The Vault - Questions and Answers

DATE:	12/03/02
SUBJECT/TOPIC:	TIME IS OF THE ESSENCE
	Q:	I have a standard realtor's residential contract which provides "closing to be on or before Nov. 25, 2002." It does not say time is of the essence. My client, the seller, wants to return the earnest money and close on a back-up contract. The buyers are relying on the time is not of the essence argument. I remember someone telling me a couple of years ago of a Tennessee Court of Appeals case that held that "close on or before date" created a drop-dead date and in effect created a time is of the essence contract. Are you aware where Tennessee law is on this issue?
	A:	Thanks for your question. I'm not aware of the case you refer to, but I can see how one could argue that "on or before" does the trick. It is so easy to say "time is of the essence" though that courts seem to treat the phrase as almost being magic words. I think your client would be running some risk in repudiating the contract. I note that even if the contract doesn't make time is of the essence it still can be. The parties' conduct (e.g., property is rising or falling rapidly in value or one party must move and has no other place to go) can make time of the essence. The problem of course, is how to prove these things.
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DATE:

12/03/02

SUBJECT/TOPIC:

TIME IS OF THE ESSENCE

I have a standard realtor's residential contract which provides "closing to be on or before Nov. 25, 2002." It does not say time is of the essence. My client, the seller, wants to return the earnest money and close on a back-up contract. The buyers are relying on the time is not of the essence argument. I remember someone telling me a couple of years ago of a Tennessee Court of Appeals case that held that "close on or before date" created a drop-dead date and in effect created a time is of the essence contract. Are you aware where Tennessee law is on this issue?

Thanks for your question. I'm not aware of the case you refer
to, but I can see how one could argue that "on or before" does the trick. It is so easy to say "time is of the essence" though that courts seem to treat the phrase as almost being magic words. I think your client would be running some risk in repudiating the contract.

I note that even if the contract doesn't make time is of the essence it still can be. The parties' conduct (e.g., property is rising or falling rapidly in value or one party must move and has no other place to go) can make time of the essence. The problem of course, is how to prove these things.

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