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Time of the Essence
Practical Law Glossary Item 8-581-7931 (Approx. 3 pages)
Glossary
Time of the Essence
A provision in commercial real estate purchase and sale agreements, leases, and construction contracts to indicate that the parties intend time for performance to be a material element. Time of the essence (TOE) provisions set out specific periods or dates for the performance of contractual obligations, which are strictly enforced. For example:
- In a commercial real estate purchase and sale agreement, each party's obligation to close on the date agreed.
- In a commercial real estate lease agreement, a tenant's obligation to:
- pay rent;
- send notices of its intent to renew or terminate the lease; and
- perform improvements to the premises.
Failure to comply in a timely manner constitutes a material breach. TOE clauses can be:
- Express or implied (except in construction contracts); and,
- Specific or general.
A specific TOE provision typically applies only to a particular obligation, while a general provision applies to all obligations. However, there may be express clauses in the agreement that are excepted from the TOE provision. The parties should consult with local counsel because general TOE provisions may be unenforceable in some states.
A court may infer that the parties intended that time be of the essence even without an express TOE provision.