Dealing with late contractual performance – how a notice making time of the essence can help
What can you do if a company has agreed to provide you with goods or services but they fail to deliver when promised? If the contract didn’t provide that time was to be of the essence then a notice ‘making time of the essence’ could help.
For a reminder of what ‘time of the essence’ means and when time is of the essence please refer to our previous note on this subject.
Where performance is delayed, even if time is not of the essence, at some point the continued failure to perform becomes ‘repudiatory’. This means that it is a serious breach of the contract allowing you to terminate it. However, it is not always easy to know when a delay has become repudiatory.
If you terminate too soon, you risk wrongfully terminating the contract and becoming liable for damages. If you delay terminating for too long then you risk being deemed to have accepted the breach and to have affirmed the contract, and you could not then terminate until a further repudiatory breach takes place.
If there is any doubt as to when your right to terminate the contract arises, you can strengthen your position by serving a notice to “make time of the essence”.
Contents of the notice
The notice must:
- Set out what the defaulting party must do and a reasonable deadline for doing so.
- Explain that if it is not complied with, the contract may be terminated.
Effect of the notice
Contrary to its name, such a notice doesn’t actually make time of the essence or change the original contract terms as to when performance is due or the effect of delay, as both parties must agree such changes. However, it does help by setting out your position as to when you consider the other party must deliver by, failing which you consider they will be in serious breach of contract.
The notice will give the other party a chance to remedy their breach and will hopefully prompt a discussion about why compliance by that date is important. It may also flush out any issues which might cast doubt on your grounds for termination.
Ending the contract after notice
If the deadline set out in the notice is not met, this will trigger your right to terminate but only if the other party is, in fact, in repudiatory breach of contract – it would be wise to get legal advice on this before actually seeking to terminate.
To bring the contract to an end, you must communicate your acceptance of the other party’s repudiatory breach and clearly state that the contract is terminated. You may also have a claim for damages.