Standard provisions in a contract to purchase and sell real property in New York state, whether commercial or residential, usually do not subject the parties to “time being of the essence”. Instead, in order to require the parties’ performance of an obligation under a real estate contract in New York to be of the essence, the parties must either add specific language to such contract or subsequently declare time is of the essence by providing clear and unequivocal notice to all other parties to the contract. (i) This article will discuss how to create “time of essence” for the purchase and sale of real property in New York state (hereinafter “Contracts”).
Drafting Terms in the Contract
The overwhelming majority of time of the essence clauses drafted in Contracts pertain to a closing date or the date by which an installment payment must be made. In order to properly draft an enforceable time of the essence clause in a Contract, the Contract must manifest the parties’ clear and explicit intent that the time to perform is “of the essence”. (ii) Since the parties may tailor their terms of the Contract to meet their particular needs, expressly stating that “time is of the essence” for performance of a specific obligation in the Contract is the simplest way to express the parties’ intention to make time of the essence. Indeed, New York courts have generally held time to be of the essence only where the Contract language specifically states that “time is of the essence”.
The absence of clear language expressing the parties’ intent that “time is of the essence” will allow the parties a reasonable amount of time to perform the terms of the Contract. (iii) Additionally, any ambiguous or equivocal language regarding the time of performance will effectively nullify any claim that time is of the essence. (iv) Even provisions in a Contract that state performance is to be done “in no event later than” (v), or “on or before” a specified date do not rise to the threshold level of intent to create time being of the essence. (vi)
Therefore, to properly draft a “time is of the essence” provision in a Contract, the Contract should clearly state that the time for performance is “of the essence” and that no contradictory or ambiguous language is otherwise stated in the Contract regarding such performance.
Making Time of the Essence by Declaration
A party to a Contract may make the time for performance thereunder of the essence by giving the other parties to the Contract clear and unequivocal notice to that effect and providing a reasonable time within which to perform. (vii) The notice should also state that the failure of the party to perform within the time that is of the essence will constitute a default under the Contract. (viii) Similar to the requirements regarding the terms of an enforceable time of the essence clause in a Contract, the notice declaring time being of the essence must clearly and unequivocally state that time is of the essence. (ix) Additionally, the date by which a party demands performance must be after the date initially set forth in the Contract (x) and be within a reasonable time of the demand. (xi) Failure to provide a party with reasonable time to perform will render any time of the essence declaration null and void. (xii)
The determination of what constitutes reasonable time to perform depends on the circumstances of each case. The following factors should be considered: “the nature and object of the contract, the previous conduct of the parties, the presence or absence of good faith, the experience of the parties and the possibility of prejudice or hardship to either one, as well as the specific number of days provided for performance.” (xiii)
It is also important to be sure that the manner in which notice declaring that time is of the essence be given in accordance with the express terms of the Contract or as otherwise agreed to by the parties. (xiv)
The failure of the party receiving the declaration to object to it will likely result in that party being deemed to have consented to time being of the essence. (xv)
Lastly, the party declaring time being of the essence must be able to perform its contractual obligations under the Contract or it may be in default of the Contract, as a proper declaration of time being of the essence to perform will be enforced against all parties. (xvi) So be sure that your client is ready, willing and able to perform on the law date if your client intends to declare time of the essence.
Endnotes
(i) ADC Orange, Inc. v. Coyote Acres, Inc. , 7 N.Y.3d 484, 486, 824 N.Y.S.2d 192, 193 (2006).
(ii) Tisoped Corp. v. Thor 138 N 6th St LLC , 180 A.D.3d 587, ___ N.Y.S.3d ___ (1st Dept. 2020) (finding that time was not of the essence where there was “no manifest intention to make the contract ‘time of the essence’”).
(iii) ADC Orange, Inc. v. Coyote Acres, Inc. , 7 N.Y.3d at 486, 824 N.Y.S.2d at 193.
(iv) CDC Nassau Assocs. v. Fatoullah , 163 A.D.2d 227, 228, 558 N.Y.S.2d 946, 947 (1st Dept. 1990).
(v) ADC Orange, Inc. v. Coyote Acres, Inc. , 7 N.Y.3d at 489, 824 N.Y.S.2d at 195.
(vi) O’Connell v. Clear Holding Co. , 126 A.D.2d 530, 530–31, 510 N.Y.S.2d 653, 654 (2d Dept. 1987).
(vii) 76 N. Assocs. v. Theil Mgmt. Corp. , 132 A.D.2d 695, 696, 518 N.Y.S.2d 174, 176 (1987), 2626 Bway LLC v. Broadway Metro Associates, LP , 85 A.D.3d 456, 925 N.Y.S.2d 437 (1st Dept. 2011); Mills v. Chauvin , 103 A.D.3d 1041, 1044, 962 N.Y.S.2d 412, 417 (3d Dept. 2013).
(viii) Vecere v. Estate of Berle , 91 A.D.3d 637, 936 N.Y.S.2d 248 (2d Dept. 2012).
(ix) Mazzaferro v. Kings Park Butcher Shop, Inc. , 121 A.D.2d 434, 435, 503 N.Y.S.2d 134, 135 (2d Dept. 1986).
(x) Weintraub v. Stankovic , 43 A.D.3d 543, 544, 840 N.Y.S.2d 487, 488 (2007) (“A purported notice mandating a closing date prior to the one in the contract is unreasonable and premature”).
(xi) 76 N. Assocs. v. Theil .Mgmt. Corp. , 132 A.D.2d at 696, 518 N.Y.S.2d at 176.
(xii) Iannucci v. 70 Washington Partners, LLC , 51 A.D.3d 869, 869, 858 N.Y.S.2d 322, 322 (2d Dept. 2008).
(xiii) Zev v. Merman , 73 N.Y.2d 781, 783, 536 N.Y.S.2d 739, 739-740 (1988).
(xiv) Ehrlich v. Island Plus Agency, Inc. , 205 A.D.2d 579, 580, 613 N.Y.S.2d 245, 246 (1994).
(xv) Westreich v. Bosler , 106 A.D.3d 569, 569, 965 N.Y.S.2d 467, 468 (1st Dept. 2013).
(xvi) Grace v. Nappa , 46 N.Y.2d 560, 567, 415 N.Y.S.2d 793, 796 (1979).
Reprinted with permission from Long Island Business News, publisher of The Suffolk Lawyer, the official publication of the Suffolk County Bar Association (June 2020 issue, Vol. 35, No. 6).