Signing a contract? Find out why time is of the essence
The finer points of a contract, its timelines and other aspects have to be carefully scrutinised by both buyers and sellers. Non-compliance of ‘time is of the essence’ clause can spell trouble for buyers
Contracts are of critical importance. The finer points of a contract, its timelines and other aspects have to be carefully scrutinised by the parties concerned. They must be careful while entering into contracts in which time is of the essence, as noncompliance of this condition can lead to violation of contract.
When an agreement to sell for an immoveable property has been executed between parties and time of essence clause has been included, will any violation regarding timeline entitle the party which suffered losses to terminate such agreement to sell?
This question came up for consideration in the Supreme Court in the case of Padmakumari and others versus Dasayyan and others in 2015.
In the case, the proterty owners entered into an unregistered agreement to sell on April 19, 1992, with buyers interested in the property. The buyers paid an advance when the agreement was signed and the parties agreed that the remaining amount would be paid within nine months from the date of the agreement to sell.
However, as the buyer failed to pay up the final sum within the agreed time period, the owners sold part of the suit property vide a registered sale deed dated April 19,1993, to some third parties.
After almost one year from the date of execution of the agreement to sell, the buyers issued a legal notice to the erstwhile owners, demanding execution of sale deed as per the agreement to sell. When they did not get a response, the buyers filed a suit against the owners and the third parties in the trial court.
The trial court observed that the sale deed was not valid and the third parties had not purchased the suit property in good faith and passed a decree in favour of the buyer.
Aggrieved by the order the third parties filed an appeal before the high court, which concurred with the findings of the trial court. Thereafter, the third parties approached the Supreme Court with their complaint.
The apex court on its part took up the issue seriously. Explaining the concept of time being the essence of the contract, SC relied on the clause in the agreement to sell, wherein the buyer had agreed to pay the balance consideration within nine months.
It held that if time or date was stipulated in a contract and it was not performed by such time or date, the innocent party could terminate the contract.
However, SC also provided an exception, saying there could be situations where inference could not be made of time being the essence of the contract.This could happen if the contract stipulated a timeline for fulfillment of an obligation, but had other clauses that specified penalties for time extensions or delay in performance of work or had clauses that allowed postponement of performance. SC also observed that it was an undisputed fact that the buyer had not made the payment in the stipulated time and ruled in favour of the third parties.
The apex court also observed that the agreement to sell executed by the buyers was unregis- tered and the third parties even upon verification could not have reasonably known about it.
Therefore, the SC set aside the decision of the trial court and the hight court and held that since third parties had paid the consideration in good faith and without knowledge of the original contract, they would be protected by law and the sale deed dated April 19.1993 executed between the owners and the third parties would be considered valid. with DDA and should have been a comprehensive bypass to Gurgaon but it has not been planned that way. So, I would say that historically there has been a planning lacunae. What are the challenges ahead? Declaring Dwarka Expressway as a national highway does not resolve the problem because it must connect one national highway to another, it must lead some where. As such it will only remain a spur to NH8.
However, to take it to its logical conclusion, I feel, as and when the order comes in, we will have to look at it more comprehensively and to ideally connect NH8 from Khirki Duala to the existing Dwarka Expressway as it exists and to connect it to NH8 near Shivmurti.
So that would make it useful as a decongestion effort and not as palliative cure for an incomplete project. My effort, therefore, once the approval and the formal notification comes in, will be to get a complete study undertaken of the exact alignment that needs to be delineated. To get it on the ground, it will take three or four months, for consideration the alignment issues keeping in view the very heavy habitation in that area and the need for land acquisition. We will also have to see how it can best be economised so that level of displacement to existing plot holders and farm holders is not there.
There would be I am sure some vociferous people who would be expecting very exorbitant compensation. We will also have to look at how the existing metro and elevated corridors are suitably taken aboard and we are able to carve out the correct alignment which is economical, efficient and cost effective and which causes the least disturbance to the existing residents by giving them maximum comfort.
This has to be looked at comprehensively, holistically, and once we have that plan in readiness, then we will start bidding it out and executing it. What expenditure will be incurred in the process? My understanding is that here the expenditure will be largely on land acquisition for remaining parts and it’s likely to be more expensive than civil construction work.But that is a preliminary estimate. And keeping in view the fact that it is important for the country, we will certainly not compromise on the specifications or the features or structures even if it needs extra money and even if we have to go to the government for extra funds. By when are you expecting the notification? Within two to three to months perhaps. I am expecting the notification any day. I have not got anything in writing. I have received a letter from the DDA talking of the specific alignment that they have in mind. DDA has given us a broad letter conveying the alignment etc. Now it is up to the ministry to issue a formal notification which we are awaiting.
As and when it happens, the ball will start rolling. It will take another three to four months to get the specifications, the project report through and another four or five months to bid it out, getting a contractor to do the work etc. The target to complete the project has been set at June 2017. Is it achievable? Unless I see the notification, I cannot say. I am looking at us as an agency that will deliver this important project. I had a delegation of citizens from the area coming and meeting me recently. I feel there is a general pain point there and it needs to be resolved and as and when the formal notification is received, we will take it up from there. For the full interview go to hindustantimes.com/realestate/