What happens legally when "time is of the essence" is included in a contract?

Including "time is of the essence" in a contract establishes that timely performance of contractual obligations is a crucial aspect of the agreement. When this phrase is present, any delays in meeting specific deadlines are regarded as material breaches of the contract. This means that the affected party has the right to terminate the contract or seek damages, as the delay undermines the fundamental purpose of the agreement.

In transactions where timing is critical—such as real estate transactions—adhering to deadlines can affect financing, buyer or seller expectations, and overall transaction success. As such, it is essential for all parties to adhere rigorously to the timeframes outlined in the contract. The inclusion of this clause emphasizes the importance of meeting these timelines and underscores the potential legal repercussions of failing to do so.