"TIME IS OF THE ESSENCE"...A Necessary Clause or Just Another Legal Snafu?
In my experience in the past, when a "Time is of The Essence" clause was put into a contract of sale it was a rare event. Usually there was a good legal reason for inserting it into a contract of sale and it was always very carefully handled: Pre-paid registered or certified letters were sent to all parties involved stating the fact that the clause is being inserted in the contract and the reasons why.
In my past experience it happened rarely and it was always done with both sides agreeing to the fact, if there were extenuating circumstances that required such a clause.
Now, I have three deals that have the clause written into the contract and one deal has fallen apart because there is a refusal on the part of the buyer to accept it.
The buyers lawyer advised them not to sign because they could go into default and lose their deposit if for any reason a bank could not close on said date. In the case of the sellers attorney, their heels were dug in and they would not give in.
In none of these deals is there any just cause to use the clause---just a difficult lawyer wanting to exert the power of "Time is of the essence" to make sure there is no "grace period" given to the buyer---no flexibility, in other words!
EVEN IF INTENTION IS TO MAKE THE CLAUSE APPARENT, VERBAL SPECIFICITY IS CRITICAL!
So, I did a little research and am finding out that there several reasons that this clause is considered defunct in a court of law if it is used carelessly:
- The failure to provide the other party with clear, distinct and unequivocal notice sent by prepaid registered or certified mail.
- The letter states that "I merely want to note that there is a 'Time Is Of The Essence' clause and your co-operation will be greatly appreciated". This kind of language surrounding the notice is ambiguous and vague and a court would be unable to discern the "requisite intention" of the parties to make the closing "of the essence".
- If the letter is sent by ordinary mail, facsimile or email it is considered insufficient notice.
- An oral agreement or conduct that is evidence of of a "waiver" (such as language that is vague) may stop a party from enforcing the"time is of the essence" clause.
...and the list goes on and on.
Have you had an experience with "Time Is Of The Essence"? If so, please comment below as to how you handled it or what you learned from the circumstances.
**ALL INFORMATION AND CONTENT IN THIS BLOG IS ORIGINAL TO PAULA I. HATHAWAY. The views expressed herein are my personal views and do not reflect the views of Douglas Elliman Real Estate
Paula I. Hathaway, Senior Broker Associate, Douglas Elliman Real Estate
Southamtpon Village Real Estate Specialist since 1995; Also Specializes in North Sea, Noyac, Water Mill and Bridgehampton, New York
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