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Part III Particular Contractual Provisions, 25 Time Stipulations

From: McMeel on The Construction of Contracts (3rd Edition)

Gerard McMeel

From: Oxford Legal Research Library (http://olrl.ouplaw.com). (c) Oxford University Press, 2023. All Rights Reserved. Subscriber: null; date: 29 January 2023

Subject(s):
Interpretation of contract — Time of delivery — Contractual stipulation and time for payment

(p. 719) 25  Time Stipulations

25.01  Contractual timetables are a significant source of disputes.1 First, questions may arise as to the order of performance of the two parties, and particular problems arise where it is contended that one party’s performance is a precondition to the other’s obligation to perform. Secondly, whilst it is now established that all delay in contractual performance amounts to a breach, and therefore yields damages for any resulting loss, questions may arise as to whether the victim of the breach may also cancel the contract, that is, legitimately terminate it. Further questions arise as to the appropriate measure of damages in such cases. The rules here involve issues of performance, breach, and remedies. A series of important appellate decisions in the 1970s and 1980s greatly modernized the subject, and brought it into line with the modern doctrine on the classification of terms and discharge for breach (as discussed in Chapter 20). However the old learning of condition precedents and mutual and independent covenants sometimes lingers.2 A shadow is (p. 720) also cast by the distinct history in Chancery, whereby in granting equitable relief a more liberal approach was sometimes adopted to issues of delay in performance. The question whether or not time is of the essence lies at the heart of this topic.3 In the modern law this generally equates to the question whether as a matter of construction or characterization a particular (time) stipulation is a condition or fundamental term, such as to justify termination by the other party in the event of breach. In addition, a distinct power exists where time is not initially of the essence (or it is unclear whether it is) for a party to serve post-contractual notice in appropriate cases of unreasonable delay, making time of performance of the essence, which does not depend on construction or characterization techniques.

Construction of Time Stipulations

25.02  It is sometimes contended that where a date is stipulated for performance in a contract the obligation of the promisor is to perform by or on that date, or within a reasonable time thereafter. Such reasoning is fallacious. The promisor is in breach once the contractual time for performance has elapsed and he is liable in damages for any loss caused by the delay. This was confirmed in the leading House of Lords’ decision of Raineri v Miles.4 Lord Fraser of Tullybelton was emphatic:

If the question in this appeal were one of pure construction it would in my opinion be out of the question to construe the words ‘on or before July 12’ as meaning ‘on or before July 12 or within a reasonable time thereafter.’ A promise to do something on a certain date is not implemented by doing the thing within a time, reasonable or otherwise, after that date. The argument to the contrary is made, if anything, more difficult by the words ‘or before’ which introduce a limited degree of elasticity and make it all the more impossible, in my view, to imply any further elasticity.5

25.03  Similarly, Lord Edmund-Davies stated:

The fact that time had not been declared to be of the essence does not mean that the express date for completion could be supplanted by the court’s treating it as a mere ‘target’ date and, in effect, enabling the defaulting party to insert into the contractual provision some such words as ‘… or within a reasonable time thereafter.’6

(p. 721) Time of the Essence: the General Rule

25.04  The general rule is that time of performance is not of the essence so as to entitle the other side to terminate in the event of even slight delay. This proposition is reflected in the statutory pronouncements, and in the leading case of United Scientific Holdings Ltd v Burnley Borough Council 7 which determined that the presumption was, in the context of timetables in rent review clauses, that the deadlines were not of the essence. Lord Simon of Glaisdale expressed the principle very broadly: ‘in general, in modern English law time is prima facie not of the essence of a contract.’8 However, first and foremost, it is always open to the parties to make it explicit that time is of the essence, or that it is not of the essence, and the courts will give effect to such expressed intentions, which remove any doubt or uncertainty on the issue. As Lord Diplock stated in United Scientific Holdings:

It is not disputed that the parties to a lease may provide expressly that time is or time is not of the essence of the contract in respect of all or any of the steps required to be taken by the landlord to obtain the determination of an increased rent, and that if they do so the court will give effect to their expressed intention.9

There is no reported case in which such express provision was ignored by the courts.10 Secondly, where no express provision is made the courts must determine whether or not time is implicitly of the essence. This appears to be a test of necessary implication, analogous to the implication of terms.11 Accordingly, regard is had to the contract as a whole, the other provisions, the background or context and the purpose of the transaction, and, more narrowly, the timetable in the overall scheme of the contract. It has been suggested: ‘Though the question is still ostensibly one of construction, more emphasis is now placed on the importance of the stipulation within the context of the contract as a whole.’12

(p. 722) Statutory provision: Law of Property Act 1925

25.05  Section 61 of the Law of Property Act 1925 provides:

Stipulations in a contract, as to time or otherwise, which according to rules of equity are not deemed to be or to have become of the essence of the contract, are also construed and have effect at law in accordance with the same rules.

25.06  The predecessor provision to section 41 was part of the critical statutory machinery effecting the fusion of (the administration) of law and equity: section 25(7) of the Supreme Court of Judicature Act 1873.13 Accordingly in United Scientific Holdings Ltd v Burnley Borough Council 14 Lord Diplock described that the 1925 Act was a consolidating measure in respect of this question:

It makes it clear that there should continue to be, as there had been since 1875, only one set of rules for judges to apply in determining whether a particular stipulation as to time or otherwise was of the essence of a contract. It places no ban upon further development of the rules by judicial decision.15

25.07  Lord Simon summarized the modern law in the light of section 41 in these terms:

I cannot read section 41 of the Law of Property Act as meaning other than that, whenever contractual stipulations as to time fall for consideration in any court, they shall not be construed as essential, except where equity would before 1875 have so construed them—i.e., only when the strict observance of the stipulated time for performance was a matter of express agreement or of necessary implication.

In my view the modern law in the case of contracts of all types is correctly summarised in Halsbury’s Laws of England, 4th ed., vol. 9, para. 481, p. 338:

Time will not be considered to be of the essence unless: (1) the parties expressly stipulate that conditions as to time must be strictly complied with; or (2) the nature of the subject matter of the contract or the surrounding circumstances show that time should be considered to be of the essence; …16

25.08  Indeed in Lord Simon’s view ‘the fused law has continued to evolve since 1875; and it has developed a more sophisticated approach to contractual terms’.17 His (p. 723) Lordship envisaged the law developing so that it was for all practical purposes the same as that which resulted from the seminal Hong Kong Fir Shipping Co Ltd v Kawasaki Kisen Kaisha18 case:

The law may well come to inquire whether a contractual stipulation as to time is (a) so fundamental to the efficacy of the contract that any breach discharges the other party from his contractual obligations (‘essence’), or (b) such that a serious breach discharges the other party, a less serious breach giving a right to damages (if any) (or interest), or (c) such that no breach does more than give a right to damages (if any) (or interest) (‘non-essential’). If this sort of analysis falls to be made, I see no reason why any type of contract should, because of its nature, be excluded.19

25.09  With the qualification that the rights in paragraph (b) of Lord Simon’s restatement may be cumulative in a case of serious breach (that is both discharge and damages) it is submitted that this is an accurate statement of the law as it has now developed.

Statutory provision: Sale of Goods Act 1979

25.10  Section 10(1) and (2) of the Sale of Goods Act 197920 provides:

  1. (1)  Unless a different intention appears from the terms of the contract, stipulations as to time of payment are not of the essence of a contract of sale.

  2. (2)  Whether any other stipulation as to time is or is not of the essence of the contract depends on the terms of the contract.

Stipulations as to time in commercial and mercantile contracts

25.11  In United Scientific Holdings Ltd v Burnley Borough Council,21 having quoted the Sale of Goods Act 1983, Lord Diplock nevertheless insisted that at common law, time of delivery in a sale of goods was treated as of the essence:

In some stipulations in commercial contracts as to the time when something must be done by one of the parties or some event must occur, time is of the essence; in others it is not. In commercial contracts for the sale of goods prima facie a stipulated time of delivery is of the essence, but prima facie a stipulated time of payment is not (Sale of Goods Act 1893, section 10(1)), in a charterparty a stipulated time of payment of hire is of the essence.22

(p. 724) 25.12  However leases of business premises were not, despite their commercial character, treated in the same way as these classic ‘mercantile’ contracts. To similar effect, Lord Salmon stated:

In commercial transactions, provisions as to time are usually but not always regarded as being of the essence of the contract. They are certainly so regarded where the subject matter of the contract is the acquisition of a wasting asset or of a perishable commodity or is something likely to change rapidly in value. In such cases if, e.g., the seller fails to deliver within the time specified in the contract, the buyer may well be seriously prejudiced.23

Commercial leases: United Scientific Holdings v Burnley Borough Council

25.13  The two appeals to the House of Lords in United Scientific Holdings Ltd v Burnley Borough Council 24 concerned timetables in rent review clauses which had not been complied with, and in respect of which there was no express provision whether or not the stipulations were of the essence. The House of Lords unanimously ruled that the presumption was against time being of the essence. According to Lord Diplock:

So upon the question of principle … I would hold that in the absence of any contraindications in the express words of the lease or in the interrelation of the rent review clause itself and other clauses or in the surrounding circumstances the presumption is that the time-table specified in a rent review clause for completion of the various steps for determining the rent payable in respect of the period following the review date is not of the essence of the contract.25

25.14  For an application of this approach (where the direction of payment was reversed) see Dominion Corporate Trustees Ltd v Debenhams Property Ltd,26 where Kitchin J rejected a submission that a date for payment by a landlord to a tenant under an agreement for a lease was of the essence. The nature of the subject-matter and the circumstances of the agreement did not render failure to pay punctually a breach which would deprive the other of the benefit of the agreement. In any event, express provision was made for interest on late payments, so the contract provided its own express remedy.27 Furthermore the tenant also failed in its alternative case that the breach was repudiatory, with Kitchin J noting that at no stage had the tenant served notice making the time for payment of the essence.28

(p. 725) Making Time of the Essence

25.15  A contribution of the historic rules of equity to the modern subject is the distinct power which exists for a party to serve post-contractual notice in respect of time stipulations which were not initially of the essence once the time for performance had elapsed, making time of performance of the essence.29 It is reflected in the second half of the disjunctive phrase in section 61 of the Law of Property Act 1925: ‘not deemed to be or to have become of the essence.’ This technique does not depend on construction or characterization techniques. According to Lord Simon in United Scientific Holdings Ltd v Burnley Borough Council:30

In equity, and now in the fused system, performance had or has, in the absence of time being made of the essence, to be within a reasonable time. What is reasonable time is a question of fact to be determined in the light of all the circumstances. After the lapse of a reasonable time the promisee could and can give notice fixing a time for performance. This must itself be reasonable, notwithstanding that ex hypothesi a reasonable time for performance has already elapsed in the view of the promisee. The notice operates as evidence that the promisee considers that a reasonable time for performance has elapsed by the date of the notice and as evidence of the date by which the promisee now considers it reasonable for the contractual obligation to be performed. The promisor is put upon notice of these matters. It is only in this sense that time is made of the essence of a contract in which it was previously non-essential. The promisee is really saying, ‘Unless you perform by such-and-such a date, I shall treat your failure as a repudiation of the contract.’ The court may still find that the notice stipulating a date for performance was given prematurely, and/or that the date fixed for performance was unreasonably soon in all the circumstances.31

25.16  Accordingly first, there must be lapse of a reasonable time or undue delay. Secondly, the party serving notice must be ready, willing, and able to perform himself. Thirdly, the stipulated deadline in the notice must itself be reasonable. Lastly, the notice itself must be clear and intelligible as to what is to be done, which is presumably to be judged from the standpoint of a reasonable recipient.32

(p. 726) Time of the essence and equitable relief

25.17  Equity adopted a more forgiving approach to breaches of contractual time stipulations where a decree of specific performance was sought. Even though the party seeking relief was in breach, nevertheless the power was retained to decree specific performance in appropriate cases. Furthermore, prior to the Supreme Court of Judicature Act 1873 an injunction was granted to prevent the victim of the breach bringing parallel proceedings to establish that the contract was discharged in the courts of common law. However even equity would only intervene where ‘lapse of time is not essential to the substance of the contract’.33 Here equity either took a narrower view of when time was of the essence than the common law, or at least perceived that it took a narrower view.34 In the wake of section 25(7) of the Supreme Court of Judicature Act 1873, which entrenched the equitable approach as the governing law, Lord Parker of Waddington in Stickney v Keeble35 attempted to summarize the position:

Where it could do so without injustice to the contracting parties it [equity] decreed specific performance notwithstanding failure to observe the time fixed by the contract for completion, and as an incident of specific performance relieved the party in default by restraining proceedings at law based on such failure.

This is really all that is meant by and involved in the maxim that in equity the time fixed for completion is not of the essence … it was only for the purposes of granting specific performance that equity in this class of case interfered with the remedy at law.36

25.18  The position has now been reached in English law, in the wake of United Scientific Holdings Ltd v Burnley Borough Council 37 that where time is expressly of the essence38 or, it is submitted, is so by reason of necessary implication, no jurisdiction to grant equitable relief exists. This appears from the importance attached to contractual certainty by the Privy Council in an advice delivered by Lord Hoffmann in Union Eagle Ltd v Golden Achievement Ltd.39

(p. 727) Calculating Time

A question of construction

25.19  A number of statutory rules for calculating time were considered in Chapter 7 on presumptions.40 At common law the ordinary principles of construction apply. In Zoan v Rouamba41 Chadwick LJ observed:

Where, under some legislative provision, an act is required to be done within a fixed period of time ‘beginning with’ or ‘from’ a specified day it is a question of construction whether the specified day itself is to be included in, or excluded from, that period.42

Inclusive construction: ‘beginning with’

25.20  Where the phrase ‘beginning with’ precedes a certain date, the date specified is generally included in the calculation of time. In Zoan v Rouamba43 Chadwick LJ stated:

Where … the period within which the act is to be done is expressed to be a period beginning with a specified day, then it has been held … over the past 40 years or thereabouts, that the legislature (or the relevant rule making body, as the case may be) has shown a clear intention that the specified day must be included in the period.44

The Court of Appeal applied this approach to the construction of a contract.

Exclusive construction: ‘after’ and ‘from’

25.21  Where either ‘after’ or ‘from’ is used (the two prepositions are treated as synonymous) the date specified is generally excluded from the calculation of time. In Zoan v Rouamba45 Chadwick LJ stated:

Where the period within which the act is to be done is expressed to be a number of days, months or years from or after a specified day, the courts have held, consistently since Young v Higgon46 that the specified day is excluded from the period; that is to say, that the period commences on the day after the specified day.47

(p. 728) 25.22  Subsequently, Chadwick LJ clearly indicated:

The usual meaning of the words ‘after’ or ‘from’ in the context of reckoning time, as the authorities make clear, is that the day ‘after’ or ‘from’ which a period of time is to be reckoned is not included within the period. There are good reasons for this. The event which gives rise to the need to determine when a limited period of time has ended (or will end) may itself happen at any time of the day on which it occurs. It is in order to avoid disputes as to fractions of a day—and to give to the party who must comply with the limit the maximum period for such compliance—that time is reckoned, in effect, from the last moment of that day; that is to say, the period begins to run from the first moment of the next day. To treat a period of a year ‘from the date of the agreement’ as commencing at the first moment after the end of the day on which the agreement is made is not (as the judge appears to suggest) to construe the words as if they read ‘a year from the day after the agreement.’48

‘Within’

25.23  ‘Within’ generally includes the whole of the specified period up to and including the stroke of midnight. In Manorlike Ltd v Le Vitas Travel Agency and Consultancy Services Ltd 49 Nourse LJ commented:

The precise meaning of a preposition such as ‘within’ depends on the context in which it is used. Here it is used in a legal document and it is applied to a period of three months’ notice. In such a context I see no difference between the meanings of ‘within’ and ‘during’. In my view if someone is required to vacate premises within or during a specified period, he will comply with the requirement by walking out of the door either before, or on, the stroke of midnight on the last day of that period.50

25.24  Kerr LJ concurred:

To my mind the word ‘within’, used in the context of a period of time, is capable of meaning ‘before or at the expiry of’ that period, as counsel for the landlord submits; it is not necessarily shorter than the period itself. Counsel for the landlord derives some assistance for that submission from one of the definitions of the word ‘within’ in the Oxford English Dictionary, where under no 6 the word ‘within’ is defined as follows: ‘In the limits of a period of time; (most usually) before the end of, after not more than.’ It is difficult to think of examples where the word ‘within’ would be used synonymously with the much more complex expression ‘after not more than’. However, what emerges from the illustration of the meaning of the word ‘within’ by the expression ‘after not more than’ is that in common parlance ‘within’ is capable of including the final moment of a period of time. If a person is required to do something within a week, or in a week, he has the full week to do it, as it seems to me, including the last moment of that week, and he is not required to complete the task in less than a week. To construe the wording of this notice so that it connotes a period of less than three months, because possession must be given ‘within’ three months with a consequent failure to allow a full period of (p. 729) three months, appears to me to strain the language in a hair-splitting and wholly artificial manner.51

‘On the expiry of’

25.25  In Ketley v Gilbert 52 the Court of Appeal held that a requirement for a payment ‘on the expiry of’ 12 months did not fall within the statutory exemption for certain consumer credit agreements where payments were made ‘within a period not exceeding 12 months beginning with the date of the agreement’53 because it could not reasonably be expected that payment would take place on the stroke of midnight, but within a reasonable time thereafter.

Footnotes:

1  See generally J Stannard, Delay in the Performance of Contractual Obligations (2007). See also J Stannard, ‘In the Contractual Last Chance Saloon: Notices Making Time of the Essence’ (2004) 120 LQR 137; and J Stannard, ‘So What if Time is of the Essence?’ [2005] Singapore Journal of Legal Studies 114.

2  The notoriously complex common law rules (largely pleading-driven) are summarized in Serjeant Williams’ notes on Pordage v Cole (1669) 1 Wms Saund 219, 85 ER 449. See also the notes to Cutter v Powell (1795) 6 Term Rep 320, 101 ER 573 in Smith’sLeading Cases (13th edn, 1929), II.1.

3  J Stannard, ‘So What if Time is of the Essence?’ [2005] Singapore Journal of Legal Studies 114 distinguishes five principal uses of the phrase ‘time of the essence’. The principal ones are: (1) as a condition precedent; (2) as a condition in the Sale of Goods Act 1979 sense; (3) in the context of delay as a bar to specific performance; and (4) in the context of post-contractual notices making time of the essence. Compare the various meanings of ‘condition’, ‘warranty’, and ‘indemnity’ in Chap 20.

4  [1981] AC 1050, CA and HL.

5  Ibid, 1089.

6  Ibid, 1082–3.

7  [1978] AC 904, HL.

8  Ibid, 940. See also: Touche Ross & Co v Secretary of State for the Environment [1983] 1 EGLR 123, CA; Thorn EMI Pension Trust Ltd v Quinton Hazel plc [1984] 1 EGLR 113; and Starmark Enterprises Ltd v CPL Distributors Ltd [2001] EWCA Civ 1252, [2002] Ch 306.

9  [1978] AC 904, 923. See also at 936: ‘the best way of eliminating all uncertainty in future rent review clauses is to state expressly whether or not stipulations as to the time by which any step provided for by the clause is to be taken shall be treated as being of the essence’ (HL: Lord Diplock). See also at 947: ‘Such clauses could easily be drafted so that they state expressly whether time is or is not to be treated as of the essence. So drafted they would present no difficulty’ (Lord Salmon). See also Lombard North Central plc v Butterworth [1987] QB 527, CA.

10  Contrast the treatment of the word ‘condition’ in L Schuler AG v Wickman Machine Tool Sales Ltd [1974] AC 235, HL. See 20.20.

11  See Chap 11.

12  J Stannard, ‘So What if Time is of the Essence?’ [2005] Singapore Journal of Legal Studies 114, 125.

13  Section 25(7) of the Supreme Court of Judicature Act 1873 states: ‘Stipulations in contracts, as to time or otherwise, which would not before the passing of this Act have been deemed to be or to have become of the essence of such contracts in a Court of Equity, shall receive in all courts the same construction and effect as they would have heretofore received in equity.’ The 1925 Act substitutes references to ‘rules of equity’ for ‘a Court of Equity’.

14  [1978] AC 904, HL. See also BNP Paribas v Wockhardt EU Operations (Swiss) AG [2009] EWHC 3116 (Comm), para [34] (Christopher Clark J (mistakenly referring to s 41)).

15  [1978] AC 904, 927.

16  Ibid, 943–4. See also Lord Fraser of Tullybelton (at 958), who completes the quote from Halsbury’s Laws: ‘ “or (3) a party who has been subject to unreasonable delay gives notice to the party in default making time of the essence.”’

17  Ibid, 945; citing Wallis, Son & Wells v Pratt & Haynes [1910] 2 KB 1003, 1012, CA (Fletcher Moulton LJ, a dissenting judgment which was affirmed by the HL: [1911] AC 394); Hong Kong Fir Shipping Co Ltd v Kawasaki Kisen Kaisha Ltd [1962] 2 QB 26, CA (esp Diplock LJ); and Wickman Machine Tool Sales Ltd v L Schuler AG [1974] AC 235, 264–5 (Lord Simon).

18  [1962] 2 QB 26, CA.

19  [1978] AC 904, 945.

20  Its predecessor, s 10(1) of the Sale of Goods Act 1893, provided compendiously: ‘Unless a different intention appears from the terms of the contract, stipulations as to time of payment are not deemed to be of the essence of a contract of sale. Whether any other stipulation as to time is of the essence of the contract or not depends on the terms of the contract’ (italics indicate difference in wording).

21  [1978] AC 904, HL.

22  Ibid, 924. See also Lord Simon (at 941) making reference to the Sale of Goods Act 1893, s 28: payment and delivery concurrent conditions. The origin of the time of payment rule in sales of goods appears to be Martindale v Smith (1841) 1 QB 389, 395, 113 ER 1181 (Lord Denman CJ).

23  [1978] AC 904, 950.

24  Ibid, HL.

25  Ibid, 930.

26  [2010] EWHC 1193 (Ch) .

27  Ibid, paras [33]–[38].

28  Ibid, para [55].

29  See J Stannard, ‘So What if Time is of the Essence?’ [2005] Singapore Journal of Legal Studies 114, 133–5.

30  [1978] AC 904, HL.

31  Ibid, 946.

32  For greater detail see J Stannard, ‘In the Contractual Last Chance Saloon: Notices Making Time of the Essence’ (2004) 120 LQR 137.

33  Lennon v Napper (1802) Sch & Lef 682, 684–5 (Lord Redesdale).

34  Compare J Stannard, ‘So What if Time is of the Essence?’ [2005] Singapore Journal of Legal Studies 114, 130–3, esp fn 96.

35  [1915] AC 386, HL.

36  Ibid, 415–16. See also Raineri v Miles [1981] AC 1050, CA and HL.

37  [1978] AC 904, HL.

38  Steedman v Drinkle [1916] 1 AC 275, PC; Union Eagle Ltd v Golden Achievement Ltd [1997] AC 514, PC.

39  [1997] AC 514, PC (failure to perform payment of price for sale of land by 10 minutes was too late where time was expressly of the essence); criticized by J D Heydon QC, ‘Equitable Aid to Purchasers in Breach of Time-Essential Conditions’ (1997) 113 LQR 385. See also Scandinavian Trading Tanker Co AB v Flota Petrolera Ecuatoriana (The Scaptrade) [1983] 2 AC 694. Contrast the position in Australia: Legione v Hateley (1983) 152 CLR 406; and Stern v McArthur (1988) 165 CLR 489, noted K Nicholson (1990) 106 LQR 39.

40  See also generally Sir Kim Lewison, The Interpretation of Contracts (6th edn, 2015), Chap 15.

41  [2000] 1 WLR 1509, CA.

42  Ibid, para [23].

43  Ibid, CA.

44  Ibid, para [24].

45  Ibid, CA.

46  (1840) 6 M & W 49, 151 ER 317, Exch (statutory construction).

47  [2000] 1 WLR 1509, para [23].

48  [2000] 1 WLR 1509, para [34].

49  [1986] 1 All ER 573, CA.

50  Ibid, 576.

51  Ibid, 574–5.

52  [2001] 1 WLR 986, CA

53  Consumer Credit (Exempt Agreements) Order 1989 (SI 1989/869), art 3(1).