This contract tip is about doing enough to strengthen your contract deadlines.
Most contracts have specific deadlines for the obligations. If a party has to perform by a specific time and doesn't, it is in breach. That is when many expect the time is of the essence provision to kick in. The conventional wisdom is that if we add this provision to a contract, we can terminate if the offending party is one minute late in performing that obligation.
But that's not what happens. U.S. courts are not reliably or uniformly applying this phrase in that way.
My advice is not to rely on a general "time is of the essence" clause. Instead, consider beefing up your contract in these four ways:
1. Draft the time is of the essence as narrowly as you can. Courts are more likely to enforce ones that apply to a specific obligation than everything in the contract.
2. Add an explicit right to terminate if a particular obligation is not performed by the deadline. Include a statement identifying why it is the parties' intent.
3. Remove the right to cure or reduce it to a shorter period for missing an important deadline.
4. Use liquidated damages as an alternative approach to motivate the counterparty.
What other ways do you approach timeliness issues in your contracts?
