Bar Exam — MBE (Multistate Bar Exam)Real PropertyHard
A buyer entered into a contract to purchase a vacant lot for $100,000. The contract included a provision stating, 'Time is of the essence.' The closing was scheduled for October 1st. On September 30th, the buyer's financing fell through. The buyer contacted the seller and requested a 10-day extension, which the seller refused. On October 2nd, the buyer secured new financing and tendered the full purchase price to the seller. The seller refused to close, claiming the buyer breached the contract. Which of the following is the most likely outcome?
- AThe seller will prevail because the 'time is of the essence' clause made the closing date a strict condition.
- BThe buyer will prevail because a delay of one day is a minor breach and does not justify termination.
- CThe seller will prevail because the buyer's financing falling through constituted an anticipatory repudiation.
- DThe buyer will prevail because the seller's refusal to grant a reasonable extension was unreasonable.
Show answer & explanationAnswer & explanation
Correct answer: A. The seller will prevail because the 'time is of the essence' clause made the closing date a strict condition.
When a contract for the sale of land explicitly states 'time is of the essence,' strict adherence to the specified dates is required. Failure to perform by the deadline, even by a short period, constitutes a material breach, allowing the non-breaching party to terminate.
Why the other options are wrong
- B. The 'time is of the essence' clause elevates the closing date to a material condition, making even a short delay a material breach, unlike a typical contract where minor delays might be tolerated.
- C. The buyer's financing falling through is a failure of a condition, not necessarily an anticipatory repudiation, which requires a clear statement of intent not to perform. However, the 'time is of the essence' clause is a more direct and stronger reason for the seller to prevail.
- D. While courts might sometimes imply a right to a 'reasonable' extension in the absence of a 'time is of the essence' clause, its presence negates such an implication and makes the date absolute.
Time is of the Essence Clause
A contractual provision in real estate agreements making timely performance a material condition, such that failure to perform by the specified date constitutes a material breach.
- Makes strict compliance with deadlines mandatory.
- Failure to meet a deadline is a material breach.
- Often included in real estate contracts.
- Without it, timely performance is generally not a material condition unless circumstances indicate otherwise.
Memory trick: Time is Tough, Essence is Exact.