"Time of Essence" Clause Can Be Waived By Actions

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A recent Tennessee court case emphasizes the point that although a real estate contract may state that “time is of the essence,” the parties can waive that provision through their actions. It’s important to remember that when a real estate contract specifies that “time is of the essence,” as the TAR and Crye-Leike contracts do, it is an expression of the intent of the parties to stick with the various deadlines set forth in the contract. However, like many other provisions of the contract, that intent can change during the life of the contract and either party can waive the other party’s violation of that provision. Therefore, if “time is of the essence” is in your contract and the other party misses a deadline, you and your client should decide immediately what your response will be. Will you use that as grounds to cancel the contract? Will you let this one slide? Or will you just throw the deadlines out because you need this deal to work? If you want to forgive this one missed deadline, while preserving the other deadlines, we recommend that you communicate that to the other party in writing. For example, if the buyer misses the loan commitment deadline (20 days after the binding agreement date) and the seller wants to continue to proceed to closing, the listing agent may want to communicate to the selling agent as follows:

“Please be advised that your client is in violation of the terms of the contract for failure to meet the deadline for the conditional loan commitment (20 days from the binding agreement date). The seller is willing to waive this violation, but only under the condition that your client provide such loan commitment within 5 days of this date. This proposed waiver shall not act as a waiver of any other deadline or term of this contract. Please advise me as soon as possible as to whether your client will be able to meet this extended deadline.”

Without a notification like this, the seller risks waiving the “time is of the essence” clause totally, and may have a hard time cancelling the contract later for something like failure to close as scheduled. Remember, when it comes to “time is of the essence,” sometimes actions speak louder than words.

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