I enjoy reading your blog.

The issue, in English law, is a wider one of course: The use of labels and not enough attention in the drafting to the linked consequences.

Regarding Mark’s suggestion to use ‘condition’ or ‘Condition. True, but I would advise a client not to rely solely on that label, as per my above comment i.e. an issue of definitions.

This leads me to Mark’s third point in that under (for example) German law, as I understand it from my German colleagues and from my own reviews of contracts, there does exist the possiblity for claiming punative damages. I assume that this is why Mark, correctly, regards his boilerplate example as dangerous.

In my experience, clients are often unaware of the implications of saying “time is of the essence”. They know that performance on time is important, but they often miss the point about being able to terminate. I give drafting talks in the UK several times per year, and I would say a minority of the non-lawyers attending are aware of this point.

I am in two minds as to whether to use this phrase. I think it has the benefit of being a well-established expression that business people are familiar with – even if they don’t understand the legal implications of breach, they understand the broad commercial point that strict adherence with deadlines is required.

I agree that moving to a plain English version of the phrase is probably not appropriate. If a change is to be made, I suggest that it should be to add a provision to the termination clause to state that a party may terminate if the other party fails to comply strictly with a stated deadline for undertaking an activity (not exact words).

1. “Time is of the essence” is one of those old-fashioned phrases that appear in contracts. Another is “determine this agreement”. A more modern version might be “time of performance is an essential term of this agreement”. [But note my penultimate paragraph–KAA] Another way of saying “essential term” is “condition”, ie (under English law) an important provision where breach may result in termination rather than just damages.

2. A liquidated damages clause is only in conflict with the above if it is intended that liquidated damages should be the only remedy for late performance, ie the non-breaching party should not be allowed to terminate as an alternative to claiming damages.

3. I am seeing an increasing tendency for contracts to include boilerplate language saying that any remedy stated in the agreement is without prejudice to any other remedy that may be available under applicable law. This is to get over the principle of construction that if the parties have agreed a remedy that should be to the exclusion of all other remedies – I can’t remember the Latin name for this principle just now but it includes the phrase “exclusio alterius” or similar. I have always thought this boilerplate language is dangerous where the agreement includes a liquidated damages clause as (at least under English law) the whole point of a liquidated damages clause is to replace “damages at large” that may be otherwise available under general principles. But such language may be helpful to the extent that it clarifies that you can terminate as an alternative to (continuing to) claim liquidated damages.