Time Is Of The Essence – Yacht Contracts
It is a distinct possibility that yacht owners and brokers may come across a “time is of the essence” provision as part of a yacht purchase and sale agreement at some point during the buying/selling process. This simple five word phrase, and its inclusion in or omission from a contract, can have significant impact on the timing of the parties’ performance obligations. The basic meaning of the phrase “time is of the essence” is that performance by the time specified in the contract, or a time otherwise agreed upon by the parties, is an essential component of the contract, the breach of which would constitute a default under the terms of the agreement. In the yacht context, a closing date may be made “of the essence” and the parties would thereby be required to perform their obligations under the contract by the date certain (i.e., the buyer would be required to take delivery of the yacht and remit the closing proceeds and the seller would be required to effectuate delivery of and transfer title to the yacht).
The immediate question that comes to mind regarding the “time is of the essence” provision is whether such contractual language is in fact enforceable – can the parties set a “hard” date? An analysis of the enforceability of the clause is largely dependent upon (1) the factual circumstances and (2) the governing law of the yacht contract in question. For the purposes of our summary herein, we limit our analysis to Connecticut and New York. For simplicity, we also limit our analysis to circumstances where the provision is an express stipulation in the contract itself.
In Connecticut and New York, the case law regarding “time is of the essence” has largely focused on real property, however, the application of the provision to yacht contracts would likely remain the same:
“In real estate contracts, the fact that a specific time is fixed for payment or for conveyance does not make time of the essence – at least, it does not make performance at the specified time of the essence…When the parties to a real estate contract want to fix a specific date for performance, we generally have required them to express specifically in the contract that time is of the essence; otherwise, performance within a reasonable time will satisfy the contract.” (Demattia v. Mauro, 86 Conn.App. 1 (2004) quoting Tulisano v. Schonberger, 74 Conn.App. 101 (2002)(internal quotations omitted)).
“When a provision that time is to be of the essence is inserted in a real property contract, the date established as the law day takes on especial significance. Ordinarily, the law will allow the vendor and vendee a reasonable time to perform their respective obligations, regardless of whether they specify a particular date for the closing of title. When there is a declaration that time is of the essence, however, each party must tender performance on law day unless the time for performance is extended by mutual agreement.” (Grace v. Nappa, 46 N.Y.2d 560 (1979)).
Connecticut and New York courts have made it clear that although a contract may specify a performance date (i.e., closing date), the fixing of a date/time itself does not make it of the essence. In general, to command contractual performance by a date certain – to demand that “time is of the essence” – the language must be expressly included in the applicable provision or agreement; and when the language is utilized, that performance date takes on heightened importance.
In context, for most yacht purchases/sales, it is likely not necessary to include a “time is of the essence” clause given the combination of a willing buyer and seller and their mutual best interests in closing the transaction within a reasonable time frame. In situations, however, where a buyer may have previously backed out of or caused undue delay in an earlier transaction and has subsequently showed renewed interest in purchasing a yacht, it may be beneficial to utilize the “time is of the essence” provision to thwart the continuation of any such activity.
As we have highlighted, the inclusion of “time of the essence” language in a contract is generally enforceable in Connecticut and New York. Although our summary is limited to the provision’s express stipulation in a contract, there could be certain fact patterns in which a court could deem time to be of the essence in a contract by implication from the conduct of the parties; clearly this scenario is both highly fact and jurisdictionally dependent. This article is a basic summary of the general usage and meaning of the “time of the essence” clause. It is not intended to be comprehensive, and any questions regarding any individual fact pattern and/or enforceability of the clause in a specific yacht contract/context should be referred to a qualified attorney – please contact our firm with any questions.
Steven A. Clark
Bohonnon Law Firm, LLC
Steven A. Clark is an associate in the New Haven based Bohonnon Law Firm, LLC. which practices extensively in Marine, Aviation, and Tax Law. Member: American Bar Association; Connecticut Bar Association; Maritime Law Association. Further questions may be directed to Steven Clark at the Bohonnon Law Firm (www.bohonnon.com), (203) 787-2151.