INDEX

S no. 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13.

Content
Time and Place for Performance Reasonable Time Lapse of time and limitation Time for performance of contract Factors which make time of essence In Business Matters Time generally of Essence Construction Contract Sale Transactions Land and Property Dealings Allotment of Plots Non-commercial Matters Extension of time Conclusion

Page no. 2 2 4 5 7 8 9 10 11 11 12 12 13

Remarks

Time and Place for Performance

Section 46 of the contract act says, where, by the contract, a promisor is to perform. Time for performance of his promise without application by the promisee, and no time for performance is specified, the engagement must be performed specified. Within a reasonable time. The question "what is a reasonable time is, in each particular case, a question of fact.

Reasonable Time
It is difficult to understand why decisions should be reported on the question of what is reasonable time, which is declared by the Act itself to be always a question of fact; but, having been reported, they must be mentioned. In The Boigal Coal Co., Ltd. v. Homee Wadia $ Co. (1899), where the defendants agreed to supply coal to the plaintiffs from time to time, as required by the defendants, on reasonable notice given to them, it was held that a notice given by the plaintiffs on the 22ndJuly, 1898, for the supply of 2,648 tons of coal on or before 31st August, 1898, was not reasonable. Jenkins, C. J., said: Perhaps it might have been physically possible for the defendants to carry out such an order, but it would clearly have required an effort which the plaintiffs had no right to demand. I do not think that a notice involving such an effort from business men with innumerable other matters to attend to can be held to be such a reasonable notice as was intended by both parties when this document was given." And where the defendant agreed to discharge a debt due by the plaintiff to a third party and in default to pay to the plaintiff such damages as he might sustain, and no time was fixed for the performance of the obligation, it was held that the failure of the defendant to perform it for a period of three years amounted to a breach of the contract, as that was a sufficient and reasonable time for performance.

"In determining what is a reasonable time for presentment for Acceptance or payment, for giving notice of dishonor, and for noting, Regard shall be had to the nature of the instrument and the usual course of dealing with respect to similar instruments; and in calculating such Time public holidays shall be excluded."

Section 47 states that, When a promise is to be performed on a certain Time and place day, and the promisor has undertaken to perform it; without application by the promise, The promisor must perform it at any time but during the usual hours of business on such Day and at the place at which the promise ought to be performed.

Illustration.

A. promises to deliver goods at B.'s warehouse on the 1st January. On that day A. brings the goods to B.'s warehouse, but after the usual hour for closing it, and they are not received. A. has not performed his promise.

Common Law rule. This section, with the illustration, simplifies the rule. According to the Common Law as laid down in Doraxiiiyti v. Aninachalam case on the subject, the illustration would have run thus: B. is not bound to be at the warehouse to receive the goods after the usual hours of business, and if he is not there, A has not performed his promise. If B. is there and could receive the goods before midnight, but refuses to do so A. has performed his promise."

It may be observed, before leaving this subject, which the Courts of British India on section 16 of the contact act, ought to decide cases under this section according to its terms, and to resort to English decisions only so far as they illustrate its provisions. This warning was given by the Judicial Committee in Dhanipal Das v. Maneshar Batchsh Singh, where their Lordships said: The Subordinate Judge was wrong in deciding the case in accordance with what he supposed to be English equitable doctrine. He ought to have considered the terms of the amended section 16 only. He also mistook the English law. Apart from a recent statute, an English Court of Equity could not give relief from a
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transaction or contract merely on the ground that it was a hard bargain, except perhaps where the extortion is so great as to be of itself evidence of fraud. ... In other cases there must be some other equity arising from the position of the parties or the particular circumstances of the case."

Lapse of time and limitation

Delay and acquiescence do not bar a party's right to equitable relief on the ground of undue influence; unless he knew that he had the right, or, being a free agent at the time, deliberately determined not to inquire what his rights were or to act upon them. In Roop Laul and Ors. vs Lakshmi Doss1 (1905) it is noted that lapse of time is not a bar in itself to such a relief. There must be conduct amounting to confirmation or ratification of the transaction. If there be no such conduct, it is open to the party, though he may not sue to set aside the transaction within the period of limitation, to plead undue influence as a defendant in a suit brought against him to enforce the transaction. As observed by Sir Lawrence Jenkins, C. J., A defendant in a suit is entitled to resist a claim made against him by pleading fraud [or undue influence, and he is entitled to urge that plea though he may not have himself brought a suit to set aside the transaction, and is not, in circumstances like the present, precluded from urging that plea by the law of limitation . This statement of the law was adopted in a recent Madras case where it was said: " We do not think it follows that because a party's remedy as plaintiff to have an instrument avoided is time-barred, his right to say by way of equitable defense

In another case it was held that plaintiffs should pay the balance of proportionate price on each installment when ready for delivery. No delivery was made within the stipulated time, and after the expiration of that period the defendant delivered 3,000 bags to the plaintiffs. The plaintiffs did not pay the proportionate price on those bags when ready for
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(1906) ILR 29 Mad 1

delivery, though required by the defendant, and the defendant thereupon rescinded the contract, and declined to deliver the remaining bags. In a suit for damages by the plaintiffs for non-delivery, the Court held, following Freeth v. Burr2, and distinguishing Withers v. Reynolds3, that the contract was an entire one, and that, the payment by the plaintiffs not being a condition precedent to the preparation of the remainder for delivery, the defendant was not justified in rescinding the contract.

Time for performance of contract

Sometimes the parties to a contract specify the time for its performance. Ordinarily it is expected that either party will perform his obligation at the stipulated time. But if one of them fails to do so, the question arises what is the effect upon the contract. Section 55 contains the answer. Section 55 states: Effect of failure to perform a fixed time, in contract in which time is essential: When a party to a contract promises to do a certain thing at or before a specified time, or certain things at or before a specified time and fails to do such thing at or before a specified time, and fails to do such thing at or before a specified time, the contract or so much of it as has not been performed, becomes voidable at the option of the promisee, if the intention of the parties was that time should be of essence of the contract.

Effect of such failure when time is not essential: If it was not the intention of the parties that time should be of the essence of the contract, the contract does not become voidable by the failure to do such thing at or before the specified time; but the promisee is entitled to compensation from the promisor for any loss occasioned to him by such failure.
2 3

LR 9 CP 208 (1831) 2 B. & Ad. 889; 36 R.R. 782.

Effect of acceptance of performance at time other than agreed upon: If, in case of a contract voidable on account of the promisor's failure to perform his promise at the time agreed, the promisee accepts performance of such promise at any time other than agree, the promisee cannot claim compensation of any loss occasioned by the non-performance of the promise at the time agreed, unless, at the time of acceptance, he give notice to the promisor of his intention to do so.

Factors which make time of essence:

According to this section, if the intention of the parties was that time should be the essence of the contract, then a failure to perform at the agreed time renders the contract voidable at the option of the opposite party. Time is generally considered to be the essence of the contract in the following three cases: 1. Where the parties have expressly agreed to treat it as of the essence of the contracr; 2. Where delay operates as an injury; 3. Where the nature and necessity of the contract requires it to be so construed, for example, where a party ask for the extension of time.4 The well known authority is Bhudra Chand vs. Betts5 The plaintiff stipulated with the defendant to engage his elephant for the pupose to capture wild elephants. The contract provided that the elephant would be delivered on 1st October,1910; but the defendant obtained an extension of time till the 6th October and yet did not deliver the elephant till 11th October. The plaintiff refused to accept the elephant and sued for damaged for the breach.

He was held entitled to recover as the parties intended that time should be of the essence of contract. This conclusion is confirmed by the circumstance that the defendant obtained an extension of time; if the time were not of the essence of the contract, he need not have asked for the extension of time.6

4 5

Orrisa Textile Mills Ltd v. Ganesh Das, AIR 1961 Pat 107 (1915) 22 Cal LJ 566:33 IC 347. 6 Colles Cranes of India v. Speedes Spares Corpn, AIR 1970 Cal 321.

In Business Matters Time generally of Essence

Business attach importance to Time The matter depends upon the intention of the parties. Even where a specific date is mentioned for the completion of the contract7, one has not to look at the letter but at the substance of the agreement in order to ascertain the real intention of the parties. 8 In commercial contracts time is ordinarily of the essence of the contract.9 This is so because the business world requires certainty10 and also because merchants are not in a habit of placing upon their contracts stipulations to which they do not attach some value and importance.11 Thus in a contract to supply imported goods in October or November12; in a contract for a purchase of chassis for a truck to be supplied within two months and in an auction purchase , where the price was to be paid within 15 days, time was held to be an essence of contract

7 8

Municipal Corporation of Delhiv. Jagan Nath Ashok Kumar (1987) 4 SCC 497. Sachidananda v. G.P. & Co. AIR 1964 9 China cotton Exporters v. Beharilal Ramcharan cotton mills ltd. 10 AIR 1962 J&K 10 11 (1872) 2 AC 455,463 12 AIR 1961 SC 1295

Construction Contract
Time in a construction contract is likely to be of the essence because construction is commercial service. Where 24 month of time was given to a builder with a stipulation that if he fails to deliver within the stated time, he would pay 10% per annum of the purchase price measured by the period of delay, time was held to be an essence entitling recovery of the stipulated amount13. Similarly, where a builders promise with a bank was that he would make their building within six months, but could not do so, the bank was allowed to terminate the contract. The fact that the bank exercised his right after about two months after the expiry of the stipulated time did not amount to the extension of the time.14

The termination of a contract was held to be proper where the contractor was held to be proper where the contractor was not able to do anything to carry out the repair of a floodprotection dam inspite of the extension of the time. The matter of time was very important factor in the contract15. The Supreme Court observed that in a contract of construction, the time of completion would be of the essence only when special features exist.16

In a joint venture agreement, one of the clauses was that the defendants were to perform certain formalities within 5 years, and that, on a failure to do so; the agreement was to become null and void. Neither any approval was obtained within that time, nor sanction of the building plan. The defendants could not start the work within time. The court said that the provision in a contract for penalty and extension of time was of no use. The contract has ended by the efflux of time17. Where the construction of a warehouse could not be completed within the stipulated time and extensions were granted several times

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(1989) 1 MAL LJ 308 IPOH HC

14 15

1989 2 CAL LJ 246 AIR 2005 Pat 190 16 2006 11 SCC 181 17 1999 Del LT 193 (Del)

and even so the work could not be completed, it was held that the party could put an end to a contract at the end of the last extension if the work was still not completed.18

Sale Transactions
The courts would have to see the facts of each case involving a sale transaction whether time factor was essential to performance or not. In a contract of sale of goods, the time of shipment is of the essence. There is considerable authority in support of this rule and it has been recognized and accepted in Bowes vs. Shand19. Here in a contract of sale of rice to be shipped at Madras during March or April, 1874, by a ship, the stipulation to be a regard in shipment was held to be condition of the contract and contract was held to be not satisfied by shipment a month earlier, that is, in February20. A contract for sale of good required fifteen days loading notice.

The court regarded as condition of a contract. The courts required precise compliance with stipulations as to time whenever the circumstances of the case, indicate that it would fulfill the intention of the parties and that, in general, time is of the essence in mercantile contracts.21

18 19

AIR 2004 Ker 137 (1877) 2 AC 455 HL 20 ( 1899) 1 QB 436 IA 21 (1981) 1 WLR 71

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Land and Property Dealings

In a contract for sale of land or immovable property, the Supreme Court has laid down that it would normally be presumed that time was not of the essence of contract. Mere incorporation in the written agreement of a clause imposing penalty in case of default does not by itself evidence an intention to make time of the essence. 22 In such cases, therefore, the time factor would not be of essence for obtaining the relief of specific performance23. Intention of the parties can be ascertained from factors like nature of the property agreed to be sold, the possibility of price fluctuation, the need for entering into the contract, conduct of the parties before, at the time of and subsequent to the contract and surrounding circumstances. A declaration that the stipulated time shall be of the essence would have to be taken in the light of other provisions and such other factors may either exclude or strengthen the inference that time was to be of the essence.

Where the agreement in clear terms provided that it was to be performed within six months else the earnest money stand forfeited. The time was held to be of the essence.

Allotment of Plots
A Development Authority allotted plots through auction sale. The auction-purchase was granted time to make a late payment with interest. Even then he could not make it. The payment made by him after the expiry of time with interested was accepted by the Authority. The court said that there was deemed extension of time. The cancellation of whole thing was not proper.24

22 23

(1967) 1 SCR 227,231-32 (2006) 5 SCC 340 24 (2001) 4 SCC 137

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Non-commercial Matters
In cases other than commercial contracts the ordinary presumption is that time is not of the essence of contract. Accordingly, in a contract for the sale of immovable property, time would not be regarded as of the essence unless it is shown that the parties intended so.25

Extension of time
The contract was to provide a rig for a certain period which was to be extended in case of any breakdown in working. The rig broke down for sometime and, without taking this into account, the owner of the rig wanted to withdraw it on the expiry of the period. The court said that though there cannot be unilateral extension of time, in this case, there was an agreement that the period would be extended so as to cover the breakdown period. The owner of the rig could not say that he should be permitted to withdraw the rig subject to his liability for damages. The machinery in question was rare and not easily available. Compensation would have served no purpose.26

25 26

AIR 1963 MP 31 (2003) 6 Bom CR 347

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Conclusion
Accidental delays in the completion of contracts for the sale of land within the time named are frequent by reason of unexpected difficulties in verifying the seller's title under the very peculiar system of property law. Sharp practice would be unduly favored by strict enforcement of clauses limiting the time of completion, and accordingly Courts of Equity have introduced a presumption, chiefly, if not wholly, applied in cases between vendors , and purchasers of land, that time is not of the essence of the contract but in the contracts of trade time is of the essence. This is especially so as to shipping contracts. As to the sale of goods, unless a different intention appears by the contract, stipulations as to time of payment are not deemed to be of the essence of a contract of sale. Whether any other stipulation as to time is of the essence of the contract or not depends on the terms of the contract. Generally it is to be observed that in modern business, men of business are taken to mean exactly what they say. Traders are not in the habit of placing upon the contracts of stipulations to which they do not attach some value and importance , parties to trade contracts, therefore, cannot rely upon the present section to save them from the consequences of unpunctuality.

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