5.01  The first situation in which termination will be available is where the other party has broken a ‘condition’. In this chapter we shall consider the nature of a condition and the ways in which it differs from other similar concepts before going on to outline the tests for determining whether a term of the contract amounts to a condition or not. After that we shall look at the rules for determining when timely performance is a condition, or as is generally said ‘of the essence’.

5.02  A good place to start in the present context¹ is with section 11(3) of the Sale of Goods Act 1979. This corresponds to what was previously section 11(1)(b) of the Sale of Goods Act 1893, and reads as follows:

Whether a stipulation in a contract of sale is a condition, the breach of which may give rise to a right to treat the contract as repudiated, or a warranty, the breach of which may give rise to a claim for damages but not to a right to reject the goods and treat the (p. 134) contract as repudiated, depends in each case on the construction of the contract; and a stipulation may be a condition, though called a warranty in the contract.

On the basis of this definition a condition is a stipulation in a contract, be it a contract of sale or some other contract, the breach of which gives rise to the right to ‘treat the contract as repudiated’. This formula also appears in section 11(2) and (4) of the 1979 Act.² But what do these words mean, and why does that right arise?

5.03  The matter is further explained in the celebrated dissenting judgment of Fletcher Moulton LJ in Wallis, Son and Wells v Pratt & Haynes,³ the sentiments of which were subsequently adopted by the House of Lords on appeal:⁴

So a ‘condition’ on this analysis is an obligation that ‘goes directly to the substance of the contract’, and is ‘so essential to its very nature that [its] non-performance may fairly be considered by the other party as a substantial failure to perform the contract at all’; if such an obligation is broken, the other party can ‘refuse to perform any of the obligations resting upon himself’ and also ‘sue the other party for a total failure to perform the contract’, or in the words of the Sale of Goods Act, ‘treat the contract as repudiated’. There are four aspects of this worth noting, these being: (1) the notion of a conditional promise; (2) the condition as an obligation; (3) the condition as an essential obligation; (p. 135) and (4) the idea that breach of condition is equivalent in some sense to a repudiation of the contract.

5.04  If there is one idea that can be said to lie at the root of the doctrine of breach of condition, it is that of a conditional promise by the innocent party.⁶ A promise to do X is not the same as a promise to do X if Y happens. In the latter case, the promisor need not do X if Y does not happen; to put it another way, the occurrence of Y is an event on upon which the existence of the obligation depends.⁷ That event can be of various sorts. For instance, it can be an external event of some sort, as in the case of an insurance policy, where the obligation of the insurer to pay up depends on the occurrence of the contingency insured against. Again, it can be something to be done by the promisee without the promisee being necessarily bound to do it, as in the case of a unilateral obligation. However, in the context of termination, the event on which the innocent party’s obligation to perform is conditioned is neither of these things, but the performance of a counter-obligation by the party in default.

5.05  As we have seen in a previous chapter, the notion of a condition as an obligation under the contract developed out of the old rules of pleading and the distinction between ‘dependent’ and ‘independent’ covenants.⁸ In the former case A’s obligation to perform covenant X would depend on prior performance by B of covenant Y, and B could not sue A for failing to perform X without averring that he or she had performed Y.⁹ The upshot of this was that if B did not perform Y, A was effectively discharged from performing X; indeed, it would be more accurate to say that A’s obligation to perform X never arose in the first place.¹⁰ It will be noted that in (p. 136) this analysis the condition for A’s promise is not B’s promise as such, but B’s performance of that promise; be that as it may, the distinction was not always drawn,¹¹ and by the time of the Sale of Goods Act 1893 the word ‘condition’ had come to denote not the performance of the promise but the promise itself—hence the term often seen in this context, ‘promissory condition’.¹²

5.06  Fletcher Moulton LJ also refers to conditions as terms which go ‘so directly to the substance of the contract or, in other words, are so essential to its very nature that their non-performance may fairly be considered by the other party as a substantial failure to perform the contract at all’.¹³ Whether a term is to be classified as a condition or not depends in the main on the intention of the parties,¹⁴ and ever since the seminal case of Boone v Eyre¹⁵ the courts have taken the line that the parties are not likely to have intended to classify a term in this way unless that term is one of some significance in the context of the contract as a whole.¹⁶ However, whereas this might be true as a general rule, the idea that all conditions are necessarily matters of importance is less compelling where the term in question is classified in that way by implication of law,¹⁷ or on the basis of a standard form contract.¹⁸ Indeed it can be argued that, given that a ‘substantial failure to perform the contract at all’ gives rise to a right of termination irrespective of whether the term broken is a condition or not,¹⁹ the whole point of allowing the innocent party to terminate for breach of condition is to cover cases where the failure in performance does not have such drastic consequences, but where for other reasons (most notably the promotion of commercial certainty) the right to terminate should be granted.²⁰

5.07  If breach of a condition is indeed equivalent to a total failure to perform the contract, then it follows, as night follows day, that any such breach is equivalent to a repudiation, and that the innocent party is entitled to treat it as such. This indeed seems to be the present state of the law; thus in Lombard North Central plc v Butterworth ²¹ it was decided by the Court of Appeal that late payment of hire in a contract where time was stated to be of the essence entitled the owners not only to terminate performance but also to recover damages on the footing of total repudiation, even though the court also decided on the facts that no such repudiation had taken place.²² The court reached its decision with some reluctance,²³ and certainly this notion of what might be termed ‘constructive repudiation’ has its difficulties. In particular, by eliding what are in essence two distinct rationales for contractual discharge (failure of condition and failure of consideration)²⁴ it creates unnecessary inflexibility in the law.²⁵ Be that as it may, unless or until Lombard North Central plc v Butterworth is reconsidered, the doctrine of constructive repudiation must be taken to be part of current English contract law.

5.08  Before one can hope to understand the nature of a condition in the present context, it is necessary to distinguish it from various other concepts with which it may appear to have similarities, but which work in different ways.

5.09  The word ‘condition’ is sometimes used to denote not a term of the contract but an event upon the occurrence of which the very existence of the contract depends.²⁶ The distinction was well drawn by Denning LJ (as he then was) in Trans Trust SPRL v Danubian Trading Co,²⁷ where the court had to consider the status of a stipulation that the defendant should organises a letter of credit. In the words of Denning LJ:²⁸

An example of the first kind of condition is given by Pym v Campbell,²⁹ where the defendant agreed to invest in a machine invented by the plaintiff subject to the machine being approved by a third party. The third party not having approved of the agreement, it was held that no contract had come into existence at all. The distinction drawn by Denning LJ in this context may not be quite as stark as he makes it appear,³⁰ but in the present context the position is clear enough; if a ‘condition’ of this sort is not fulfilled, the promisor’s duty to perform may not arise, but before an event can qualify as a ‘promissory’ condition, breach of which gives rise to the right to terminate, the party in default must have promised to bring that event about.

5.10  Another possibility is that the contract may make the promisor’s duty to perform conditional on the occurrence of a certain event, without the other party necessarily being under any obligation with regard to that event. In such a case the promisor’s obligation is classified as unilateral, the rule being that if the event in question does not occur the obligation does not arise. The effect of this, as we have seen, is very similar to termination,³¹ but the two are not the same.³² In Hare v Nicoll ³³ a seller of shares was held to be debarred from exercising an option to repurchase the shares when he had failed to come up with the price by the due date; here the seller’s delay in paying the price discharged the buyer from having to resell the shares, but the seller was not bound to pay (p. 139) the price or indeed to exercise the option at all. In summary, the seller’s payment of the price by the due date was a ‘condition precedent’ to the buyer’s obligation to reconvey the shares, but it was not a ‘condition’ in the sense that the seller was bound to do it, or that the buyer could obtain damages for his failure to do it.

5.11  A ‘condition subsequent’ has been defined as ‘an event the occurrence of which terminates a contractual relationship, or the obligation of one or both parties to perform’.³⁴ This is generally illustrated by the case of Head v Tattersall,³⁵ where a horse was sold with a warranty that it had been hunted with the Bicester hounds. The contract went on to provide that if the horse did not answer its description the buyer should have the right to return it by a certain day. Before removing the horse from the seller’s stables the buyer was informed by the groom (who was not employed by the sellers) that the warranty was incorrect, but nevertheless decided to take the horse away, it being said that he did not require it for hunting purposes.³⁶ The horse was subsequently injured, and the buyer then decided to return it. It was held by the Court of Exchequer that this injury did not deprive the buyer of his right to return the horse, but the judges differed as to the legal effect of the information given by the groom. According to Kelly CB and Cleasby B, the buyer could not have been expected to make up his mind then and there whether or not to return the horse, as he was entitled to an opportunity to test the reliability of the information.³⁷ According to Bramwell B, the buyer would normally have been expected to reject the horse as soon as he learned that the warranty was incorrect, but this was overridden by the special condition in the contract allowing it to be returned at a later date.³⁸ This case was decided twenty years before the Sale of Goods Act, and is not easy to explain in terms of the current law. At one level it could be said that the buyer was entitled to reject the horse for failure to correspond with its description, and that his removal of the horse from the stables did not amount to a waiver by election as it was not done in the certain knowledge that the description was false.³⁹ On the other hand, Bramwell B at least seems to have thought that this was not a simple case of rejection, and there are certainly cases where a condition subsequent has been held to excuse performance by one or both parties without any suggestion of there having been any breach involved.⁴⁰ As Carter points out, the words ‘precedent’ and ‘subsequent’ in (p. 140) this context do no more than express contrasting relations in time,⁴¹ and on this basis all ‘conditions’ (in the present sense of terms breach of which gives rise to a right to terminate) can also be classified as ‘conditions subsequent’,⁴² though not all ‘conditions subsequent’ are necessarily ‘conditions’ in that sense.

5.12  A contract will often contain provisions giving one or other of the parties an express right to terminate performance on the occurrence of certain contingencies.⁴³ Where such a contingency amounts to a breach of a term of the contract, it would be logical to conclude that the term in question was intended to be a condition, but this is not necessarily so.⁴⁴ On the contrary, as we shall see, the law draws a distinction for some purposes between termination for breach of condition at common law and termination pursuant to a express right conferred by the contract; in particular, a party who exercises an express right of termination given in the contract may be entitled to less in damages than one who terminates for breach of condition at common law.⁴⁵

5.13  That the law draws this distinction is not open to doubt, but the rationale for the distinction is not clear, nor is it always clear how to tell when a particular clause in the contract makes the relevant term a condition and when it merely confers an express right of termination.⁴⁶ This matter will be further explored later,⁴⁷ but in many cases the distinction will not be of any practical significance; if the only issue is whether the innocent party is entitled to terminate or not, it matters little whether that right arises from the contract alone or from the common law.⁴⁸ In the same way, given that the question whether the innocent party is entitled to terminate will generally be decided on the same basis whether it arises in the context of a contractual or common law right, it makes good sense to treat the two as the same for most purposes⁴⁹ whilst not forgetting that in some contexts the distinction can be crucial.

5.14  When is a term a ‘condition’ in this context?⁵⁰ The basic rule is as laid down by Blackburn J in Bettini v Gye:⁵¹

Though Blackburn J uses the older terminology of ‘condition precedent’, his approach still represents the law;⁵² deciding whether a term is a condition is basically a question of construction.⁵³ In this context we shall follow Carter in adopting the language of express and implied terms; hence a term can be made a condition either by express stipulation or by implication.⁵⁴

5.15  Given that a condition is a term of the contract breach of which gives rise to a right of termination, the most obvious ways of making a term a condition might seem to be either: (1) to call it a ‘condition’, or (2) to provide that breach of the term will give rise to a right of termination. However, one of the curious features of the law in this area is that neither of these methods will suffice.

5.16  A party to a contract will not be entitled to terminate for breach of a term merely because that term is called a ‘condition’ in the contract. In Schuler AG v Wickman Machine Tool Sales Ltd,⁵⁵ a contract gave the defendants the sole right to sell the plaintiff’s products, and stated that it was a ‘condition’ that the defendant’s representative visit certain firms at least once a week to solicit orders. Despite the use of this terminology, it was (p. 142) held by the House of Lords that the plaintiff could not terminate merely on the ground that some of the specified visits had not been made. As Lord Reid said, the more unreasonable a result the less likely that the parties could have intended it; if the plaintiffs’ contention were right, failure to make even one visit would have entitled them to terminate no matter how blameless the defendant might be.⁵⁶ The word ‘condition’ can be used in many different senses, and what this case indicates is that it is not enough for the parties to call a term a condition;⁵⁷ their intention must have been that, in the present sense, it should be one.

5.17  Nor will it be enough for the contract to specify a right of termination for breach of the term in question. Though it is assumed in some of the cases that the existence of such a right makes the term a condition,⁵⁸ this need not necessarily be so. Indeed, as previously indicated, in some contexts the law draws a clear distinction between termination for breach of condition and termination under an express stipulation in the contract, and this it could not do if there was no difference between the two. That said, there is no easy test for distinguishing the former case from the latter, and the question has not often been litigated. No doubt this is because in most cases the only issue is whether the innocent party can terminate, and in this context it matters little whether the right arises from the contract or at common law.⁵⁹ The question has, however, been considered on a number of occasions by the High Court of Australia. In Shevill v Builders Licensing Board ⁶⁰ a lease gave the landlords a power of re-entry for late payment of rent, but added that this was without prejudice to any other remedy they might have. The tenants having frequently failed to pay the rent on time, the landlords exercised the power of re-entry and then sought to recover as damages an amount equal to the rent payable over the balance of the term. The landlords argued that the effect of the contractual power of re-entry was to make the prompt payment of rent a condition,⁶¹ but this was rejected by the court. In the words of Gibbs J:

Or, as Brennan J put it five years later in Esanda Finance Corporation Ltd v Plessnig: ‘A stipulation which confers the right to terminate the hiring for any breach does not transform the non-essential terms into conditions.’⁶³ So it is not enough in this context for the contract to specify a right of termination for breach of the provision in question; something more is needed.

5.18  The converse of this can be seen in Legione v Hateley,⁶⁴ where a contract for the sale of land made time of the essence and gave the vendor the right to rescind and forfeit the deposit in the event of the purchaser’s default. However, it also specified that neither of the parties could enforce their rights without serving a notice giving the other party fourteen days to remedy the matter. The vendor having terminated for late completion, one of the key issues in the case was whether the court had jurisdiction to relieve the purchaser against forfeiture, and this depended to some extent on whether the vendor had terminated for breach of condition at common law or under an express contractual right. In the end it was decided that the effect of the clause making time of the essence was to elevate the duty of timely completion to the status of a condition, and that the effect of the notice provision was merely to regulate this common law right.⁶⁵

5.19  To what extent do these decisions provide us with a test for determining whether a right of termination for breach set out in the contract makes the relevant term a condition or not? No doubt the court in all these cases was concerned to construe the contract in a way that was least onerous for the party in default, but what they do indicate is that merely providing a right of termination is not enough; rather, as Carter suggests,⁶⁶ the contract must define the nature of the term itself rather than merely setting out the consequences of its breach.

5.20  The reason why labelling the term as a ‘condition’ is not enough is that the word can be used in so many different senses;⁶⁷ it therefore need not necessarily indicate that the parties intended the term to be a condition in the sense used in the present context. However, there are other words that may be less ambiguous; thus, for instance, it is clear that saying that time is ‘of the essence’ is enough to make timely performance a (p. 144) condition,⁶⁸ and Carter suggests that an express statement that some other term is ‘essential’ or words to that effect may bring about the same result.⁶⁹ Since the use of this sort of terminology puts the focus on the status of the term in question rather than on the consequences of its breach, there can be no question as to whether the intention was to make the term a condition in the full sense or merely to provide a contractual right of termination.

5.21  In many cases the question whether a particular term of the contract is a condition or not will have to be decided by implication. As in the case of implied terms generally,⁷⁰ the implication can be in fact or in law.

5.22  A term is implied in fact when, in the words of Lord Denning MR, the implication is based on ‘an intention imputed to the parties from their actual circumstances’.⁷¹ In the present context this covers cases where it is clear from the circumstances that the parties must have intended the term to be a condition. There are a variety of factors that may point towards this conclusion, and the list is by no means closed, but several key pointers are worth highlighting in this regard.

5.23  (i) What the parties said In some cases the course of negotiations between the parties will make it clear that some particular term was regarded as of crucial importance. In Bannerman v White,⁷² a case involving the sale of hops, the buyer asked the seller whether sulphur had been used in their cultivation, adding that if it had he would not even ask the price. The seller assured him that it had not, and the buyer bought the hops on this basis. It was then discovered that the seller’s representation was inaccurate. The jury having found as a fact: (1) that the seller had not wilfully made a false representation at the time of the contract, but (2) that the buyer had purchased the hops on the faith of that representation,⁷³ the Court of Exchequer Chamber held that the buyer was entitled to reject the hops and sue for damages; in the words of Erle CJ, the intention of the parties was clearly that the contract should be ‘null’ if sulphur had been used.⁷⁴ Here the case turned on a statement by the innocent party, but the same principle can (p. 145) apply to a statement by the party in default. In Harling v Eddy⁷⁵ the defendant put his cow up for auction, but it was obviously in poor shape and nobody was willing to bid for it. The defendant then said that there was nothing wrong with the cow, that he would absolutely guarantee her in every respect, and that he would be willing to take her back if she turned out not to be what he stated she was, and on this basis the cow was sold to the plaintiff. However, the cow later turned out to be suffering from tuberculosis and died before the plaintiff could return it. It was held by the Court of Appeal that the defendant could not rely on a clause in the auctioneer’s catalogue stating that no warranty was given; the circumstances clearly indicated that this was more than a mere warranty. In the words of Evershed MR:⁷⁶

The defendant’s statement having, therefore, included words to the effect, ‘If there is anything wrong I will take it back’, it seems to me quite plain that the words which he used could not have been intended merely as a warranty; for a warranty would give no right of rejection to the purchaser. The final words involve necessarily a right in the purchaser to reject, that is, to return the animal; and they convert the statement, to my mind, from a warranty into a condition.

5.24  (ii) The importance of the term generally It has been recognized from the earliest days of the doctrine that a term is more likely to have been intended as a condition if it relates to a matter of importance. In the words of Lord Mansfield:⁷⁷

The distinction is very clear; where mutual covenants go to the whole of the consideration on both sides, they are mutual conditions, the one precedent to the other: but where they go only to a part, where a breach may be paid for in damages, there the defendant has a remedy on his covenant, and shall not plead it as a condition precedent.

Whether a term goes to the ‘whole consideration’, in this sense, is a matter of looking at its importance within the contract as a whole, or as Kerr LJ puts it ‘making of what is in effect a value judgement about the commercial significance of the term in question’.⁷⁸ Thus in Bentsen v Taylor, Sons & Co (No 2)⁷⁹ a statement in a charterparty that the ship was ‘sailed or about to sail’ was held to be a condition, on the grounds that such a statement was of crucial importance in contracts of this kind. In the words of Bowen LJ:⁸⁰

. . . the non-accuracy of such a statement is likely to affect the very foundation of the adventure, because its inaccuracy would displace the only basis, or one of the chief bases, of the calculation on which the parties would act. It is obvious that when you are dealing with a voyage, the contemplated date of its commencement may be of the utmost importance. Having regard to the time of the year at which it is intended to (p. 146) prosecute the voyage, delay in its commencement, if it is protracted beyond a certain point, may in many cases be so vital a matter as to render the voyage impossible, or the risk may be so much increased as to make it no longer possible to have a voyage of the same kind.

5.25  (iii) The importance of the term to the innocent party The key question in this context will often be the likely importance of the term to the other party. Thus in Behn v Burness⁸¹ a stipulation in a charterparty as to the current location of the ship was held to be a condition on the basis that this might be the only datum on which the charterer could found his calculations of the time of the ship’s arriving at the port of loading, and one of the reasons why time is generally held to be of the essence of delivery in a commercial contract for the sale of goods is that in such cases the buyer is likely to have arranged his or her affairs on the basis that the goods in question would be delivered on the date specified.⁸² In a contract for the sale of land, time is not so important,⁸³ but even here time will be of the essence if the vendor knows that the purchaser wants the property for immediate use.⁸⁴ In the same way, terms regarding the payment of deposits may be regarded as conditions on the basis that without the deposit the seller does not know where he stands, and has nothing to show for the contract except a fetter on his freedom to deal with the property.⁸⁵ According to Diplock LJ, a term will be a condition if it can be predicated that any breach will result in the innocent party being deprived of substantially the whole benefit which it was intended he should obtain from the contract,⁸⁶ but the likely effect of the breach does not have to be as extreme as this for a term to be classified in this way;⁸⁷ rather, it is a matter of degree to be taken into account by the court. The more serious the likely consequences for the innocent party, the more likely it is that the term will be classified as a condition on this basis.

5.26  (iv) The balance of disadvantage Another way the courts have looked at the problem is by considering the balance of disadvantage, that is to say the disadvantage to the party in default if the term is construed as a condition as against the disadvantage to the innocent party if it is not. Thus in the early case of Boone v Eyre,⁸⁸ which involved the sale of a plantation with the slaves on it in return for an annuity, Lord Mansfield refused to allow the vendor’s inability to make good title to all the slaves to prevent him from recovering the annuity, saying that if the purchaser’s plea was allowed the seller’s lack of title to a single slave would be a bar to the action;⁸⁹ in other words, such a finding would (p. 147) cause detriment to the vendor far in excess of any possible benefit to the purchaser. A similar approach can be seen in cases involving time limits in the context of rent review provisions; one of the reasons given for not treating time as of the essence of these provisions⁹⁰ is that, in the words of Slade LJ, ‘the detriment to the landlord of losing his review altogether by failure to adhere strictly to the stipulated time limit will be wholly disproportionate to the disadvantage to the tenant of a delay in the assessment of the rent’.⁹¹ As Lord Roskill says, the court must always strike a balance between on the one hand the need for certainty and on the other the desirability of not allowing termination where the breach complained of is highly technical and where damages would clearly be an adequate remedy.⁹² It is, however, important to note the precise nature of the balancing exercise involved in this context. The law does not say that a provision will only be construed as a condition in cases where the disadvantage to the innocent party if the court does not do so outweighs the disadvantage to the party in default if it does. After all, the whole point of a condition is to allow the innocent party to terminate without having to show that he or she has been disadvantaged by the breach in the particular case.⁹³ Rather, it is a guide to the construction of the contract, the question being whether it is the proper intention to impute to the parties, from the words which they have used, the intention that the party in default should lose his or her right to enforce the contract for any and every breach of the term under consideration. What is crucial here is not the actual effect of the breach, but of its likely effect at the time the contract was made.⁹⁴ As Carter points out, the application of this test is a matter of commercial judgment.⁹⁵ The fact that construing a term as a condition would cause a totally disproportionate disadvantage to the party in default may be a good indicator that he or she never agreed to such a construction in the first place,⁹⁶ but it is no more than an indicator, and ultimately other considerations, such as the need for commercial certainty, may outweigh the need to produce a result that is fair to the parties in the individual case.

5.27  (v) The nature of the subject matter Whether a term is construed as a condition may depend to some extent on the matters with which it deals. A good illustration of this is Sharp v Christmas,⁹⁷ where a buyer of a crop of potatoes agreed to take them by a (p. 148) certain date but failed to do so. The presumption that time was of the essence in the commercial context was held to be strengthened here on the grounds that the potatoes were a perishable commodity; in the words of Lord Esher MR, the buyer could not be allowed to leave them in the farmer’s hands until they became rotten.⁹⁸ In a sale of land, time is generally not of the essence,⁹⁹ but it will be different if the obligation is to transfer property of a wasting or fluctuating value,¹⁰⁰ for in such cases the efficacy of the bargain depends on prompt performance by both transferor and transferee. Indeed, it has been argued that it is this principle which underlies the oft-cited presumption that time is of the essence in ‘mercantile’ or ‘commercial’ contracts,¹⁰¹ for when property is sold to be used in commerce or business rather than for private consumption or use, it is likely that the buyer will have arranged his or her affairs, and made other contracts, on the assumption that performance will be forthcoming at the relevant time.¹⁰² This applies with particular force to the time of delivery in a commercial contract for the sale of goods, where the buyer may very well have made a subsale on the footing that he or she would have the goods at a certain time; hence the general rule that time is of the essence with regard to this obligation.¹⁰³

5.28  (vi) Interrelationship with other obligations A term of the contract is sometimes construed as a condition on the ground that the proper performance of other obligations in the same contract depends on it.¹⁰⁴ Thus time will often be of the essence of an obligation where timely performance of that obligation is necessary to ensure timely performance by the other. In Toepfer (Hamburg) v Lenersan Poortman NV (Rotterdam)¹⁰⁵ a cif contract for the sale of rapeseed provided for ‘payment net cash against documents and/or delivery order on arrival of the vessel at port of discharge but not later than 20 days after date of Bill of Lading’. The bill of lading was issued on 11 December 1974, but delivery orders were not tendered to the buyer until the following February. It was held that the buyer was entitled to reject the documents, since the clause concerning the time of tender was one which bound both parties and time was of the essence; the buyer’s obligation to pay depended on prompt tender by the seller. Again, it was held in Haugland Tankers AS v RMK Marine¹⁰⁶ that where a shipbuilding (p. 149) contract gave the buyer an option to purchase an extra vessel on payment of a commitment fee, time was of the essence of the payment no less than of the option. In the same way, clauses relating to the time of nomination are often conditions, as important obligations of the other party may depend on this being done promptly.¹⁰⁷ The same reasoning has been used in cases where a rent review mechanism is accompanied by a ‘break’ clause, which gives the tenant the right to surrender the lease by a certain date if he or she does not wish to pay the revised rent. Obviously it would defeat the purpose of such a clause if a landlord was allowed to have the rent reviewed when it was too late for the tenant to exercise the break clause, and for this reason it has been held that where rent review provisions contain such a clause, time will be presumed to be of the essence with regard to the revision of the rent.¹⁰⁸ In Bunge Corporation (New York) v Tradax Export SA¹⁰⁹ it was held on this basis that a term requiring fifteen days’ notice of readiness to load was a condition; in the words of Popplewell J, performance of the nomination by the buyers was necessary in order to enable the sellers to fulfil their obligation to nominate the loading port and ship the goods.¹¹⁰ However, in Spar Shipping AS v Grand China Logistics Holding (Group) Co Ltd¹¹¹ the same was held not to apply to the prompt payment of hire under a charterparty; it was not, in the words of Gross LJ, a condition precedent to the performance by Spar of their obligations under the charterparties in the same ‘direct or immediate sense’ that the terms were interdependent in Bunge v Tradax.¹¹² Put another way, it could not be said that any failure to pay hire punctually in advance, no matter how trivial, would derail Spar’s performance under the charterparties.

5.29  (vii) Interrelationship with contractual rights of termination Courts are sometimes confronted with the question whether the provision of a contractual right of termination excludes the right to terminate at common law for breach of condition. As will be seen, the general rule is that it does not,¹¹³ but the scope of such a right may cast light on the issue whether a particular term in the contract was intended to be a condition in the first place. In Schuler AG v Wickman Machine Tool Sales Ltd ¹¹⁴ the contract gave the plaintiffs sole selling rights in relation to products manufactured by the defendants, clause 7 of the agreement providing that it was a ‘condition’ of the agreement that the plaintiffs should send salesmen to visit certain firms on a weekly basis. The contract (p. 150) also set out a procedure whereby in the event of any ‘material breach’ by either party the other could call on the breach to be remedied, and terminate the contract if this was not done within a certain time. The defendants sought to terminate on the grounds that the plaintiffs had breached clause 7, but it was held by the House of Lords that despite the terminology used to describe the clause in question it could not have been intended to be a condition in the strict sense of the word. After all, it would have been exceedingly odd if the parties had intended to allow material breaches to be remedied whilst giving a peremptory right of termination for some breaches that were not material. In this context a lot depends on the ambit of the express right in question. In the case under discussion the limited ambit of the express right suggested that the parties did not intend it to coexist with a wider common law right, but different considerations will apply where the express right itself gives a wider power of termination than would have been available at common law. This will be so particularly where the express right of termination does not depend on proof of breach at all.¹¹⁵

5.30  (viii) The breadth of the obligation The broader the ambit of the obligation in question, the less likely it is to be construed as a condition. Thus where a contractual provision embraces a wide variety of matters ranging from the critically important to the relatively trivial, it is difficult if not impossible to impute to the parties a common intention that any failure to carry out any of the obligations diligently and promptly, however insignificant the breach and however trivial the consequences, is to be treated without more as a repudiatory breach of an essential term.¹¹⁶ In the same way, it has been said that time is more likely to be of the essence in relation to a term requiring a single act to be done than where it covers a variety of acts.¹¹⁷ In The Hongkong Fir¹¹⁸ the Court of Appeal was confronted with the issue whether a charterer could terminate the charter for delays caused by unseaworthiness. One of the arguments on behalf of the charterer was that the obligation to provide a seaworthy ship was a condition, but this was rejected by the court. In the words of Upjohn LJ:¹¹⁹

Why is this apparently basic and underlying condition of seaworthiness not, in fact, treated as a condition? It is for the simple reason that the seaworthiness clause is breached by the slightest failure to be fitted ‘in every way’ for service. Thus, to take examples from the judgments in some of the cases . . . if a nail is missing from one of the timbers of a wooden vessel or if proper medical supplies or two anchors are not on board at the time of sailing, the owners are in breach of the seaworthiness stipulation. It is contrary to common sense to suppose that in such circumstances the parties (p. 151) contemplated that the charterer should at once be entitled to treat the contract as at an end for such trifling breaches.

This approach should be contrasted with the greater readiness of the courts to construe time stipulations as conditions. Indeed, an attempt to apply the reasoning in The Hongkong Fir to such a stipulation was firmly rejected by the House of Lords in Bunge Corporation (New York) v Tradax Export SA.¹²⁰ In the words of Lord Wilberforce:¹²¹

The point here is not that providing a ship that is ready on time is necessarily more important than providing one which is seaworthy. Rather, the point is that where the seaworthiness stipulation can be broken in a great many ways, a time stipulation can only be broken in one way.

5.31  (ix) Availability of other remedy Termination for breach is a serious matter, and the courts will be less likely to construe a term as a condition where the innocent party has some other suitable remedy for the breach. Thus in Lamprell v Billericay Union¹²² the provision of liquidated damages for delay was held to prevent time being of the essence with regard to the completion of the work, and in Inman SS Co v Bischoff  ¹²³ it was held by the House of Lords that the seaworthiness of the ship could not have been intended as a condition precedent to the right of the owner to recover freight under a charterparty, since the contract provided for deductions of freight in that instance. Indeed, in Aktieselskabet v Arcos Ltd ¹²⁴ Sargant LJ observed that one of the functions of a demurrage clause in a charterparty was to prevent the owners from arguing that they had the right to withdraw the ship for delays by the charterer. On the other hand, one of the reasons why time is said to be of the essence in relation to unilateral contracts and options is that refusal to perform is the only remedy available to the promisor if the time limit is not kept.¹²⁵ Indeed, it has been argued that one of the reasons why termination is so often an issue in relation to time stipulations is that since delay will often cause no calculable economic loss the only possibilities are either to allow the innocent party to terminate or to ignore the time stipulation altogether.¹²⁶

(p. 152) 5.32  (x) Options Strictly speaking, the discussion of unilateral obligations and options is outside the remit of the present book;¹²⁷ though the principles governing the refusal of the promisor to perform in such cases are akin to termination,¹²⁸ such termination is not, ex hypothesi, termination for breach of contract. Nevertheless, the considerations taken into account by the courts are very similar, and for that reason options are worth discussing in the present context. The general rule is that any conditions precedent to the exercise of an option must be strictly complied with before the promisor can be called on to perform.¹²⁹ This is well illustrated by the early case of Lock v Wright,¹³⁰ where the defendant covenanted by deed poll to pay a sum of money to the plaintiff once the plaintiff had transferred certain stock to him. The court held that the plaintiff could not sue on the promise without averring tender or delivery, the reasoning being that since there was no counter-promise by the plaintiff to do this, refusal to perform was the only remedy available to the defendant. Again, in United Dominions Trust (Commercial) Ltd v Eagle Aircraft Services Ltd ¹³¹ the Court of Appeal drew a clear distinction between ‘synallagmatic’ contracts, where the right to terminate might depend on the effect of a failure in performance, and ‘unilateral’ contracts, where conditions precedent had to be strictly complied with before the promisor would be under any obligation at all.¹³² The reasoning in these cases seems to be as given in the previous paragraph; whereas in the case of a bilateral or synallagmatic obligation damages are available for deficiencies in performance by the other party, termination (or rather refusal to perform) is the only remedy available in respect of one that is purely unilateral.¹³³

5.33  (xi) Commercial contracts It has sometimes been said that terms are more likely to be construed as conditions in commercial contracts,¹³⁴ and that substantial and important provisions in a mercantile contract relating to the time, place, or mode of shipment of the goods are to be treated as conditions unless the contrary intention is manifest.¹³⁵ This is said in particular to apply to time stipulations,¹³⁶ a principle which ‘may not be justifiable by any presumption of fact or rule of law’, but is rather ‘a practical expedient (p. 153) founded on and dictated by the experience of businessmen’.¹³⁷ This approach can be supported on the basis of the need for certainty in the commercial context, where the parties will frequently have entered into other transactions dealing with the same subject matter, and will need to know where they stand without having to engage in time-consuming and expensive litigation.¹³⁸ On the other hand, to label a contract ‘commercial’ or ‘mercantile’ and then to conclude that all the terms of that contract must be conditions is far too crude an approach;¹³⁹ after all, nothing could be more ‘commercial’ or ‘mercantile’ than a contract between businessmen for the sale of goods, but in relation to one very important obligation, that of payment, time is presumed not to be of the essence.¹⁴⁰ In the same way it was held in Spar Shipping AS v Grand China Logistics Holding (Group) Co Ltd,¹⁴¹ overruling a long line of authority to the contrary,¹⁴² that the timely payment of hire under a charterparty was not in the nature of a condition, one reason being as we have seen that late payment (as opposed to the late performance of other obligations), is less likely to have a significant effect on the performance of other obligations under the same charterparty.¹⁴³ All in all, though conditions are still more likely to be found in commercial contracts than in those which are not; each contract, and indeed each obligation, must be considered on its own merits.

5.34  (xii) Executed and executory contracts It was pointed out by Bridge in 1983¹⁴⁴ that ever since Boone v Eyre¹⁴⁵ the courts have been more willing to construe terms as conditions where the contract is purely executory than where the innocent party has received some kind of benefit under it. This result arises naturally from the approach adopted in that case; a covenant could hardly be said to ‘go to the entire consideration’ where despite its breach the innocent party had received some if not all of the benefit of the contract.¹⁴⁶ This factor may be another reason why the courts have taken a more strict approach in this respect to mercantile contracts—where any such benefits can often be returned to the party in default—than to building contracts or sales of land (p. 154) where there is a greater possibility of unjust enrichment. Of course, an obvious objection to this kind of ‘execution analysis’ is that a breach of condition need not necessarily have catastrophic effects,¹⁴⁷ and that in any event the question whether a term is a condition or not is one of construction,¹⁴⁸ and cannot therefore be affected by later events. Nevertheless, the accrual of benefit to the innocent party can still detract from his or her right to termination in three ways. First of all, a party who voluntarily accepts the benefit of the other party’s performance in the wake of a breach of condition may be held to have elected to affirm the contract.¹⁴⁹ Secondly, where the effect of termination would be to work a forfeiture on the party in default, relief may be granted by the courts.¹⁵⁰ Last but not least, the fact that construction of a term as a condition leads to unjust results may be an indication that such a construction was never intended in the first place.¹⁵¹

5.35  A term is implied by law when, in the words of Lord Denning MR, the court imposes duties on one or other party in the context of ‘relationships of common occurrence’, such as buyer and seller, employer and employee, landlord and tenant, and so on.¹⁵² These obligations differ from terms implied by fact in that they depend not on the intention of the parties in the particular case but on more general considerations.¹⁵³ In the present context, a condition is implied by law when it can be said that certain terms in certain types of contract are always conditions unless the parties provide otherwise.¹⁵⁴ Such implication can be by statute or by the common law.

5.36  (i) Condition implied by statute Conditions implied by statute can be found in a number of contexts. Thus, for instance, section 42 of the Marine Insurance Act 1906 provides that in certain cases there is an implied condition that the adventure should be commenced within a reasonable time,¹⁵⁵ and section 8 of the Landlord and Tenant Act 1985 implies into certain leases a condition that the premises are fit for human habitation at the commencement of the term.¹⁵⁶ Other obvious examples of implied conditions of this sort are to be found in the obligations imposed on the seller with regard to title, correspondence with description, and quality in the Sale of Goods Act 1979,¹⁵⁷ and similar conditions have been implied by statute into other contracts involving the (p. 155) supply of goods and services.¹⁵⁸ In all of these cases the provision in question is to be construed as a condition in all contracts of that nature, unless and so far as the parties are allowed to provide otherwise.¹⁵⁹

5.37  (ii) Condition implied by common law A condition may also be implied into contracts of a certain kind by the common law. This was the case prior to the Sale of Goods Act in relation to the implied terms regarding correspondence with description¹⁶⁰ and quality,¹⁶¹ and similar examples can be seen in the present law. Thus in a contract for the carriage of goods by sea there is an implied condition that the ship will not deviate from the agreed voyage,¹⁶² and in a lease there is an implied condition that the tenant shall not deny the landlord’s title.¹⁶³ Again, it is now settled by authority that a statement in a charterparty that the ship is ‘expected ready to load’ on a certain day is a condition,¹⁶⁴ as is the time of delivery in a contract for the sale of goods.¹⁶⁵ No doubt the classification of these terms as conditions can often be justified in terms of their importance within the individual case, but with each succeeding decision on the point this factor becomes less important and the weight of previous authority more so;¹⁶⁶ where the term was originally construed as a condition by implication of fact, it is now a condition by implication of law. The designation of terms as conditions on this basis without any reference to the particular contract in which they appear can be criticized on the ground that it enables the innocent party to terminate performance in cases where the breach has caused minimal or no loss, and where he or she is merely looking for an excuse to escape from an unprofitable bargain.¹⁶⁷ However, in cases of this sort these (p. 156) considerations are outweighed by the need for certainty;¹⁶⁸ in the commercial context parties need to know where they stand, and the classification of terms as conditions on this basis enables this end to be achieved.

5.38  Before leaving the topic of conditions, it is worth spending some time dealing with the special case of time stipulations. One reason for this is that a good many of the cases on conditions that we have been considering involve such stipulations. The other is the divergent approaches of the common law and equity to time stipulations. As the ensuing discussion will show, attempts have been made to draw these together into a single body of doctrine, but these have not met with unqualified success.

5.39  A good place to start is with Maitland’s famous Lectures on Equity, where the learned author summarized the different approaches of the common law and equity to time stipulations in the following words:¹⁶⁹

As a general rule a man can not sue upon a contract at law if he himself has broken that contract, though of course, as you know, there are many exceptions to this statement. Now in contracts for the sale of land it very frequently happens that a breach of the terms of the contract has been committed by the person who wishes to enforce it. Such a contract will be full of stipulations that certain acts are to be done within certain times . . . Well you know that equity held as a general rule these stipulations as to time were not of the essence of the contract—that for example a purchaser might sue for specific performance although he had not in all respects kept the days assigned to him by the contract of sale for his various acts. This was the general rule—these stipulations as to time were not essential unless the parties declared them to be so.

Hence the saying that time was generally of the essence at common law but not in equity.¹⁷⁰ But to what extent was that the case in the past, and to what extent is it the case today?

5.40  Maitland’s assertion that as a general rule a man cannot sue on a contract at law if he himself has broken that contract would seem to imply that all terms of the contract were effectively regarded by the common law as conditions, or were at least presumed to be conditions unless a contrary intention was shown. However, as we have already seen,¹⁷¹ this was far from being the case; failure of performance by the party in default would excuse the innocent party from having to perform a dependent covenant, but not one that was independent or concurrent.¹⁷² Indeed, far from there being a presumption of dependency, it seems that covenants were originally treated as independent unless a contrary intention was expressed.¹⁷³ Nor was there any general rule that time was of the essence at common law; while this may have been so in some cases (for instance the date of shipment in a contract for the sale of goods,¹⁷⁴ or the time of sailing in a charterparty)¹⁷⁵ it was not in others (for instance the time of payment,¹⁷⁶ or the time of completion in a building contract).¹⁷⁷ Indeed, time was not always of the essence at common law even in the conveyancing context.¹⁷⁸ However, that there was some difference of approach cannot be denied. If there had not been, the courts of equity would not have been in the practice of granting injunctions to prevent the innocent party taking proceedings at law on the footing that the contract had been terminated, or of granting specific performance in cases where such a decision had already been made.¹⁷⁹

5.41  Whatever the position of the common law may have been, there is no doubt that the courts of equity were willing to take a more relaxed approach to the breach of time stipulations, at least in the conveyancing context. This equitable jurisdiction was exercised in two ways. The first was by granting a decree of specific performance to a party who was ready to proceed to completion even though he or she may have failed to meet the set completion date.¹⁸⁰ The other was by granting what was known as a ‘common injunction’ to prevent the other party bringing an action at law on the basis that the (p. 158) contract had been lawfully terminated.¹⁸¹ In relation to time stipulations, as in relation to mortgages and penalties, equity looked to the substance rather than the form, and whatever the common law might say would not allow a party to withdraw from the contract simply for failure to meet the date set for completion.¹⁸² Rather, a court would relieve against such failure provided that the other party was adequately compensated and that the damage caused by the delay was not great nor the substance of the covenant destroyed by it.¹⁸³

5.42  However, this did not mean that equity was prepared to ignore time stipulations altogether, or that a decree of specific performance would be granted as a matter of course. The legal construction of the contract was the same in equity as it was at law,¹⁸⁴ which meant that time could be of the essence in equity no less than at law; in particular, this could be done by ‘direct stipulation’ (where the parties had expressly indicated an intention that this should be the case)¹⁸⁵ or by ‘necessary implication’ (where the surrounding circumstances showed that timely performance was essential).¹⁸⁶ In such cases equity would refuse to intervene, and the parties would be duly left to their position at common law.

5.43  A major change in the relationship between law and equity came with the passing of the Judicature Acts 1873 and 1875, the main purpose of which was to amalgamate the superior courts into a single Supreme Court of Judicature which would administer both common law and equitable doctrine. As far as time stipulations were concerned, the key provision was section 25(7) of the Act of 1873, which read as follows:

Stipulations in contracts, as to time or otherwise, which would not before the passing of this Act have been deemed to be or 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.

(p. 159) 5.44  On the face of it this seemed to prescribe for the courts a much more relaxed approach to time stipulations, but in the end it made very little difference. As far as the ‘construction’ of such stipulations was concerned, equity had always followed the law in any event,¹⁸⁷ and when it came to the question of their ‘effect’ it was eventually affirmed by the House of Lords in Stickney v Keeble¹⁸⁸ that the key issue was the same as it had always been, namely whether the court would be ready to grant a decree of specific performance. In this case it was held that following protracted delays in completion by a vendor of land the purchaser was entitled to a declaration that the contract was at an end and to the recovery of his deposit with costs. At the time of the action, the vendor had put it out of his power to perform the contract by selling the land to a third party, and this was held to be fatal to his case, despite his argument that section 25(7) of the Judicature Act made the availability of specific performance irrelevant.¹⁸⁹ In the words of Lord Parker:¹⁹⁰

My Lords, I cannot give to the section in question the interpretation for which the respondents contend. It means, in my opinion, that where equity would prior to the Act have, for the purposes of decreeing its own remedies, disregarded a stipulation as to time and restrained an action at law based on the breach thereof, the Courts constituted by the Act are for the purpose of giving common law relief to disregard it in like manner. In considering whether it would give relief by restraining proceedings at law the Court of Chancery took cognizance of everything which had happened up to the date of the decree, and in applying s. 25, sub-s. 7, of the Act, everything up to the date of judgment ought, in my opinion, to be similarly taken into account. The section cannot in my opinion mean that the rules as to time laid down by Courts of Equity in certain cases, for certain purposes, and under certain circumstances only, shall be applied generally and without inquiry whether the particular case, purpose, or circumstances are such that equity would have applied the rules. If since the Judicature Acts the Court is asked to disregard a stipulation as to time in an action for common law relief, and it be established that equity would not under the then existing circumstances have prior to the Act granted specific performance or restrained the action, the section can, in my opinion, have no application, otherwise the stipulation in question would not, as provided in the section, receive the same effect as it would prior to the Act have received in equity.

Lord Parker had already observed that, prior to the Judicature Acts, the vendor could only have obtained relief by filing a bill for specific performance and a common injunction to restrain the action. The injunction would only have been an adjunct to the main purpose of the action, namely the claim for specific performance. Since specific performance would not have been available to the vendor in the present case, he could (p. 160) not have the injunction either, and since prior to 1873 he would have been unable to restrain the purchaser’s claim for the return of his deposit, that claim could not now be denied.¹⁹¹

5.45  The effect of all this was more or less to turn the clock back to where it was prior to the Judicature Acts. Though it was no longer necessary to go through the old procedure of filing a bill for specific performance and claiming for a common injunction, it still had to be asked what the result would have been if that procedure had been followed. This completely scotched any idea of the equitable rules having superseded those of the common law as to time stipulations; indeed, it ensured that those rules continued to be a specialized branch of the law mainly of interest to property lawyers.

5.46  Despite this setback, it could never be realistic to keep the equitable rules as to time stipulations indefinitely, as it were, in a sealed box, all the less so now all courts had to administer both common law and equitable rules. As well as that, the parallels between the two were plain for all to see; thus, for instance, equity no less than the common law allowed time to be made of the essence either by express stipulation or by implication, and the refusal by equity in such cases to grant specific performance was equivalent in effect to saying that the contract was terminated. A further attempt to consolidate the two sets of doctrines was made by the House of Lords in United Scientific Holdings Ltd v Burnley Borough Council, decided in 1977.¹⁹² The issue in the case was whether time was of the essence for the exercise of a rent review clause in a commercial lease, and it was argued by the tenants on the basis of Stickney v Keeble¹⁹³ that equity had no jurisdiction in a case of this sort,¹⁹⁴ and that therefore the principles of the common law applied, whereby time was to be regarded as being of the essence in a unilateral option.¹⁹⁵

5.47  The House of Lords held that the provisions in question were not options in the true sense and that time was therefore not of the essence, but of more interest are the general observations made by members of the House on the scope of the equitable jurisdiction as to time. Thus care was taken to limit the observations of Lord Parker in Stickney v Keeble to the facts of the case, Lord Diplock saying that they were not to be taken as determining the question as to when time stipulations were to be regarded as of the essence of the contract.¹⁹⁶ He also suggested that following the Judicature Acts the two (p. 161) systems of substantive and adjectival law formerly administered by the common law courts and the Courts of Chancery had been effectively ‘fused’, and that whilst it might have been true for a while to say that the two streams of jurisdiction ran side by side and did not mingle their waters, this had long since ceased to be the case.¹⁹⁷ In the same vein, Lord Simon suggested that the time had come to restate the equitable principles relating to time stipulations in the language of the common law. In the words of Lord Simon:¹⁹⁸

Discussion of stipulations as to time has generally turned on the historic distinction between time being or not being of the ‘essence’ of a contract. . . But the fused law has continued to evolve since 1875; and it has developed a more sophisticated approach to contractual terms. . . 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 (c) such that no breach does more than give a right to damages (if any) . . . (‘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.

What Lord Simon was essentially trying to do here was to restate the equitable rules as to time in the common law language of ‘condition’, ‘warranty’, and ‘innominate term’. To what extent, then does it still make sense to talk about an equitable jurisdiction in this context?

5.48  Whatever one’s views may be on the extent of the so-called ‘fusion’ between law and equity,¹⁹⁹ there is no doubt that Lord Simon’s restatement holds true for the vast majority of cases.²⁰⁰ The construction of contracts is and always has been the same at law and in equity;²⁰¹ to say that time has been made expressly of the essence is more or less the same as saying that timely performance is a condition of the contract;²⁰² for it to be made so by implication involves consideration of the same factors as apply in relation to any other kind of term.²⁰³ However, there are still some situations where the law is (p. 162) somewhat more complicated, and where Lord Simon’s formulation therefore needs to be treated with care.

5.49  There is nothing in United Scientific Holdings Ltd v Burnley Borough Council ²⁰⁴ to prevent the court treating time as of the essence in the commercial context. In Bunge Corporation (New York) v Tradax Export SA²⁰⁵ the question arose before the House of Lords as to the status of a term in an fob contract requiring the buyers to give at least 15 days’ notice of readiness to load. The buyers argued on the basis of United Scientific Holdings Ltd v Burnley Borough Council that time was no longer presumed to be of the essence in cases of this sort,²⁰⁶ but the House of Lords were having none of it. Whilst time might not always be of the essence in the commercial context, there were clearly cases where the need for certainty and the interdependence of other obligations on the prompt performance of the term in question required a term to be construed in such a way.²⁰⁷ In particular, there was no presumption against time being of the essence where the courts could infer from the nature of the contract or the surrounding circumstances that the parties regarded time stipulations as of the essence of their bargains, most notably in mercantile contracts.²⁰⁸ Whilst it was not necessarily helpful in determining whether a particular term was to be construed as a condition by attaching a particular label to the contract, the need for certainty in mercantile contracts was often of great importance and sometimes might well be a determining factor in deciding the true construction of a particular term in such a contract.²⁰⁹ That was certainly the case before United Scientific Holdings Ltd v Burnley Borough Council, and it remains the case at the present day.²¹⁰

5.50  While it seems clear that timely performance will be made a condition by use of the actual formula ‘time is [or shall be] of the essence’,²¹¹ giving the innocent party the right to terminate in the event of late performance by the party in default will not necessarily have this effect. As we have seen, the granting of a contractual right of termination for breach of a particular term does not necessary make that term a condition in the full sense,²¹² and this applies to time stipulations no less than to any other kind of stipulation.²¹³

5.51  The key to the old equitable jurisdiction to time was, as already indicated, the granting of specific performance to a party in default despite the fact that he or she had failed to perform on time.²¹⁴ Where such a decree is granted we can still say that time is not of the essence, for the fact that the innocent party is still under a duty to perform his or her primary obligations necessarily excludes termination for breach of condition.²¹⁵ However, the converse is not so; the fact that time is not of the essence does not necessarily mean that specific performance will be available, for it may be withheld on other grounds.²¹⁶ To put it another way, the availability of specific performance in cases of this sort is a sufficient indication that time is not of the essence, but not a necessary one.

5.52  Another relevant factor in the present context is the jurisdiction of equity to grant relief against forfeiture.²¹⁷ As indicated in Chapter 4, the extent to which this can be given to a party in breach of an essential time stipulation is open to doubt,²¹⁸ but it is clear that the jurisdiction only applies to contracts involving the transfer of proprietary or possessory rights.²¹⁹ The cases also seem to indicate that such rights must be in existence at the time when the relief is sought; the position being that whereas equity may protect a party in breach of an essential time stipulation from being deprived of a possessory or proprietary interest that he or she already has, it will not go so far as to insist on that party being allowed to acquire such an interest that he or she does not yet have.²²⁰ However, where these conditions are met there is nothing to prevent the court from granting relief in appropriate cases,²²¹ and where it does so the position is not dissimilar to that which prevailed prior to the Judicature Acts, the right of the innocent party to terminate being limited or even excluded in so far as it would be unconscionable for him or her to insist on it. To that extent it may still make sense to say that time is of the essence at common law, but not in equity.