55. Effect of failure to perform at fixed time, in contract in which time is essential. - When a party to a contract promises to do a certain thing at or before a specified time, or certain things at or before specified times, 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.
Effect of such failure when time is not essential. - If it was not the intention of the parties that time should be of the essence of the contract, the contract does not become voidable by the failure to do such thing at or before the specified time; but the promisee is entitled to compensation from the promisor for any loss occasioned to him by such failure.
Effect of acceptance of performance at time other than that agreed upon. - If, in case of a contract voidable on account of the promisor’s failure to perform his promise at the time agreed, the promisee accepts performance of such promise at any time other than that agreed, the promisee cannot claim compensation for any loss occasioned by the non-performance of the promise at the time agreed, unless, at the time of such acceptance, he gives notice to the promisor of his intention to do so.
Upon reading, the said Section 55 brings clarity regarding when under what circumstances, the time is considered to be the essence of the contract.
(1) Where the parties have expressly agreed to treat it as of the essence of the contract; or
(2) Where delay operates as an injury; or
(3) Where the nature and necessity of the contract requires it to be so construed. For example, where in a contract, a party asks for extension of time for performance, such request for extension will be considered to indicate that the time is of the essence of the contract. [1] if the time was not of the essence of the contract, the party obligated to adhere to the time frame need not have asked for extension of time. [2] However, unless the contract prescribes a time for performance, there is no question of any particular moment of time being regarded as of the essence of the contract. [3] Further, it is also to be noted that a contract containing provisions for extension of time in certain circumstances often has the effect of reducing the value of time of performance. [4]
When a contract specifies a deadline for the delivery of goods, time is of the essence, and the buyer can reject the goods and claim damages if the delivery is not made within the specified time. [8] If a contract specifies a deadline for the payment of the consideration, time is of the essence, and the seller can terminate the contract if the payment is not made within the specified time. [9]
In conclusion, the concept of time being the essence of the contract is an important aspect of contract law in India. The Indian Contract Act, 1872 provides clear legal provisions regarding the same in Section 55. The various landmark cases discussed above help to provide clarity on the interpretation and application of Section 55. Parties to a contract must be mindful of the importance of timely performance of their obligations to avoid legal disputes and breaches of contract.
When time is of the essence of a contract, parties are obligated to ensure timely performance of their obligations. Any delay in the performance of the contractual obligations can lead to serious legal consequences, including the termination of the contract and the payment of damages. Therefore, it is important for parties to ensure that the time of performance is clearly specified in the contract and that they strictly adhere to the timelines mentioned.
[1] R. K. Prasad J, Orissa Textile Mills Ltd v. Ganesh Das [AIR 1961 Pat 107]
[2] Colles Cranes of India Ltd v. Speedeo Spares Corpn [AIR 1970 Cal 321]
[3] D.S. Thimmappa v Siddaramakka [(1996) 8 SCC 365]
[4] Abdul Khader v. Plantation Corpn of Kerala Ltd., [1982 KLT 928]
[5] Maula Bux v. Union of India [1970 SCR (1) 928]; Union of India v. Bhim Sen Walaiti Ram [AIR 1969 SC 78]; Alopi Prashad v. Union of India [AIR 1960 SC 588]; Ram Chand v. Union of India (1966); Jaipur Development Authority v. Daulat Mal Jain (2010); Larsen & Toubro Limited v. Maharashtra State Electricity Board (2011); Jyoti Structures Ltd. v. KMC Constructions Ltd. (2012).
[6] Fateh Chand v. Balkishan Das [AIR 1963 SC 1405]
[7] ONGC v. S.S. Agarwalla & Co. [AIR 1984 Gau 11]
[8] Union of India v. Bhimsen Walaiti Ram [(1960)]; Aircon Agencies v. Union of India (2006)
[9] Shashi Prakash Khemka v. NEPC Micon Ltd. [(2000)]
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