale consideration. The A.P. Court
held that the vendee was not entitled to relief of specific performance.

2. WHEN TIME IS NOT THE ESSENCE OF THE CONTRACT

VAIRVAN Vs. K.S. VAIDYANANDAM15

In this case, there was no express stipulation making the time of performance in a sale of
immovable property as essence of the contract. It was however, stipulated that the performance
must be completed within 6 months by executing and registering sale deed, otherwise the
advance of Rs. 5,000/- paid by the purchaser would not be returned. It was held that the time had
not become the essence of the contract, and the contract had not come to an end merely by non-
performance within the stipulated time.

14
A.I.R. 2008 (NOC) 813 (A.P.)
15
A.I.R. 1996 Mad. 353

14
 CHAPTER - 4

COMPARATIVE STUDY

U.S.A.

A Time is of the Essence clause in the U.S. laws, serves to define the period of time wherein the
parties must perform their duties, such as delivering goods or paying for services. TOE clauses
that are included in a valid contract are enforceable under state contract laws.

A time is of essence clause can be included in any contract where the completion of the duties is
dependent on time or the occurrence of some event or condition. Common situations where TOE
clauses are used are in the sale of property that is perishable or the sale of property that is subject
to rapid fluctuations in value.

For example, a contract for the sale of perishable food might contain a clause stating, “This
product should be delivered within 2 days”. Or, a construction contract may state, “The agreed-
upon construction must be completed within six months from the date of signing”.

Other types of contracts where a time is of the essence clause may be necessary include:

 Construction contracts
 Contracts involving music or other entertainment-related performances
 Rush or express service contracts (such as overnight delivery)
 Real estate contracts (especially if market values are fluctuating)
 Contracts involving an important release date or publishing date

Thus, TOE clauses are employed in situations where performing a duty after a certain date would
render the performance useless or less valuable.

If a Contract Does not Contain a Time is of the Essence Clause -

If a contract does not contain a time is of the essence clause, it is generally assumed that time is
not an important factor for the agreement. In other words, the parties must specifically agree that
time is of the essence if they deem it necessary. Unless explicitly stated, time is not of the
essence in contracts.

15
 In determining whether a contract contains a TOE clause, a court will usually analyze several
factors, such as the existence of any dates or times mentioned in the contract. The court will
check to see if performance of contract duties hinges on an important date. They may also review
the parties’ previous interactions to determine whether time was of the essence in their previous
dealings.

Thus, it is always best if a TOE clause is clearly labeled in a contract, so as to avoid any
confusion. The clause may be entitled “Time is of the Essence Clause.” Or, the clause can state
clear language such as, “Time is of the essence in this agreement”. Unambiguous language will
help prevent unnecessary delays or misunderstandings in the future.

Also, if a contract contains a time is of the essence contract, but in reality the contract does not
depend on time, courts will not hold the parties liable for reasonable delays.

If a Time is of the Essence Clause is not Followed -

If a contract contains a valid time is of the essence clause, it must be followed strictly. If a party
fails to abide by provisions regarding the essence of time, it could result in several legal
consequences, such as:

 Being held liable for losses caused by the delay

 If the party has refused to continue or render performance, they could face an injunction, which
is a court order instructing them to fulfill their remaining contractual duties
 If the delay was intentional or involved tortuous actions, they may be held liable for punitive
damages

On the other hand, a good faith effort to comply with a time is of the essence clause is usually
enough to avoid liability. If the party has made reasonable efforts to perform their contract duties
to the best of their capabilities, they will usually not be held liable for losses due to a delay that
was beyond their control.

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South Africa

In South African Contract Law time is of the essence either where -

1. There is an express clause in the contract specifying a date or period by or within which
performance is to be completed or

2. Where it ought to be concluded from the nature of the contract and the surrounding
circumstances that the parties intended for time to be of the essence (i.e. there exists a
tacit term).

In the absence of an express term specifying that ‘time is of the essence’ whether or not time is
of the essence is a question of fact and not law to be determined in each set of particular
circumstances.

The simple inclusion of a specified time for completion of the works (i.e. a clause stating the
period within which the works are to be executed) in a construction contract may not be
sufficient provision to make time of the essence in the contract. Usually the time for completion
is determined from a fixed commencement date (which is determinable) and the works are
agreed to be completed within a specified period (i.e. a definite time for performance is agreed
upon).
However, in the absence of a specific provision and/or agreement that in the event of the works
not being completed within that period, the aggrieved party would be entitled to terminate
(without notice placing the other party in mora) the issue to be determined would be whether
there is on the particular facts “… cogent evidence that the parties had in fact agreed that ‘time is
of the essence’ …”.

Obviously, where a contract contains a penalty provision (as in South African law) or an
entitlement for the Employer to deduct liquidated damages (contracts outside RSA) when
contractors complete their work late, the damages for late completion would be limited to these
damages, either a penalty or liquidated damages.

In RSA, the inclusion of a time for completion would make time of the essence automatically.
Only in circumstances where the contract had been delayed and no extension of time had been

17
granted, notwithstanding the occurrence of an admissible delay, provision for notices and
compliance with all the requirements of the contract, could we perhaps say that time was “at
large” and the contractor may consider that he has a reasonable time for completion.
The trouble with this situation is that under South African law, the date for completion remains
the date for completion until it is changed in terms of the contract either by the Engineer,
Employers Representative or an Arbitrator. So we don’t get a time at large situation, you have to
work to the date for completion as it exists at the time.

Time of the essence clauses work both ways. In other words, if the Contractor must be seen to be
doing everything reasonable in his power in terms of the contract to complete on time, the
Employer and his agent cannot be seen to be acting in another, less urgent manner.

Common Law and Equity (U.K.)

Time of the Essence became an issue under UK law when contracts were not permitted to
include a completion date or a time within which a service was to be provided, and the service
was then provided late. If time is not of the essence, then time is said to be “at large” and the
service supplier has to provide his service within a reasonable time. A delay by the employer on
a contract where time is of the essence puts time “at large” and the contractor must then
complete within a reasonable time.

At common law, the position was (though the common law has mellowed) that any stipulation as
to time was to be construed as a condition rather than a warranty. That is, if there was a breach of
a time stipulation, the innocent party was entitled to put an end to the contract and not merely to
sue for damages.

Equity, however, following its maxim that it should look to intention rather than to form, when
considering whether or not it would grant specific performance looked to see whether it would
be essentially unfair to give specific performance after an unconscionable time has passed. The
equitable approach has prevailed legislatively.

18
 CHAPTER - 5

CONCLUSIONS
Thus we can conclude that -

 The Supreme Court of India through various decisions held and laid down the principle
that time is not essence of contract unless parties to a contract expressly or by necessary
implications provide for the same.

 The court further said that even in case where time is not the essence of contract then also
it is performed within reasonable time which is to be determined from express terms of
contract, nature of the properties and surrounding circumstances.

 It is also laid down that the principle that "in cases of sale of immovable property, time is
not normnally considered essence of time" needs to be revisited, as this preposition of
law cannot hold well in today's time. This is because the prices of real estate property
have steeply arisen in last decades and there is change in economic situation which has
resulted in inflation.

In cases where time is not considered an essential condition in performance of the

contract it shall result in causing prejudice to the seller who shall be forced to settle with
a less price of immovable property when prices have arisen by leap and bounds in case
buyer does not perform the contract within the stipulated time-period in the contract and
perform 2 months or 1 or 2 years later when prices have changed. The apex court said
that court cannot ignore this reality and hence the time is an essential condition of
contract relating to immovable property.

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 BIBLIOGRAPHY

BOOKS REFERRED

 Dr. RK Bangia
 Dutt on Contract

WEB LINKS

 http://www.lawsenate.com/publications/articles/is-time-essence-of-contract.pdf
 https://www.google.co.in/search?q=issues+related+to+time+as+an+essence&oq=issues+r
elated+to+time+as+an+essence&aqs=chrome..69i57.16573j0j7&sourceid=chrome&es_s
m=93&ie=UTF-8
 http://www.tcl-india.net/node/220
 https://www.google.co.in/webhp?sourceid=chrome-instant&ion=1&espv=2&ie=UTF-
8#q=stricto%20sensu%20meaning
 http://www.legalmatch.com/law-library/article/time-is-of-the-essence-clause.html
 http://www.nolo.com/legal-encyclopedia/contracts-101-make-legally-valid-30247.html
 http://www.lawsenate.com/publications/articles/is-time-essence-of-contract.pdf
 http://www.nolo.com/legal-encyclopedia/time-of-essence-contract-provisions-33345.html
 http://www.mdaconsulting.co.za/fafc-general-time-is-of-the-essence/
 http://www.aicnsw.com.au/uploads/images/PDF/Time%20of%20essence_Paper_toAICN
SW130404_PDF.pdf
 https://www.google.co.in/search?q=time+as+an+essence+of+contract+in+common+law
&biw=1366&bih=667&noj=1&ei=t0L3VP3lB4OduQSHx4DIDg&start=40&sa=N
 http://indiankanoon.org/doc/679619/
 http://indiankanoon.org/doc/1085351/
 file:///C:/Users/admin/Downloads/SSRN-id2129165.pdf
 http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2129165&download=yes

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