Definition
This phrase in contracts makes deadlines strictly binding and enforceable. Missing them constitutes material breach, even if the delay didn't cause major harm.
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When 'time is of the essence' appears in the contract, deadlines become strictly binding and enforceable. Missing deadlines without the other party's consent or valid contingencies constitutes material breach. This clause makes closing dates, contingency removal dates, and inspection deadlines legally binding in a stricter sense. Without this clause, courts might allow slight delays if the delay didn't substantially harm the other party.
Pro Tip
When this phrase is in your contract, take all deadlines seriously.
Example
The contract stated 'time is of the essence,' making the April 15th closing date strictly binding.