Enforcing Time Limits and Deadlines in Your Contracts

You have taken great pains to draft your business contract. You’ve covered every detail, and made sure that every contingency is planned for. Except for one thing: There’s no specific time frame in the contract that says when the parties must perform their obligations. When there are no time limits listed, how long is too long? And how can you ensure that the obligations under the agreement are performed in a timely manner?

Reasonableness and Performance

In the absence of any specific time frames or deadlines, a court will assume that obligations under an agreement must be performed in a reasonable manner. As you can probably tell, that’s a vague term that leaves things open for lawsuits and court interpretation. That’s why the best bet is to have specific deadlines in your contract.

If your contract has multiple stages, such as with a real estate or construction contract, separate deadlines or time frames should be listed for each deadline.

But it may surprise you to know that even if you include deadlines, a court may not find a breach of the deadline to be a material breach that constitutes a breach of the entire agreement. For example, a court may find the time to get financing in a real estate project to be material, but time frames to conduct inspection, hand over keys, or provide documents, to be non-material.

Time is of the Essence

So how does a party or a court know which deadlines are material and important, and which are not material? Parties tell the court that they consider all time deadlines in a contract to be important by including what is known as a time is of the essence clause (TIOE) in their agreement.

A TIOE clause tells the court that no deadline is too minor, and a breach of any deadline is a breach of the agreement.

Multiple Parts, Multiple Clauses

Many contacts can be multiple pages long, with multiple deadlines for performing various parts of the contract. In these cases, one, broad TIOE clause may not be enough. In some cases, it may be best to specifically state which deadlines “matter,” and which are not-material. If they are all material and important, then a TIOE clause should be included in each area where there is a performance obligation.

It’s worth noting that TIOE clauses are not foolproof. If a party is otherwise performing under an agreement, and willing to continue performing, but just missed a single deadline, courts may find it unfair to find the party in breach for narrowly missing a single deadline.

Much of this depends on how much timing matters. In a real estate contract, or the agreement to sell goods, time may matter much more, and a court will give a TIOE clause much more weight.

We can help you draft contracts that work for you, and which can be enforced in court if needed. Call the West Palm Beach business litigation lawyers at Pike & Lustig to help you with your business law problem.