Time is of the Essence in UK Law

Since the statutory fusion of law and equity in 1875 it has been enacted (Supreme Court of Judicature Act 1873, Section 25 (7) now re-enacted in slightly different language in the Law of Property Act 1925, Section 41) that stipulations of a contract, as to time or otherwise, which according to rules of equity are not deemed to be orto have become of the essence of the contract are also to be construed and have effect at law in accordance with the same rules, The third parties rely on Section 41 on the point of construction.

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 charter-party a stipulated time of payment of hire is of the essence.

So upon the question of principle which these two appeals were brought to settle, I would hold that in the absence of any contra-indications 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.

For these reasons I am of opinion that the equitable rule against treating time as of the essence of a contract is applicable to rent review clauses unless there is some special reason for excluding its application to a particular clause. The rule would of course be excluded if the review clause expressly stated that time was to be of the essence.

More commonly, equity will not allow the contract to be so treated unless the party in default has been given an opportunity to mend his ways. The only way in which that can be done is by giving him notice to comply within a reasonable time. Such a notice is invariably described as one making time of the essence of the contract, although it has been justly observed that the description is not quite accurate. That is because one party cannot vary the terms of the contract on his own.

In my judgment, where there is a provision for the purchase of shares upon payment by a stated date, it is to be presumed, in the absence of any contrary indication, that the parties to such a contract have impliedly stipulated and mutually intend that the time of payment shall be of the essence of the contract.

So far as concerns repudiatory conduct, the legal test is simply stated, or, as Lord Wilberforce put it, “perspicuous”. It is whether, looking at all the circumstances objectively, that is from the perspective of a reasonable person in the position of the innocent party, the contract breaker has clearly shown an intention to abandon and altogether refuse to perform the contact.