In representing tech suppliers, service providers and developers, we often come across “time is of the essence” clauses in customer contracts that purport to apply to some or all obligations of the agreement. An example is, “Time is of the essence with respect to Developer’s compliance with all deliverable milestones.”
It’s tempting to ignore such clauses, in favor of “picking your battles” and focusing on clauses of more obvious import like the liability caps. But that could be a mistake. The point of a “time is of the essence” clause is to allow the customer to claim a right of termination, or even rescission, of the agreement if the vendor is merely an hour late in delivery.
As a general matter of contract law, failure to meet a deadline is generally not grounds for discharge of the other party’s duties, although such failure may give rise to claim of damages to compensate for the delay. A time of the essence clause is an attempt to change that dynamic; to enhance leverage in the case of delays, via a rescission threat. Can it work? Possibly.
Strategies for dealing with essence clause negotiations and related work product are available here.
(The intended audience for this post is licensed and practicing lawyers, not laypersons seeking legal advice for their situation. If you are not a lawyer, hire one before using or relying on any information contained here.)