Time is of the Essence: What It Really Means for Your Business

We’ve all heard the phrase "time is of the essence."

In action movies: "The villain is about to launch the missile—time is of the essence!"  

In sports commentary: "With seconds left on the clock, time is of the essence for the team to score the winning point."

In business contracts, this phrase takes on even more significance. While it may seem like just a formality, "time is of the essence" has real, legal consequences. It can impact your client relationships and your bottom line.

When a contract states that "time is of the essence," the deadlines for deliverables become crucial. Missing a deadline by even a minute could give the other party grounds to terminate the contract and sue for damages.

Imagine this scenario: You've been working on a project for weeks or even months. You've poured time, money, and resources into completing it. Then, due to circumstances beyond your control, you're slightly delayed and miss the deadline by a day. Suddenly, your client has the right to terminate the contract and seek damages. All the work and money you've put in? Gone. The phrase "time is of the essence" has just jeopardized your business.

So, what should you do when you encounter this phrase in contract negotiations? Here are three strategies we recommend:

1. Replace the Phrase: Instead of "time is of the essence," use something less rigid, like "time is of importance." This softens the consequences of minor delays.

2. Include a Cure Period: In the termination for cause section, add a defined cure period. For example, “If a party breaches this agreement, they have 15 days from notice to cure the breach.” This gives you time to correct issues without facing immediate termination.

3. Define Liquidated Damages: Set specific liquidated damages in the contract as the sole and exclusive remedy for delays. This limits financial exposure in case of a missed deadline.

By addressing "time is of the essence" head-on, you can protect your business from unnecessary risk and ensure fair contract terms.