Time is of the Essence: When Late is No Better Than Never
Contracts for the purchase and sale of real property and other commercial contracts often contain a clause that says “time is of the essence” in respect of certain or all contractual obligations (a “Timing Clause”). Many parties sign contracts without given due consideration to the full impact of a Timing Clause or otherwise hold the belief that a Timing Clause is merely part of a standard form contract and would not be strictly applied.
Briefly put, a Timing Clause requires one or more parties to a contract to perform certain obligations by a specific date and time, failing which, the offending party(ies) will be considered to have materially breached the contract.
In the case of Gill v Bal, 2017 BCSC 2015 (CanLII) the purchasers learned that there can be severe consequences for even the smallest of breaches of a Timing Clause.
In Gill v. Bal, the original purchaser agreed to purchase a property from the defendants and entered a contract that included a completion date of on or before April 25, 2016, a requirement for documents required to give effect to the contract to be delivered to the Land Title Office on or before 4:00 PM on April 25, 2016 and a Timing Clause.
The contract was later assigned to the plaintiffs and an extension of the completion date to April 26, 2016 was granted when the plaintiffs could not arrange for financing in time.
On the day of completion:
- the vendors’ notary forwarded executed transfer documents including everything needed from the vendors to complete the transaction;
- at 4:00 PM, the purchasers’ notary was not in a position to complete;
- at 4:11 PM, the vendors’ notary wrote to the purchasers’ notary confirming their understanding that the purchasers were unable to complete the purchase and the vendors had remained ready, willing and able to complete;
- at 4:19 PM, the vendors’ notary wrote again and, among other things, wrote that the purchasers’ notary was not authorized to make use of the transfer document; and
- at 5:36 PM, the purchasers’ notary advised the purchasers were now in the position to complete and the vendors advised that they refused to complete.
The vendors subsequently entered into a different contract of purchase and sale with a purchase price increased by $149,000. The purchasers commenced an action for specific performance seeking to force the vendors to sell on the original terms or, alternatively, damages. The vendors counterclaimed for breach of contract and wrongful filing of a certificate of pending litigation. The vendors additional sought damages in respect of additional financing costs they incurred as a result of having to find alternative financing while the dispute with the purchasers made anticipated purchase funds unavailable for the purchase of their new home.
In resolving the dispute, the court found that the Timing Clause had not been waived and, even if it had, the contract required that the purchasers be in a position to complete the transaction by 4:00 PM on April 26, 2016, which they were not. As a result, the purchasers had breached the contract.
Despite the vendors selling the subject property for more money than they would have under the original contract, the court awarded the vendors $25,450.10 from the purchasers in respect of those additional costs they incurred as a result of requiring alternative financing. The vendors were also awarded court costs for being the successful party.
Had the purchasers in Gill v Bal identified early that they were unable to complete in time, they could have attempted to negotiate a sufficient extension of time to perform their duties. Having failed to obtain an extension, the purchasers being less than two hours late with their performance was enough to constitute a material breach of contract. Having commenced an action to enforce a contract that the purchasers materially breached, they were exposed to additional costs and expenses.
The loss of a $705,000 purchase price for a home that apparently had a market value of $854,000 and having to pay court and financing costs was a hard lesson to learn for the purchasers, but is a reminder that, in agreeing to perform contractual duties by specific dates and times, a party must do so or face the consequences of having breached a contract. A party which materially breaches a contract may be unwise to later seek to enforce it.