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The essence of time of the essence

time of the essence

In a recent Ontario Court of Appeal decision (Di Millo v. 2099232 Ontario Inc. (2018), 99 R.P.R.(5th) 1) the Court considered what a “time is of the essence” provision means in the context of an option to purchase. In this case the option granted a vendor the right to re-purchase a property if a specified industrial building wasn’t built within a prescribed time. What is crucial is that the option did not provide for a time period after the failure to build during which it could be exercised. 

The application judge found that waiting 6 months after the option was exercisable did not respect the time of the essence provision and therefore the option had not been properly exercised. 

The Court of Appeal disagreed – a time of the essence provision does not mean a party has to move quickly (as it does in conversational English) – rather it means that time periods in the contract have to be strictly adhered to. In this case where no time limit was specified the vendor had a reasonable period of time to exercise the option once it became exercisable. The Court found that in all of the circumstances 6 months was a reasonable period of time and therefore the option had been validly exercised.

It is always preferable to specify an option exercise period – but if you don’t, the essence of this case is the Court will imply a reasonable one, whether or not time is of the essence.

By Abraham Costin

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McCarthy Tétrault LLP

McCarthy Tétrault is a Canadian law firm that delivers integrated business law, litigation services, tax law, real property law, labour and employment law nationally and globally.McCarthy publishes a series of blogs to share information with companies to help them comply and manage their businesses. On the Inside Internal Controls blog we will share some of those blog posts sharing their expertise among others, in the areas of Competition/Anti-trust, Corporate and Commercial Law, Intellectual Property, Privacy, Environmental Law, Technology and Litigation. Read more here
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