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Carter v. Sherburne Corp.

    Brief Fact Summary.

    Carter (plaintiff) sued Sherburne Corp. (defendant) for failure to perform within a reasonable time.

    Synopsis of Rule of Law.

    When a contract contains a time of the essence clause the party performing must do it in the time allotted, and that performance is a constructive condition on the other party performing.

    Facts.

    Plaintiff and defendant entered into 4 separate contracts regarding the development of certain real property, with two of the contracts containing provisions of what would happen in a situation of late performance. The defendant was also allowed to retain ten percent of the contract amount if the plaintiff did not comply with the terms of the agreements. The plaintiff failed to perform due to the defendant constantly moving them around the 4 contracts and withheld ten percent of the contract price and plaintiff sued for the 10 percent withheld. The trial court ruled in favor of the plaintiff because they substantially performed and any nonperformance was the fault of the defendant. Defendant argues the court erred because the contract contained a time of the essence clause.

    Issue.

    Whether when a contract contains a time of the essence clause the party performing must do it in the time allotted, and that performance is a constructive condition on the other party performing.

    Held.

    Yes. When a contract contains a time of the essence clause the party performing must do it in the time allotted, and that performance is a constructive condition on the other party performing.

    Discussion.

    When a contract contains a time of the essence clause the party must perform within the time stated in the contract and if doesn’t contain this clause performance will be in a reasonable time. Generally, a contract with a time of the essence clause will also contain a clause that the contract is void if the party fails to perform in time. Courts will only hold the time was of the essence if the contract expressly says so, especially regarding construction contracts. Here, the contracts between the parties contained no such provision and thus performance was to be in a reasonable time. The penalty provision only provides damages for late performance, not voiding the contract.


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