Time is of the essence even if the extension has been granted:
1. Bhudra Chand v. Betts [(1915) 22 Cal. LJ 566]
Section 55 of the Indian Contract Act provides that when a party to a contract promises to do
a certain thing at or before a specified time and fails to do any such thing at or before the
specified time, the contract, or so much of it as has not been performed, becomes voidable at
the option of the promisee, if the intention of the parties was that time should be of the
essence of the contract. What, then, was the intention of the parties in the case before us? As
Lord Cairns observed in Bowes v. Shand (1877) 2 App. Cas. 455 at p. 463 : 36 L.T. 857 : 25
W.R. 730 : 46 L.J.Q.B. 561, merchants are not in the habit of placing upon their contracts
stipulations to which they do not attach some value and importance. Prima facie, then, the
parties may be deemed to have intended that time should be of the essence of the contract in
the case before us. This conclusion is confirmed by the circumstance that the defendant
obtained an extension of the time for delivery of the elephant; if the time were not of the
essence of the contract, he need not have asked for extension of time. We must thus proceed
on the assumption that according to the true intention of the parties time was of the essence of
the contract.
2. Pulgaon Cotton Mills v. Gulabai [AIR 1953 Nag. 345]
In the present case parties had fixed the end of June 1940 for the fulfilment of the contract.
This was extended to the end of July 1940 at the request of the Plaintiff. The very fact that he
asked for an extension shows that time was of the essence. See - Bhudar Chandra v. Betts
AIR 1916 Cal 901at p. 902 (E). Where time is of the essence and is extended, the extended
date is also of the essence of the contract. See - Haji Fakir Mohammed v. Shaik Abdulla 12
Bom 658 at p. 672 (F). It is to be noticed that while extending the time the Mills made it clear
that they were reluctant to extend the time and that some of the ordered goods must be taken
in June. This also points to time as being of the essence of the contract. We are, therefore, of
opinion, disagreeing with the lower Court that (Clause 10 apart) time was of the essence of
the contract.
3. Chitty on Contracts, 26Ed.,
Time is generally considered to be the essence of the contract in the following three
cases:
i. Where the parties have expressly agreed to treat it as of the essence of the contract;
ii. Where delay operates as an injury;
iii. Where the nature and necessity of the contract requires it to be so construed, for
example, where a party asks for extension of time for performance.
4. Chand Rani vs. Kamal Rani (AIR 1993 SC 1742):
From an analysis of the above case-law it is clear that in the case of sale of immovable
property there is no presumption as to time being the essence of the contract. Even if it is
not of the essence of the contract the court may infer that it is to be performed in a
reasonable time if the conditions are,
i. From the express terms of the contract;
ii. from the nature of the property; and
iii. from the surrounding circumstances
5. (1979) 2 SCC 70 Hind Construction Contractors v. State of Maharashtra.
The parties may expressly provide that time is of the essence of the contract and where there
is power to determine the
contract on a failure to complete by the specified date, the stipulation as to time will be
fundamental. Other provisions of the contract may, on the construction of the contract,
exclude an inference that the completion of the works by a particular date is fundamental;
time is not of the essence where a sum is payable for each week that the work remains
incomplete after the date fixed, nor where the parties contemplate a postponement of
completion.
6. Burn & Co. v. Lukhdhirji Morvai State (MANU/PR/0025/1925):
The Privy Council had held that inclusion of clauses in a contract providing for extension of
time in certain contingencies and providing for payment of fine or penalty for every day or
week for the work undertaken on the contract remains unfinished on the expiry of the time
provided in the contract is inconsistent with time being of the essence of a contract and would
be calculated to render ineffective an express provision in a contract to that effect.
7. Hind Construction Contractors by its Sole Proprietor Bhikamchand Mulchand Jain
(Dead) by Lrs vs. State of Maharashtra (MANU/SC/0031/1979):
It will be clear from the aforesaid statement of law that even where the parties have expressly
provided that time is of the essence of the contract such a stipulation will have to be read
along with other provisions of the contract and such other provisions may, on construction of
the contract, exclude the inference that the completion of the work by a particular date was
intended to be fundamental, for instance, if the contract were to include causes providing for
extension of time in certain contingencies or for payment of fine or penalty for every day or
week the work undertaken remains unfinished on the expiry of the time provided in the
contract such clauses would be construed as rendering ineffective the express provision
relating to the time being of the essence of contract.
8. Arosan Enterprises Ltd. vs. Union of India (UOI) and Ors. (MANU/SC/0595/1999):
The extension if there be any, should and ought to be categorical in nature rather than being
vague or in the anvil of presumptions. In the event the parties knowingly give a go by to the
stipulation as regards the time - the same may have two several effects: (a) parties name a
future specific date for delivery and (b) parties may also agree to the abandonment of the
contract - as regards (a) above, there must be a specific date within which delivery has to be
effected and in the event there is no such specific date available in the course of conduct of
the parties, then and in that event, the Courts are not left with any other conclusion but a
finding that the parties themselves by their conduct have given a go by to the original term of
the contract as regards the time being the essence of the contract.
9. National Buildings Construction Corp. (NBCC) Ltd. vs. Natavarlal M. Patel
(MANU/DE/0879/2017):
The very grant of EOTs by NBCC from time to time and with retrospective effect revealed
that in fact time was not the essence of the Contract. As a result of an EOT, for reasons not
attributable to the Contractor, the completion got delayed. Since each EOT is without penalty,
it is at best NBCC and not the Respondent that is responsible for the delay.
10. Indian Oil Corporation vs Lloyds Steel Industries Ltd. (2007 (4) ARBLR 84 Delhi)
The arbitrator has held that at the time of entering into the contract, the intention of the
parties was that time should be the essence of the contract, but it did not remain so in view of
successive extensions given by the petitioner and, therefore, the clause relating to time being
the essence of the contract lost its significance. However, overall view is to be taken having
regard to the facts and circumstances of each case.
--- This was accepted by the Delhi High Court. The court held that since subsequent
extensions were granted the urgency or time as an essence of the contract was lost and
completion of project became the paramount condition of the contract.
11. Indian Oil Corporation vs Lloyds Steel Industries Ltd. (2007 (4) ARBLR 84 Delhi):
In a particular case where extensions are given fixing the extended date, time may become
the essence of the contract.
12. GAIL (India)Ltd. v. Paramount Ltd.:
a mere stipulation in the contract that time is of the essence of
the contract by itself does not make it so. The other contractual
terms require to be construed before such conclusion could be
reached.
13. Pollock & Mulla in their celebrated text “Indian Contract and
Specific Relief Acts” have culled out the following three
instances as to when time would be the essence of the contract
from a reading of the judicial pronouncements on the subject :-
“(1) Where the parties have expressly stipulated in their contract
that the time fixed for performance must be exactly complied
with;
(2) Where the circumstances of the contract or the nature of the
subject-matter indicate that the fixed date must be exactly
complied with; and
(3) Where time was not originally of the essence of the contract,
but one party has been guilty of undue delay, the other party
may give notice requiring contract to be performed within
reasonable time and what is reasonable time is dependent on the
nature of the transaction and on proper reading of the contract
in its entirety.”
14. AIR 1940 NULL 1 Shambhulal Panalal Vaish vs. Secretary
of State
In building contracts time is not of the essence of the contract in
the absence of express words making it so, as the subject of the
contract is not such as to, make the completion of time essential.
And the mere insertion of words making time of the essence of
the contract will be ineffective if they are inconsistent with other
terms of the contract.”
15. Mahabir Prasad v. Durga Dutta (1961 AIR 990):
The Supreme Court held that in commercial transactions time was ordinarily of the essence.