Time of the essence

You’ve agreed with someone to manufacture something bespoke for you. Maybe a large household item, something as a present for someone else or a treat for yourself. You find a manufacturer who can produce the item and get into discussions with them about price, specifications and how quickly they can produce the item. They seem competent and professional and so you agree to enter into a contract with them. Mindful of the risks, you agree to payments being staged at various points of the process with a final payment to be made on delivery/completion.

What do you do though if despite making the agreed payments, the manufacturer fails to deliver the goods in the agreed time frame and you are left out of pocket without the goods that you have ordered?

Opening up dialogue is crucial to try and ascertain what the situation is. Maybe the manufacturer needs a bit more time as a result of issues with their supply chain or other problems outside of their control. If they are asking for a reasonable extension of time then it is probably best to agree to the same. What if they go silent, though, and won’t respond to your attempts to contact them? Or what if they say that they need longer than they previously thought to deliver the goods? Can you walk away from the contract and demand your money back?

In order to terminate the contract you need to establish that the manufacturer has committed what is known as a repudiatory breach of the contract. That is a breach of contract which is so serious that you are entitled to treat the contract as ended.

If there is no term in the contract stating the date by which delivery of the goods is to be made and stating that time is ‘of the essence’ in the contract then whether a delay constitutes a repudiatory breach is an issue for the court to determine. In general where a contract is to be performed as soon as possible or within a reasonable time period, time is unlikely to be of the essence. It is not always straight forward to determine quite when a delay has become so long that a party can terminate a contract.

In those circumstances there is a risk for the unwary. If a party terminates a contract but the court subsequently finds that the breach complained of is not sufficiently serious to be repudiatory, the other party to the contract may claim damages against the first party for breach of contract and any losses that stem from that breach.

It is possible for a party facing these difficulties to serve a notice making time of the essence and stating that, if the goods are not delivered by a certain date (which should be reasonable in all the circumstances), that party will then terminate the contract and claim damages for the breach. If this fails to force the manufacturer to deliver the goods then you have the option of either affirming the contract (treating it as continuing) or accepting the repudiation, terminating the contract and claiming damages for breach of contract.

It remains up to the Court to determine whether the delay has been long enough to become a repudiatory breach of contract but service of the notice will help to strengthen the argument.

If you would benefit from advice regarding any contractual problems then please contact our Rob Synnott on 01736 362 362 to discuss them further.

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