Appellant

In the words of Shorland J, “The dictionary meaning of the noun ‘Delay’ is ‘the putting off’
or ‘the deferring’. These latter words, in our opinion, in their ordinary meaning connote
postponement of performance of some act or step beyond the point of time when the act or
step should have been performed”.1 The timely performance by the promisor is the
fundamental term, or ‘condition’ of contract2 and according to the traditional classification of
contractual terms into ‘condition’ and ‘warranties’, if a condition is broken, the promise can
not only claim damages but can also terminate the contract.3 Where a time is set for
performance, the promisor is bound to perform at that time, and will be liable for breach if he
fails to do so without good excuse. It does not matter whether or not time is ‘of essence’ with
regard to obligation in question.4

There is no place, however, in mercantile contract wherein both parties are engaged in
business and articles are purchased by one from another for business purpose, the
presumption that time is not the essence of contract.5 Indeed the Supreme Court of United
States has laid down that “in the contract of merchants time is the essence”6 and the same has
been held by the Supreme Court of India — that stipulation as to time is ordinarily of the
essences of the contract in mercantile contracts7 and when this important condition is broken
the aggrieved party is entitled to rescind the contract under S. 55 of Indian Contract act.8

Time is the essence of contract when:

 The parties have already stipulated in their contract that the time fixed for
performance must be exactly complied with9 and the delay may cause injury.10

1
Cable (William) Ltd v Trainor [1957] NZLR 337.
2
ohn E. Stannard: Delay in the performance of Contractual obligation, p30
3
Furnston, Micheal P, Cheshire, Fifoot and Furmston’s law of contract (15th Edn 2007), p196.
4
John E. Stannard: Delay in the performance of Contractual obligation, Oxford p 5
5
Reuter v Sala (1879) 4 C P D 239, 249.
6
Norrington v Wright (1885) 115 US 189.
7
Mahabir Prasad Rungta v Durga Dutta (1961) 3 SCR 639; Dominion of India v Bhikraj Jaipuria (1962)
2 SCR 880; China cotton exporters v Behri Lal Ram Charan (1961 3 SCR 845.
8
Anson: Law of Contract(22nd Edn.) 436.
9
Chitty: On contracts(24th) ed.) para 1271; terital: Outline of law of contracts.
10
Avtar Singh: Contract and specific relief (12th Edn) p377
  Where the circumstances of the contract or the nature of the subject matter indicate
that the fixed date must be exactly compiled.11

Whether time is really the essence of contract to be ascertained from real intention of
parties12 and if the intention of the parties is clear that the time is the essence of contract
(i.e.,) that it is only performance within the fixed time that will give efficiency to transaction,
then failure to perform within such period vests in other party a right to avoid the contract.13
Therefore, if the condition as to time was not fulfilled, the other party might treat the contract
as broken and elect to terminate it.14 Specially, where an agreement is for the sale of specific
goods, has been made and before the risk passes from to the buyer without any fault on the
part of the seller, the goods perishes, the contract is avoided.15

Discharge by breach occurs when a party to contract commits breach of a condition 16 or some
other breach going to the root of the contract.17 If one of the parties to the contract breaches
18
an obligation which the contract imposes, that party is in breach of contract, and there are
circumstances under which the breach not only gives the right of action for damages but also
gives the innocent party, a right to decide not to render the further performance of contract
and to discharge both parties from their obligations under the contract - that is, to terminate
the contract.19 The breach may consist in non performance of relevant obligation, or its
performance in the manner or at a time which fails to comply with the requirements of
contract.20

A clause excluding/ limiting promiso’s liability will not prevent the promise from terminating
the contract.21 To put it in another way, exclusion clauses drafted in general terms will not be
allowed to defeat the specific requirements of the contract; as in sometimes said, the back of

11
Chitty: On contracts(24th) ed.) para 1271. ; Terital: Outline of law of contracts.
12
Rabindra kumar v Siddaramakka Mookherjee (2005) 2 CTLJ 499 (Cal) (DB).
13
T.S. Vwnkatesa Iyer: The law of Contracts & tenders (10th Edn) Vol. 2 p289, 290.
14
United scientific holdings v Burnley BC [1978] AC 904, 940- 1
15
Anson’s Law of Contract (29th Edn), p477
16
Bunge corp v Tradax Export SA [1981] 1 WLR 711 (HL).
17
The Hongkong Fir [1962] 2 QB 26 CA.
18
Anson’s Law of contract (29th Edn), p507
19
Photo Production Ltd v Securicor Transport ltd [1980] AC 827
20
Anson’s Law of contract (29th Edn), p507
21
Suisse atlantique societe d’armement SA v NV Rotterdamsche Kolin Centrale [1967] 1 AC 361 (HL).
the contract will not be allowed to prevail over the front of the contract.22 Also, the exclusion
clauses do not protect a party who had committed a fundamental breach of the contract.23

Counter frustration – common law rule of contract is that a man is bind to perform the
obligation which he has undertaken and cannot claim to be excused by mere fact that
performance has sub subsequently became impossible.24 This may seem to be rather an
obvious point to make, but it needs to be stressed nonr the less, since it was thought in the
past that time stipulations were only binding when time is the essence of contract. 25

Respondent

Although the words used in the contract indicate that time is essence of contract, it is not of
much significance when there is specific provision in the contract regarding extension of
time.26 Even where the contract may at first sight indicate that the promisor is liable, he may
seek to avoid or limit that liability by reference to exclusions and exceptions contained in the
contract.27 A properly worded exclusion clause can even apply to the cases of most serious
breaches. In the light of this it has been suggested that there is no longer even a presumption
that exclusion clauses do not extend to cases of fundamental breach.28

29
Where the conditions of contract provided for penalty in case of delay in execution and
special conditions provided for grant of extension of time30. The mere fact of time being

22
Homburg houtimport BV v Agrosin Pvt Lts (the Strasin) [2004] AC 715.
23
Trietel, p 225-41 para 3.08.
24
Nihati Jute Mills v Khayaliram (1968) A. SC. 522, 525; Raja dhruv dec Chand v Raja Harmohinder Singh (1968)
A. SC. 1024.
25
Williams, Cyprian A Treaties on the law of vendor and purchaser (1906), Vol II para 934; Williams v Gretrex
[1957] 1 WLR 31
26
Tonkos engineering and contractors v Union of India 2001 (1) KLT 666.
27
John E. Stannard: Delay in the performance of Contractual obligation, Oxford p 86.
28
Chitty: On contracts para 14.024.
29
Food Corporation of India v Ratanlal N. Gawalani AIR 2004 MP 215.
30
U.P state Bridge Corporation Ltd. Lucknow v Banglore development Authority, banglore AIR 2005 Kant 166.
entioned with a statement that delay would have to be compensated does not of itself make
time of essence, non performance on stipulated date did not give the party the right to treat
the contract as ended.31 Even where the parties have expressly provided that time is the
essence of contract, other provisions may exclude the interference that the conclusion of the
work by a particular date was intended to be fundamental.32 Whether time is really the
essence of contract to be ascertained from real intention of parties 33 and the intention to make
time the essence of contract should be absolutely clear.34 The test would be to look to the
intention of parties. 35

Frustration- the principle of frustration will apply where the commercial object of contract
has been frustrated by the intrusion or occurrence of an unexpected event creating a state of
things in which parties could not have reasonably intended that the contract, as they made it,
should be operative. 36

On the principle laid down in s.5537, a promise is discharged if, without the promisor’s fault,
a specific subject matter assumed by parties to exist or continue in existence is accidently
destroyed or fails to be produced.38

31
D S Thimakka v Sidramakka (1996) 8SCC 365.
32
Thakorlal V patel v Lt Col Syed Badruddin (1993) 1 Guj LR 28.
33
Rabindra kumar v Siddaramakka Mookherjee (2005) 2 CTLJ 499 (Cal) (DB).
34
Raghubir v Sundar Lal (1931) 11 Lah 699; Suryanarayanmurti v Satyanarayanamurti (1925) 48 MLJ 150.
35
Nanak builders and Investors Pvt Ltd v Vinod Kumar Alag Air 1991 Del 315, 321.
36
Gouri Shankar v Moitra (1921) 26 CWN 573.
37
The Indian Contracts act, 1872
38
Tylor v Caldwell (1863) 3 B. & S. 826; Howell v Coupland (1876) 1 Q.B.D. 258; Kimjilal Manohardas v
Durgaprasad Debiprasad (1919-20) 24 C.W.N. 703.