Many of the contracts and agreements that we sign have deadlines for them, whether they are deadlines to complete contractual milestones or deadlines to make payments. And while you may think that these deadlines are important, you may be surprised to learn that a court may not consider these time deadlines to be as important as you do. Our Chicago commercial litigation lawyer at Ellis Legal explains more on this below.
Do Time Deadlines Matter?
As a general rule, if a party breaches a contract, a court is going to want to see that the breach was material. Material breaches not only allow you to sue for damages, but they also allow you to refuse to complete your part of the contract in return.
There are a lot of different definitions of what a material breach is or is not. But when it comes to timed deadlines, missing those deadlines is not always considered to be a material breach or one that warrants your being able to back out of your obligations under the contract.
Many courts will look at the overall agreement, and so long as, in the end, everybody got what they contracted to get, the fact that something was done late won't be a big consideration for the court.
Using a TOTE Clause
That's where time is of the essence, or TOTE provision comes in.
A statement in your agreement that time is of the essence tells both parties (and the court if you need to enforce the contract) that the timelines in your agreement are not merely flexible or suggested deadlines, but rather, that the timing of the contract is something that the parties materially relied upon, in making the contract.
A TOTE clause tells the parties and the court that time matters—including for payment (which is especially important in installment agreements, where payments are made over time or after the performance of certain contractual milestones).
When to Use TOTE Clauses
Although a court will consider your TOTE clause in any kind of contract, they are best used in contracts where time really does matter. Examples may be construction contracts or contracts involving real estate, but any time you can make a plausible argument that the other party missing time deadlines has cost you injury or damages, a TOTE clause will likely be enforced.
Despite the existence of a TOTE clause, you don't want to go to court over a delay that was trivial, minor, or which, in the end, didn't cost you anything or damage you in any way.
Waiving TOTE Clauses
Be aware that, like any contractual provision, you can waive a TOTE clause. So, for example, if you informally look the other way when a contractual deadline is missed or don't do anything to enforce the time deadlines in your agreement, it would be hard, later on in court, to argue that your time deadlines in your contract were as important as you say that they are.
Speak with a Chicago commercial litigation law attorney at Ellis Legal at (312) 967-7629 today for help drafting your business' agreements and contracts.