Time is an essence – Part 1. What does it mean?
S.56 CA 1950 says in a contract, time is an essence… to perform at fixed time, in contract in which time is essential. Simply said, within agreed time, there is contract, if outside agreed time, the contract becomes voidable at the option of the promisee. Take for example, when a tenant wants to rent a property in a future date, and when the tenant (promisor) cannot fulfil that time, the landlord (promisee) can void the contract.
Take for example in a common scenario a teacher renting an apartment when the school re-starts in July. The teacher put his booking fee with the agent. The agent went to the landlord and informed him that the tenancy starts in July (more than a month in the future – now is mid May). As the landlord agreed with the tenant to start renting 1st Jul, that agreement is accepted. When there is an offer (tenant offered to rent from Jul) and acceptance (landlord agreed) and a deposit of 1 month rental is paid (hold by agent in client’s account), a contract is formed.
BUT, the contract is not yet performed (Jul is in the future). Hence, if the tenant fails to commence his tenancy in Jul, the promisee (landlord) can choose to void the contract (becomes voidable at the option of the promisee). Of course, the landlord can choose to extend that time as it is an option for him to accept the delay. He can allow for this tenancy to commence at a later date. However, S.56 (3) says landlord cannot claim any compensation if he agrees to the extension of time. Meaning, if landlord allows the tenant to commence tenancy only in Aug, landlord cannot charge compensation on July rental.
Tomorrow, we will look at more examples.