TIME IS AN ESSENCE OF CONTRACT, NON PERFORMANCE WOULD LEAD TO BREACH OF CONTRACT

 TIME IS AN ESSENCE OF CONTRACT, NON PERFORMANCE WOULD LEAD TO

BREACH OF CONTRACT

In India, the laws relating to ‘time as the essence of a contract’ is specified in Section 55 of the

Indian Contract Act, 1872, which provides that “Effect of failure to perform at 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 specified times, and fails to do any such thing

at or before the 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 the

essence of the contract.”

However, in contracts where time is of the essence of the contract, contracts may provide for an

extension of time. But that does not mean that by extending the time for performance of a contract,

time ceases to be of the essence of contract. Service contracts sometimes contain a provision that if

in case the promisor is unable to complete the given work within the stipulated time, then in such a

case the promisee will have an option to extend the time of performance along with imposition of

liquidated damages. This the promisee can do only when it receives a request from the promisor as

to the same effect.

Sec 55(3) if The Indian Contract Act, 1872 provides that “Effect of acceptance of performance at

time other than that 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 that agreed, the promisee cannot claim compensation for any loss occasioned

by the non-performance of the promise at the time agreed, unless, at the time of such acceptance he

gives notice to the promisor of his intention to do so.”

It has been held in the case of Muttayya v. Lekku, 1 that clause 3 of the s 55 of the Indian Contract

Act means that the promisee cannot claim damages for non-performance at the original agreed time;

at the same time it also means that he can claim performance at the extended time. It has also been

held that the section does for not enable a promisee to keep alive a broken contract in the hope of

being able to recover heavier damages for its breach.

Further, sec 63 of the Act provides that “every promisee may dispense with or remit, wholly or in

part, the performance of the promise made to him, or may extend the time for such performance, or

may accept instead of it any satisfaction which he thinks fit.” It was held in case of Lucknow

1 (1914) 37 Mad. 412

Automobiles v. Replacement Parts Co. 2 , that if time is originally of the essence of the contract, it

does not cease to be so because a party agrees to grant a short extension. Indeed, a new agreement

may lead to the presumption that the parties considered time of the essence.

It was held in the case of Kamal v. Chhatoorbhuj 3 , that a mere extension of time and nothing more

is only a waiver to the extent of substituting the extended time for the original time and not an utter

destruction of the essential character of time. In the case of Haji Fakir v. Abdulla 4 , it was held that

where a promisee extends the time for performance, it does not necessarily follow that time has

ceased to be of the essence of the contract.

It was held in case of Pulgaon Cotton Mills v. Gulabai 5 , that if a purchaser applies for an

extension of time, the very fact shows that time was of the essence. It was also held that where time

is of the essence and is extended, the extended date is also the essence of the contract.