Timing is everything, they say, and nowhere is that more true than in the law of contract, where a failure to meet a deadline can have serious commercial and practical ramifications for the parties. In this blog Tim Reid has pulled together a reminder of some of the most common rules affecting commercial contracts connected with UK real estate.
Missing the boat – Where time is of the essence
Where time is of the essence in relation to the exercise of a contractual right, that right can be lost if not exercised within the time limit.
It is sensible to make it clear in the contract itself whether time is of the essence in relation to the deadlines it contains.
If a contract is silent on whether time is of the essence (or on a party’s ability to make time of the essence by serving notice on the other), then a strict time limit may be implied by the operation of the surrounding provisions of the contract, or by an established legal presumption. Bear in mind that:
- time may be implied to be of the essence, if missing the deadline would lead to the other party losing out on the benefit of the contract (United Scientific Holdings v Burnley Borough Council )
- where one party serves notice on the other, stating that time is of the essence, and failure by the other party to comply with the notice would deprive the first party of the benefit of the contract, then the notice may validly take effect to make time of the essence (Re Olympia & York Canary Wharf Limited (No.2) )
- time is usually of the essence as regards a tenant’s deadline for service of a break notices under a lease (Orchard (Developments) Holdings Plc v Reuters Ltd )
- There is a general presumption in relation to rent review clauses that time is not of the essence in respect of the time limits they contain. However, this presumption can be rebutted, either by implication or express provision. Time will be of the essence for service of the tenant’s counter-notice if the lease contains a clause stating that if the tenant has not served a counter-notice in time, the rent will be that set out in the landlord’s rent review notice.
When is “close of business”?
A contract may require steps to be taken on or before “close of business” on a particular day, without defining what that term means.
In the recent case of Lehman Brothers International (Europe) v Exxonmobil Financial Services BV , a contract provided for notice to be received before “close of business” for it to be deemed to have been received on that day. The notice in question was served at 6.02pm.
The court held that the burden is on the party who alleged that the deadline had been missed, to establish when the close of business occurred. In the present case, the receiving party had failed to produce sufficient evidence to support its contention that – in the circumstances – close of business should mean 5pm. On the facts of the case, it was the evidence of the sender that the court preferred. The judge made it clear that “close of business” has no fixed meaning in English law, and would have a different meaning in different contexts.
Finally, where a contract refers to a period measured in days or months, remember that for the purposes of your calculation:
“From” is typically exclusive, so one should start counting from the day after the date specified. For example, where a lease term is expressed to commence “from” 1 January (rather than “on” 1 January), that date is not included in the term.
“From and including” (and “to and including”), and “starting with” are inclusive of the dates specified.
A period of “clear days” excludes the day on which the notice is sent (and the day on which it arrives, or takes effect). For example, 14 clear days’ notice of a shareholder meeting must allow for the day of service, then 14 days, and then the date of the meeting.
Whilst “clear days” typically include weekends and public holidays (unless the contrary is specified), “business days” will not include non-working days.
Remember to bear in mind the date on which the notice will actually be received or will be deemed to be received under the terms of the contract, in order to start the clock ticking.