A contract to be legally enforceable it is very necessary to meet certain set of basic essentials. But even if the parties have already fulfilled these essentials, the validity of the contract can be questioned if it’s not fulfilled in due time as mentioned in the contract. Generally, in all contracts time plays and vital role in order to make the contract licit because on failure to do so one can suffer a huge loss hence could frustrate the parties suffering loss. Parties may clear out the essence of time while getting into a contract as to avoid any kind of dispute. Contracts for example in Commercial contracts it is utmost important to complete the contract in due time if not it might nullify the whole contract. In contracts where the production process involves perishable goods failing to meet the proper production might lead to a huge loss, though it is the duty of the parties to decide the time and place of the contract once decided it becomes mandatory to act in accordance to such terms.
TIME IS THE ESSENCE OF CONTRACTS
A common feature of construction a valid contract is its time, therefore it is said that “Time is the essence of Contracts”.
Time is very essential and vital aspect when it comes to a contract. It is the basic important ingredients of a contract to proof its validity. But the time of a valid contract depend on each case and situation. In some cases, the time is already mentioned in the terms and conditions of the contract where as in some cases the reasonable time plays a vital role. The reasonable time depends on the nature of the contracts. If there is no particular time mentioned for the performance of the contract the law will imply that the parties should perform the contract within a reasonable period of time.
The meaning of the “Reasonable Time” is different in each particular case. If in any case the party of the contract promise to do certain things at any time before a specified time in the contract and fails to do so the contract become voidable if the intention of the party is that the time is the essence of the contract.
LEGAL PROVISION AS PER THE INDIAN CONTACT ACT, 1872
TIME AND PLACE FOR PERFORMANCE (SECTION: 46-50)
Time for performance of promise, where no application is to be made and no time is specified–
Where, by the contract, a promisor is to perform without application by the promise, and no time for performance is specified, the engagement must be performed within a reasonable time.
Explanation - The question "what is a reasonable time" is, in each particular case a question of fact.
Time and place for performance of promise, where time is specified and no application to be made-
When a promise is to be performed on a certain day, and the promisor has undertaken to perform it without application by the promise, the promisor may perform it at any time during the usual hours of business on such day and at the place at which the promise ought to be performed.
Explanation - A promises to deliver goods at B‟s warehouse on the 1st January. On that day A brings the goods to B‟s warehouse, but after the usual hour for closing it, and they are not received. A has not performed his promise.
Application for performance on certain day to be at proper time and place-
When a promise to be performed on a certain day, and the promisor has not undertaken to perform it without application by the promise, it is the duty of the promisee, it is the duty of the promise to apply for performance at a proper place and within the usual hours of business.
Explanation - The question "What is a proper time and place" is in each particular case, a question of fact.
Place for the performance of promise, where no application to be made and no place fixed for performance-
When a promise is to be performed without application by the promisee, and no place is fixed for the performance of it, it is the duty of the promisor to apply to the promisee to appoint a
reasonable place for the performance pf the promise, and to perform it at such a place. Explanation – A undertakes to deliver a thousand mounds of jute to B on a fixed day. A must apply to B to appoint a reasonable place for the purpose pf receiving it, and must deliver it to him at such place.
Performance in manner or at time prescribed or sanctioned by promisee-
The performance of any promise may be made in any manner, or at any time which the promisee prescribes or sanctions.
Explanation – Ritesh’s son is in the hospital and he needs money for his son’s operation. Hritik owes money to Ritesh and agrees to repay him in at any place or time decided by Ritesh. In this case, Ritesh has the liberty to ask for the performance of the promise in any manner and at any place or time suited to him.
Effect of failure to perform at a fixed time, in contract in which time is essential-
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 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 of the essence of the contracts.
Essence of contract–
The general principal to determine that time is not the essence of contract, in agreement for sale relating to immovable property if time specified for payment of sale price, but not for execution of sale deed, it will become essence only for payment of sale price. In the present case agreement contains a date fixed for performance of the contract and since a agreement was not sought to be performed within the aforesaid period, a suit for enforcement of aforesaid agreement could have been filed within three years, else it would be barred by time. If time is not the essence of contract, non-observance of performance of some part of contract by one of the party shall render the contract only voidable. The general principal applicable to determine, whether time is the essence of contract or not, one has to read entire agreement between the parties to find out whether, therein time is the essence or not with reference to performance of contract, as a whole, or, with reference to a particular term or condition of contract which is allegedly breached. In an agreement for sale relating to immovable property if time is specified for payment of sale price but not in regard to execution of sale deed, it will become essence only with reference to payment of sale price but not in regard to execution of sale deed. Ordinarily, in relation to agreement to sale of immovable properties, time is not considered to be the essence of contract unless such an intention can be gathered either from express terms of contract or by necessary implication, if it is or can be borne out from the terms of the contract as to what is the intention of the parties. In the present case time is thr essence of contract and having expired, there was no question of extending the period by the conduct of the parties.
Saradamani Kandappan v. Rajalakshmi, the Apex Court Held:
“The intention to make time stipulated for payment of balance consideration will be considered to be essence of contract where such intention is evident from the express terms or the circumstances necessitating the sale, set out in the agreement. Even if the urgent need for money within the specific time is not set out, if the word used clearly show an intention of the parties to make time the essence of the contract, with reference to payment, time will be held to be the essence of contract.
• The well-known authority is Bhudra Chand v. Betts in this case the plaintiff stipulated with the defendant to engage his elephant for the purpose of kheda operations to capture wild elephants. The contract provide that the elephant would be delivered on the 1st October, 1910; but the defendant obtains an extension of time till the 6th October and yet did not deliver the elephant till the 11th.The plaintiff refuse to accept the elephant and sued for damages for the breach.
• In the case of Mahabir Prasad v. Durga Rungta Datt 10 the Supreme court held on the facts of the case that time of payment was of the essence of the contract. The facts of the case were that a transport coal from a colliery to the railway station. The colliery-owner had to keep the road in repair and to arrange for petrol. He has also pay for the transportation of the 10th of the next month. It was alleged that these things were not go on with his work. The transporter rescinded the contract and brought an action for damages. It was held that in commercial transaction’s time is ordinarily of the essence of the contact. In this contract time of payment and of arranging other things was, particularly, such as important condition of the contract that section 55 could be invoked by the aggrieved party and the transporter was entitled to rescind the contracts.
• In China Cotton Exporters v. B.R.C. Mills, under the agreement for the sale of goods the agreement was to dispatch goods through “October/November, 1950” shipment. It was also mentioned as a remark that the contract “is subject to import licence and therefore the shipment date is not guaranteed”. The question which had arisen in this case was whether the date of shipment was the essence of the contract. It was held by the Supreme Court that in this case the date of shipment as October/November, 1950 was guaranteed except in one situation, i.e., to the extend the delay in obtaining import license might stand in the way of keeping to the shipment date.
• In the case of Bishamber Nath Agarwal v. Kishan Chand it was held that if any
agreement states that a particular act relating to the contracts is to be done within the particular time or manner, it should be done in that manner or time and it is not the rights of the parties to perform it is own his manner or time according to them.
EXTENSION OF TIME
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. In C.C. of India Ltd. V. S.S. Corporation, there was a contract to supply goods within 10 days or earlier, i.e., before 10th May 1964. The buyer extended the time and accepted deliveries up to November, 1964. He then gave a notice to the seller that no further extension will be given and the contract must be performed by the end of 1964. It was held that on the seller’s failure to supply the goods by 31st Dec, 1964 the buyer had a right to terminate the contract.
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 in accordance with the extended time is deemed to be proper performance.
In this above researched topic “Effect of failure to accomplish objectives of contract in time “. It has been concluded that time is a very important ingredient to each and every valid contract. The effect of the time depends on the situation and the respective circumstances in each case. The importance to the time is also depending on the intention of the parties to the contract. The parties can expressly make time as the essence of the contact and if not expressed their intention, then the performance of the contract must depend on its nature.
If the parties have already made it clear in the contract about their intention related to time, the parties cannot delay in the transaction. If the party commits delay in transaction intentionally, they may be charged to compensate to the others. As it has been discussed in this this article about “Reasonable Time” if it is not possible to perform the contract within the prescribed time, the contract must be performed within the reasonable time. But the reasonable time also depends on the situation and the circumstances of each different case. If there is no intention of time mentioned in the contract by the parties the contract does not become voidable, but by the failure of such performance the promise is entitled to compensation from the promisor in case of any loss suffered by the promisee. Not performing the contract may also frustrate the parties due to which the other party has the right to avoid the contract.
When the time is the essence of the contact it is expected that the promisor would perform the contract within due time. On failure to do so, the promisee has the right to avoid the contract.
● Saradamani Kandappan v. Rajalakshmi
● Bhudra Chand v. Betts , (19150)22 Cal LJ566:33 IC3347.
● Mahabir Prasad v. Durga Rungta Datt, AIR 1961 SC990
● China Cotton Exporters v. B.R.C. Mills
● Bishamber Nath Agarwal v. Kishan Chand, AIR1990 ALL70
● C.C. of India Ltd. V. S.S. Corporation
● Indian Contract Act, 1872
● Phillip J. Scheibel, TIME IS OF THE ESSENCE, January, 2009 accessed on 27th,2012-07-30
India Contact Act 1872 bt Pollock and Mulla.
This article is written by Arpita Saha of South Calcutta Law College.