In the fast-paced world of contracts and real estate transactions, the phrase “time is of the essence” carries profound significance. Whether you are a seasoned real estate professional or a first-time homebuyer, understanding the importance of this seemingly straightforward clause can make the difference between a smooth, successful closing and a cascade of complications.
Time is often a critical factor in real estate deals, where numerous legal and financial considerations intertwine. The phrase “time is of the essence” underscores the gravity of adhering to specified timelines and deadlines outlined in a contract. This principle not only sets the pace for the transaction but also serves as a safeguard against potential disputes and delays that may jeopardize the entire process.
The case of 3 Gill Homes Inc. v. 5009796 Ontario Inc. (Kassar Homes) involved a dispute over a delayed real estate transaction. The purchaser, 3 Gill Homes, entered into three agreements of purchase and sale for newly constructed residential homes being built by the vendor, Kassar Homes. Two of these agreements closed without incident. However, the third agreement did not close on its original date of August 31, 2021, due to construction delays.
Despite the agreement containing a “time is of the essence” clause, neither party chose to terminate the contract. On November 15, 2021, the agreement was amended to change the closing date to January 28, 2022. This amended agreement contained “time is of the essence” similarly worded as the original.
On the closing date, the purchaser provided the purchase funds 35 minutes later than stipulated in the agreement. As a result of this breach, the vendor treated the contract as terminated. The purchaser contested this decision by bringing the matter before an application judge.
When the matter was brought before the Court, the application judge assessed the conduct of the parties approaching the closing date. The Courted noted that during January 2022, the vendor reminded the purchaser that the purchasing funds must be provided by 3:00 p.m. on the closing date or the transaction would be terminated. The purchaser was also advised of this by the vendor’s lawyer on January 25, 2022.
One day before the closing date of January 28, 2022, the purchaser requested a further extension of the closing date until January 31, 2022. This request was denied by the vendor.
At 2:47 p.m. on the closing date, the purchaser’s lawyer advised the vendor’s lawyer that the funds had been attained and the “banking was being dealt with.” At 3:10 p.m., the vendor’s lawyer advised they had instructions to terminate the deal as the 3:00 p.m. deadline had been missed. The purchasing funds were ultimately delivered to the vendor 35 minutes late. As such, the vendor treated the agreement as terminated.
When the matter came before the application judge, the purchaser sought a declaration that the vendor breached the agreement; the contract was unconscionable; and damages were sought due to the property in question having been sold by the time litigation commenced. Upon review, the application judge held the vendor was entitled to terminate the agreement due to late payment of purchase funds. While the result “seemed harsh, it was not unfair for the respondent to enforce the payment deadline in light of the ‘time is of the essence’ clause.” Given that the parties involved in the transaction were “sophisticated and in the business of real estate,” the rigid use of timelines in a contract was justified. The application judge also found support for this in the amended agreement, “which provided a departure from the previous conduct of the parties that treated deadlines as informal.”
The application judge found the contract was not unconscionable as the other two transactions closed without incident, suggesting that there was “no issue with unequal bargaining power of circumstances of unconscionability.” As 3 Gill Homes was unsuccessful in their application, damages were not awarded.
On appeal, the Court of Appeal found that the application judge did not err in finding that 3:00 p.m. was the payment deadline under the agreement, as the contract was clearly worded and several warnings had been provided to 3 Gill Homes in advance of the closing date regarding the strict deadline. As such, court intervention was unwarranted. A boilerplate “time is of the essence” clause is contained within many, if not all, contracts, and the provision means that there is a specific time limit in an agreement that is so essential that a breach of such a time limit will allow the innocent party to terminate the contract. In this case, Kassar Homes did just that.
The Court also determined that the application judge’s conclusion that the contract was not unconscionable was entitled to deference, and therefore, the Court declined to interfere. Further, there was no basis for appellate review of the application judge’s reasoning as the findings were based on governing case law, the agreement in question, and the surrounding factual circumstances.
Ultimately, the Court of Appeal dismissed 3 Gill Home’s appeal and awarded Kassar Home with costs of the appeal in the amount of $26,000.
The experienced litigation lawyers at Campbell Litigation understand the financial risks and unique considerations associated with new construction and pending real estate transactions. Whether you are involved in a property dispute over a failed closing, require assistance with contract interpretation, or have questions about debt recovery, we can help. Our team regularly provides clients with comprehensive and tailored legal advice on their rights and options pertaining to a particular dispute. To speak with a member of our firm regarding your real estate or construction disputes, contact us online or by phone at 519-886-1204.