Time Being Of The Essence
What happens when a purchase and sale contract stipulates
a closing date or settlement date or final sale date or transfer
date for, say, June 15, and June 15 comes and goes without a
closing? Perhaps the sellers' new plans are not completed, perhaps
the buyers' financing commitment hasn't come through.
Is the deal dead?
The date set in the contract is usually just a target date.
The contract is still in effect after June 15. The only exception
would be if the original contract contained the powerful legal
phrase "time being of the essence". It usually doesn't.
Instead, brokers, attorneys and closing agents will work together
to mediate between buyers and sellers, trying to dovetail the
needs of both parties. Happens all the time, and the matter usually
works out to everyone's satisfaction -- more or less.
But what if one party absolutely must close by June 15?
In that case, the closing date can be made an essential part
of the contract, even weeks after it was first signed. The buyer's
lawyer, eager to bring things to a head, may send a letter to
the seller, saying "We are making time of the essence, we
will be there at the closing June 15 at 10 a m with a certified
check, you'd better show up ready to give us possession."
Or the sellers' attorney may notify the buyer that the sellers
are ready to fulfill their part of the contract at a certain
place, date and time.
The phrase is not usually included in business sales contracts,
because it can have unpleasant consequences like voiding of the
contract, lawsuits for damages or specific performance.
It is strong legal medicine, and should never be resorted
to without an attorney's guidance. It means "be there ready
to complete the deal or else!"
"Or else what?" you might ask.
"Ask your lawyer! "