Q: I recently made an offer to purchase a house which included a time limit for the seller to accept. The seller did not sign and return the offer until after the time for acceptance passed. We moved toward closing and both sides prepared closing documents. On the closing date the seller told me he was not going to close because we did not have a contract. He claims that because he did not accept until after the deadline for acceptance, it was no deal. Is he right?
A: When time for performance under a contact is critical, it is deemed to “of the essence.” When time is of the essence, any delay is considered a material breach of the contract. Time can be made critical by any of the following:
- Express language in the contract making the time for performance or deadline inviolate;
- When the subject of the contract makes it clear that time for performance is an essential part of the contract;
- Where disregarding the time for performance in the contract would be unfair to one of the parties;
- Where one party gives notice to the other that timely performance of the contract is critical and the notice is reasonable under all circumstances.
Cases where the court held that time was not critical include Thomas v. Fusilier. In that case, a divorce settlement agreement required the wife to move out of the marital home within 60 days at which time she would receive a $250,000.00 equalizing payment from the husband. The former wife took 72 days to move out of the house. The court held the delay did not excuse the former husband’s obligation to pay because time was not of the essence.
The court explained that the contract did not make time of the essence, the subject matter of the agreement did not compel a finding that time for performance was critical, treatment of time as non-essential would not produce a hardship (the former husband did not present any evidence that he had been prejudice in any way by the wife’s delay) and the former husband did not give any post-default notice to the former wife that she had to comply with the time for moving in their agreement.
When timely performance is made of the essence, it can work a severe hardship on the late performing party. Hence, unless it can be shown that a brief delay is prejudicial to the other party and that everyone understood time for performance was critical, the courts will generally not allow termination of a contract based upon this technical breach.
Since both contract language and circumstances determine if time is critical, it is always better to comply with contractual dates for performance. When there is a delay and some question about enforceability, the first step is to examine the contract language. If the contract does not state that failure to perform by a certain time is a material breach of the contract or that time is of the essence, it may well be that time is not critical.
Other sections of the contract may shed light on the issue of timely performance. For example, the standard Collier County sales contract usually requires a second deposit be made to escrow within a specific number of days after the contract is signed. Another section of the contract addressing the escrow agent’s obligations provides that the escrow agent is to give written notice to the parties if any deposit is not received by the fifth day after its due date. This second provision of the contract indicates that time is not of the essence for making deposits. Even that language might be rebutted by circumstances, as when there is a short notice closing or the property is in foreclosure and time for all performance is critical.
Even where time for performance appears to be made of the essence by contract language, timely performance can be waived by action of the parties. In the case of Hammond v. D.S.Y. Developers a counter offer was made by a buyer, with a date for acceptance of November 25, 2004. After receiving the counter offer, the seller made slight changes and changed the acceptance date to December 10, 2004 and sent it back to the buyer. The seller did not mail the signed counteroffer to the buyer until December 15, 2004. The buyer received it on December 20, 2004 and the buyer’s attorney faxed the executed contract to the seller’s attorney on January 12, 2005. In the interim, the parties had been working toward closing as if a valid contract had been executed.
The seller refused to honor the contract and claimed that the buyer’s failure to accept the counteroffer by December 10, voided the offer. The appellate court ruled that the seller waived the December 10, deadline by failing to mail the counteroffer until after that deadline, which meant the buyer had a reasonable time within which to accept the counteroffer. The parties had a course of dealing directed toward closing and because no demand was made for compliance with any deadline for acceptance, acceptance was timely as a matter of law.
The Hammond case underscores the importance of circumstances and subject matter. The interplay of contract language and actions of the parties is important in these matters and can make it difficult to predict the result of any given case. An experienced attorney can provide guidance and discuss both strengths and weaknesses of your position so you can determine if suit might be appropriate. I urge you to consult with an experienced attorney without further delay, as delay in attempting to enforce your rights may be deemed prejudicial to the seller and allow the seller to escape the clutches of the contract you want to close.