PastPaperHero | Real estate contracts

Learning Outcomes

This article examines time for performance in land sale contracts, including:

How to determine when each party’s performance is due where the contract states a specific closing date, is silent as to date, or expressly provides that time is of the essence.
How “time is of the essence” language functions as an express condition, when courts will imply such a condition from circumstances or notice, and how that changes whether a delay is treated as a minor or material breach.
How courts assess what constitutes a “reasonable time” for performance when time is not of the essence, and how facts such as market changes, financing problems, and title defects affect that analysis on MBE questions.
How waiver, course of performance, and written or oral communications can relax, preserve, or reinstate strict timing requirements, including the role of “ready, willing, and able” tender.
What remedies are available when one party tenders late or fails to close at all—damages, specific performance, rescission, and deposit forfeiture—and how to structure a clear, exam‑style answer to timing and marketable‑title issues in real estate contracts.

MBE Syllabus

For the MBE, you are required to understand timing rules in land sale contracts, with a focus on the following syllabus points:

Determining whether time is “of the essence” in a real estate contract and how that changes the nature of breach.
Consequences of failing to perform by the stated closing date when time is, and is not, of the essence.
Identifying what constitutes a “reasonable time” for performance when a date is missed or not stated.
Recognizing waiver and retraction of timing conditions through words or conduct.
Selecting proper remedies (damages, specific performance, rescission, forfeiture of deposits) when timing provisions are breached.
Integrating timing rules with related doctrines: equitable conversion, marketable title, conditions, and substantial performance.

Test Your Knowledge

Attempt these questions before reading this article. If you find some difficult or cannot remember the answers, remember to look more closely at that area during your revision.

In a contract for the sale of land, if no closing date is specified, performance is generally due:
1. Within 30 days.
2. Within 90 days.
3. Within a reasonable time.
4. At the buyer's discretion.
If a land sale contract states "time is of the essence," failure by one party to perform on the exact closing date generally results in:
1. The non-performing party having a reasonable time to cure.
2. The contract becoming voidable at the option of the non-breaching party.
3. Automatic termination of the contract.
4. A minor breach, allowing only for damages.
Buyer and Seller enter a contract for the sale of Blackacre with closing set for July 1. The contract does not state time is of the essence. Seller tenders performance on July 10. Which is most likely true?
1. Buyer may terminate the contract because Seller materially breached.
2. Seller is in total breach and Buyer owes nothing.
3. Buyer must perform but may be entitled to incidental damages for the delay.
4. The contract is automatically extended for 30 days.

Introduction

Contracts for the sale of land typically specify a date for closing, which is the date when performance (payment by the buyer and delivery of the deed by the seller) is due and legal title changes hands.

Key Term: Closing
The event at which the seller delivers a deed and the buyer pays the purchase price. Legal title passes to the buyer at closing; until then the seller holds legal title.

A common issue tested on the MBE involves the legal effect of a party's failure to perform on the specified closing date. Does this failure automatically excuse the other party's performance, or is the late party given additional time? The answer depends primarily on whether the contract made time of the essence, and on general contract doctrines about conditions and material breach.

This topic also interacts with equitable conversion and marketable title:

Key Term: Equitable Conversion
Once a specifically enforceable land sale contract is signed, equity treats the buyer as the equitable owner of the real property and the seller as holding bare legal title as security for the purchase price.

Key Term: Marketable Title
Title reasonably free from defect and from an unreasonable risk of litigation. The seller’s duty is to deliver marketable title at closing, not at contract formation.

Because of equitable conversion, the buyer usually bears the risk of loss between contract and closing in most jurisdictions, unless the contract allocates risk differently or the jurisdiction has adopted a contrary statute (such as the Uniform Vendor and Purchaser Risk Act). But whether a party can walk away from the transaction due to delay in closing depends on whether timely closing is a condition of the other party’s duty.

Key Term: Express Condition
A contract term that explicitly makes one party’s duty contingent on the occurrence of a stated event in the exact manner and time specified. Express conditions must be strictly satisfied; substantial performance is not enough.

“Time is of the essence” language is one classic express condition. Understanding when such a condition exists, whether it has been waived, and how strictly it is enforced is critical on MBE real estate questions.

Equally important is the default rule that, absent such a condition, performance is due within a reasonable time, even if a specific date is mentioned. The bar exam often turns on whether the delay is minor and excusable, or so long and prejudicial that it constitutes a material breach.

To analyze timing questions efficiently on the MBE, it helps to keep in mind the basic contract structure behind land sale contracts:

Most promises (to convey and to pay) are mutual, dependent promises, each viewed as subject to a constructive condition of exchange.
Constructive conditions are satisfied by substantial performance within a reasonable time; express conditions are not.
Timing provisions can be either:
- mere promises (breach yields only damages, performance still due), or
- conditions (non-occurrence excuses the other party’s performance altogether).

The rest of this article develops these ideas in the specific context of real estate contracts.

Conditions, Promises, and Time

Before focusing specifically on time clauses, it helps to distinguish promises from conditions:

A promise is a commitment to act (e.g., “Seller will close on June 1”). Breach gives rise to damages; material breach may excuse the other party’s performance.
A condition is an event that must occur before a duty arises (e.g., “Seller’s duty to convey is conditioned on Buyer tendering the price on June 1”). If the condition does not occur, the duty never becomes due.

Timing language can be either:

merely promissory (“Closing shall be on or before June 1”), or
both promissory and conditional (“Time is of the essence; the parties’ obligations are expressly conditioned on closing by June 1”).

Because the consequences differ dramatically, a core exam skill is spotting when time is an express condition as opposed to a mere promise.

Key Term: Material Breach
A breach serious enough that it defeats the essential purpose of the contract and excuses the other party’s remaining performance.

With that framework, we can turn to how courts and the MBE treat “time is of the essence” and “reasonable time” in land sale contracts.

The "Time is of the Essence" Doctrine

The default rule in contract law, particularly concerning land sale contracts, is that time is NOT of the essence. This means that failure to perform on the specified closing date is generally considered a minor breach, not automatically discharging the other party's duty to perform. The non-breaching party may recover incidental damages resulting from the delay, but cannot typically rescind the contract solely based on tardiness unless the delay is unreasonable.

Key Term: Time is of the Essence
A contract term providing that timely performance is an express condition to the other party's duty to perform. Failure to perform on time under such a clause is a material breach that excuses the other party’s performance.

Where time is not of the essence, timely closing is still important, but is treated as part of a constructive condition of exchange. That constructive condition can usually be satisfied by substantial performance within a reasonable time, so a short delay in closing is not automatically fatal to the contract.

Creating a "Time is of the Essence" Clause

For time to be considered "of the essence," the contract must usually contain an explicit clause stating this. Phrases like:

“Time is of the essence with respect to all obligations under this agreement.”
“Closing must occur on or before July 1, and the parties’ obligations are expressly conditioned on closing by that date.”

are typically sufficient. The phrase “on or before July 1” alone, without further language, often is not enough by itself; courts look for clear intent that timely performance is a condition, not just a target date.

Courts may also infer that time is of the essence in limited circumstances:

Clear contract language indicates this was the parties' intent (e.g., describing the closing date as “strict” or “a condition precedent”).
Surrounding circumstances suggest prompt performance was critical (e.g., rapidly fluctuating land values, a buyer who needs immediate occupancy to continue an existing business, or a developer needing to close by year‑end to preserve financing).
Subsequent notice: One party gives the other clear, unequivocal notice, within a reasonable time before (or after) the originally scheduled closing date, that performance on a specified date is required and that late performance will be treated as a material breach.

Where no such language or circumstances exist, the presumption remains that time is not of the essence.

When notice is used to make time essential, courts typically require that:

The notifying party choose a specific future date for closing.
The date itself be reasonable in light of prior delays and the nature of the transaction.
The notice clearly state that failure to close by that date will be treated as a default.

On an MBE question, if you see a lawyer’s letter saying, “We hereby set June 15 as the closing; if you do not close then, we will treat the contract as terminated,” assume the notice is sufficient to make time of the essence as of June 15—provided the date is not unreasonably early.

Conditions vs. Promises in Time Clauses

It is common for a time clause to play both roles:

As a promise, the party commits to perform by that date; breach may yield damages.
As a condition, the occurrence of performance by that date is required before the other party’s duty arises.

When the contract expressly states that time is of the essence, the time requirement is almost always read as an express condition. That triggers the strict compliance rule: even a one‑day delay can be a material breach that excuses the other party, as long as the other party was ready, willing, and able to perform.

By contrast, if the contract simply uses calendar language without “of the essence” terminology, the date is usually treated as a promissory term and as part of a constructive condition; substantial performance within a reasonable time will satisfy it.

Effect of a "Time is of the Essence" Clause

If time is genuinely of the essence, failure to tender performance by the specified date constitutes a material breach. The non-breaching party is excused from performance and may pursue remedies for total breach, such as rescission, retention of a deposit if permitted, or damages.

Two MBE-relevant limits:

The party invoking the clause must show that they were ready, willing, and able to perform on the closing date. A party who could not perform on time cannot insist that the other’s delay is a material breach.
Courts sometimes soften harsh outcomes in equity. For example, if the delay is trivial and causes no prejudice, some courts will still grant specific performance to a slightly late buyer, often with an adjustment for the delay. On the MBE, however, you should generally treat a clearly drafted “time is of the essence” clause as enforceable according to its terms.

Note the interaction with equitable conversion:

If time is of the essence and the buyer misses the closing date, the seller may treat the buyer as in total breach and keep the land (and often retain a reasonable deposit as liquidated damages).
If time is of the essence and the seller cannot tender marketable title on the closing date, the buyer can treat the seller as in total breach but still has the benefit of equitable conversion to claim specific performance with abatement if the title defect is curable or minor.

Time-of-the-Essence and Marketable Title

A frequent tested twist combines time-of-the-essence language with the seller’s duty to deliver marketable title.

If the contract states that time is of the essence and the seller cannot tender marketable title on the stated date (for example, an undisclosed easement, a mortgage that will not be paid off, or a partial outstanding interest), the seller is in material breach on that date. The buyer may:

Refuse to close,
Treat the seller as in total breach, and
Seek damages or specific performance (if the defect can be cured and the buyer still wants the property).

By contrast, if the contract does not make time of the essence, the seller typically has a reasonable time after the scheduled closing to cure title defects and then tender marketable title. The buyer must generally wait that reasonable period before walking away.

This is reflected in many outlines: time‑of‑the‑essence language makes the obligation to convey marketable title by the stated date an express condition; without it, the seller need only deliver marketable title within a reasonable time.

Applications and Edge Cases

Some common exam scenarios involving time‑of‑the‑essence clauses:

Option contracts and rights of first refusal: Time is almost always of the essence even without express language. Late exercise is ineffective; the option simply expires.
Installment land contracts with forfeiture clauses (e.g., “time is of the essence; upon default, all payments are forfeited and seller may retake possession”): Courts often scrutinize forfeiture provisions; some will grant the buyer equitable relief (e.g., give credit for payments) despite a time‑of‑the‑essence clause, particularly if the default is minor and the buyer has made substantial payments.
Repeated extensions: Even when the original contract said time is of the essence, repeated consensual extensions, especially informal ones, often show that the parties themselves do not treat the date as strict. This can support a finding of waiver, discussed below.

Worked Example 1.1

Buyer and Seller contracted for the sale of Greenacre, with closing set for August 1. The contract included a clause stating, "Time is of the essence for all obligations herein." On August 1, Buyer was unable to secure financing and failed to tender the purchase price. Seller immediately declared the contract terminated and sought another buyer. Can Buyer compel Seller to perform if Buyer secures financing by August 15?

Answer:
No. Because the contract explicitly stated time was of the essence, Buyer's failure to perform on August 1 constituted a material breach of an express condition. This breach excused Seller's duty to perform (convey the property) and gave Seller the right to terminate the contract and seek damages. Buyer cannot compel performance after materially breaching, even if financing is later obtained.

Worked Example 1.2

Assume the same facts as above, except that Seller was not in a position to convey marketable title on August 1 because the property was still encumbered by a lien that Seller could not pay off until a week later. Buyer had the full purchase price ready to tender on August 1. Seller asks Buyer to proceed with closing anyway and promises to clear the lien afterwards. If Buyer refuses to close and Seller sues for specific performance, what result?

Answer:
Buyer prevails. Under a time‑of‑the‑essence clause, Seller was obligated to be able to deliver marketable title at the August 1 closing. Seller’s inability to do so is a material breach of an express condition. Buyer was ready, willing, and able to perform and is justified in refusing to close. Seller cannot force Buyer to accept non‑marketable title and a promise of later cure when time is of the essence.

Reasonable Time for Performance

If the contract does not contain a "time is of the essence" clause (and circumstances do not clearly imply it), failure to perform on the specified closing date is not a material breach. Instead, performance must be tendered within a reasonable time after the stated date.

Key Term: Reasonable Time
The length of time that is fair and appropriate under all of the circumstances, considering the nature of the contract, the parties’ expectations, and changes in conditions between the scheduled date and actual performance.

Courts consider various factors in determining what counts as a reasonable time:

The length of the delay (days vs. weeks vs. months).
The complexity of the transaction (simple residential sale vs. multi‑property commercial deal).
Customary practice in local real estate closings.
Changes in market conditions or financing availability during the delay.
Whether either party suffers prejudice because of the delay (e.g., lost financing, vacancy costs).
Whether the delaying party acted in good faith and with diligence.

In many ordinary residential transactions, a delay of a few days or a couple of weeks is often considered reasonable. Many bar outlines suggest that closing within one to two months of the stated date is ordinarily acceptable if the contract is silent on time being of the essence, particularly where delay is needed to cure title defects. Delays of several months can still be reasonable in larger commercial deals, but at some point the delay becomes unreasonable and thus a material breach.

Effect of Delay When Time is Not of the Essence

If performance occurs within a reasonable time after the closing date:

The contract remains enforceable.
The late party has breached, but the breach is minor, not material.
The non-breaching party must still perform (e.g., accept a late tender of the deed or purchase price) but is entitled to compensation for incidental losses caused by the delay (e.g., extra interest, property taxes, insurance, or temporary housing costs).

If performance is delayed beyond a reasonable time, the delay constitutes a material breach, excusing the non-breaching party from performance and allowing pursuit of remedies for total breach.

In terms of conditions:

When time is not of the essence, the obligation to close by the stated date is usually part of a constructive condition of exchange.
That constructive condition is satisfied by substantial performance within a reasonable time.
Only if the delay is so prolonged and prejudicial that it amounts to a material breach is the constructive condition unsatisfied.

No Stated Closing Date: “Reasonable Time” Fills the Gap

Sometimes the contract is completely silent as to a closing date. In that case, performance is due within a reasonable time after the contract is made. The same factors above guide the analysis.

On the MBE, if you see:

A valid written contract for sale of land,
No stated closing date, and
No clear evidence that time is of the essence,

assume that each party has a reasonable time to tender performance. Ten days or a few weeks is almost certainly within that range. A year is usually not, absent special facts.

Worked Example 1.3

Buyer and Seller contract for the sale of Blueacre, closing date October 1. The contract is silent regarding time being of the essence. Buyer tenders the purchase price on October 20. Seller refuses to close, having received a better offer on October 15. Can Buyer obtain specific performance?

Answer:
Likely yes. Since time was not of the essence, Buyer had a reasonable time after October 1 to perform. A 20‑day delay is often considered reasonable in land sale contracts, absent special circumstances indicating urgency. Seller's refusal to close, motivated by obtaining a better offer, constitutes a breach. Buyer can likely compel Seller to perform via specific performance, possibly subject to paying Seller any provable damages caused by the 20‑day delay (for example, extra carrying costs).

Worked Example 1.4

Buyer and Seller enter a written contract for the sale of Redacre. The contract sets closing for March 1 but does not state time is of the essence. Buyer encounters minor delays in obtaining financing and tenders the full purchase price on September 1—six months after the stated date. During those six months, the property’s value has doubled, and Seller has found another buyer willing to pay far more. Seller refuses to convey to Buyer. Is Buyer entitled to specific performance?

Answer:
Probably not. Even though time was not of the essence, a six‑month delay, coupled with a major change in market conditions and no compelling justification from Buyer, is likely unreasonable. An unreasonable delay constitutes a material breach, excusing Seller’s obligation to perform. Seller may treat the contract as terminated and sell to the new buyer, though Buyer might still claim restitution of any benefits conferred (for example, a deposit).

Reasonable Time and Marketable Title

When time is not of the essence, the seller is entitled to a reasonable time to cure title defects discovered around the scheduled closing date. This is a classic exam trap:

On the scheduled date, Buyer’s title search reveals an undisclosed easement or mortgage.
Buyer refuses to close.
The contract is silent on time being of the essence.

In this setting:

Seller is not automatically in total breach just because the title is defective on the original closing date.
Seller has a reasonable time to cure the defect and tender marketable title.
Buyer cannot walk away immediately; Buyer should give Seller a reasonable opportunity to cure.

If Seller fails to cure within a reasonable time, Buyer may then treat Seller as in material breach.

Waiver of Time Condition

Even if time is of the essence, the condition of timely performance can be waived by the party who benefits from it.

Key Term: Waiver
The voluntary relinquishment of a known right, which may occur through express statements or conduct inconsistent with insisting on strict performance.

Waiver can occur expressly (“I don’t care if we close a week late”) or through conduct. If a party accepts late performance without objection, or consistently allows prior closing dates to slide, they may be held to have waived the right to enforce the strict timing requirement.

Examples of waiver through conduct:

Seller accepts late deposits or late installment payments without protest.
Buyer insists on additional inspections after the scheduled closing date, implying that closing will occur later.
Both parties continue to negotiate closing logistics after the stated date passes.

When a time-of-the-essence provision is waived, the timing requirement is effectively relaxed, and performance becomes due within a reasonable time (the default rule).

Waiver vs. Modification and the Statute of Frauds

It is important to distinguish:

An oral modification of a land sale contract, which typically must satisfy the Statute of Frauds if it materially changes a term (including the closing date), from
A waiver of a condition, which can often be made orally and without new consideration.

For example:

If Buyer and Seller agree orally to move the closing date from June 1 to September 1, that is a modification of a contract within the Statute of Frauds and, strictly speaking, should be in writing.
If, instead, Seller simply says on June 1, “That’s fine, I’ll give you more time; we can close later this month,” Seller has likely waived the strict June 1 deadline rather than forming a whole new contract.

On the MBE, questions involving waiver of a time condition in land sale contracts usually treat such waivers as effective even if not in writing, especially where there is reliance or partial performance.

Retracting a Waiver

A party who has waived the "time is of the essence" condition can generally reinstate it by giving the other party:

Clear notice that strict compliance will be required going forward, and
A reasonable time to comply with the reinstated deadline.

However, reinstatement is not permitted if the other party has detrimentally relied on the waiver in a way that would make enforcement inequitable.

Worked Example 1.5

A land sale contract for Silveracre states that “time is of the essence” with closing scheduled for May 1. Buyer is not ready on May 1. Seller nevertheless agrees in writing to reschedule closing for May 15 and accepts an additional payment from Buyer for an extension fee, stating, “We’ll close whenever your lender is ready in May.” Buyer tenders full payment on May 28. Seller refuses, claiming that Buyer’s failure to close on May 1 was a material breach. Is Seller likely correct?

Answer:
No. Seller’s conduct—granting a later closing date, accepting an extension fee, and indicating willingness to close when Buyer’s lender is ready—constitutes a waiver of the original time‑of‑the‑essence condition. The contract now requires closing within a reasonable time under the new circumstances. A 13‑day delay from May 15, after Seller’s waiver, is likely reasonable. Seller’s refusal to close is a breach, and Buyer can seek specific performance, subject to compensating Seller for any minor delay‑related losses.

Worked Example 1.6

Same contract as in Example 1.5. After granting the first extension to May 15 and saying “whenever your lender is ready in May,” Seller becomes concerned about further delay. On May 20, Seller’s lawyer sends Buyer a letter stating, “Seller will require closing on June 1; if Buyer does not close on that date, Seller will treat the contract as terminated.” Buyer tenders full payment on June 15. Seller refuses to close. Is Seller’s June 1 deadline enforceable?

Answer:
Likely yes. By giving Buyer clear written notice on May 20 that Seller will require closing on June 1, and by allowing a reasonable period (about 12 days) for Buyer to arrange funding and close, Seller effectively reinstated a time‑of‑the‑essence condition for June 1. Buyer’s failure to tender by June 1 is then a material breach, excusing Seller’s performance. A later tender on June 15 is too late once time has been properly made of the essence again.

Tender of Performance and “Ready, Willing, and Able”

The consequences of a missed date also depend on whether the complaining party was prepared to perform.

To treat the other party’s failure to close on time as a breach (especially a material one), the non‑breaching party generally must show that they were ready, willing, and able to perform on the closing date. This requirement is applied particularly strictly when time is of the essence.

If Seller insists that Buyer’s late tender is a material breach, Seller must show that Seller could have conveyed marketable title and delivered the deed on time.
If Buyer claims Seller’s failure to close is a material breach, Buyer must show that Buyer had the funds and was prepared to tender the purchase price.

Actual tender (literally showing up with the deed or the funds) is not required if it would be futile—for example:

Seller has already conveyed the property to someone else.
The other party has unequivocally repudiated the contract (“I will not close under any circumstances”).
The other party cannot possibly perform (e.g., Seller no longer owns the property).

In these circumstances, it is enough that the complaining party was ready and able; a formal tender is unnecessary.

Practically, on the MBE:

Look for facts showing that the party now claiming breach had financing lined up, had signed the deed, or otherwise had removed their own conditions (inspection contingency satisfied, etc.).
If the complaining party was themselves not ready to perform, they cannot rely on an opposing party’s tardiness as a material breach.

Tender, Conditions, and Substantial Performance

In ordinary contract doctrine:

Performance by one party is usually a condition precedent to the other’s duty to perform.
But at common law, the substantial performance doctrine prevents harsh forfeitures: if a party has substantially performed the constructive conditions, the other party’s duty arises, and the remedy for defects is damages—not refusal to perform.

In land sale contracts, substantial performance often concerns the quality of title; a minor title defect that can be compensated with money will not excuse the buyer entirely. With respect to time:

When time is not of the essence, substantial performance within a reasonable time satisfies the constructive condition.
When time is of the essence, substantial performance is not enough; tender must occur by the specified date.

This is why the “ready, willing, and able” requirement is so central: it marks whether the complaining party satisfied their own conditions or constructive conditions as of the critical date.

Oral Rescission and Timing

An additional MBE‑relevant wrinkle: parties can sometimes orally rescind a written land sale contract, even though the original contract had to satisfy the Statute of Frauds.

If the parties later clearly agree to rescind, and neither party sues to enforce the contract before rescission is carried out, the oral rescission is generally valid. This is true even if performance would otherwise still be due within a reasonable time.

Why is oral rescission permitted when oral modification often is not?

A rescission terminates the contract; it does not create a new land‑transfer obligation.
The Statute of Frauds governs the creation of certain obligations (like contracts for the sale of land), but not necessarily their mutual termination.
Courts also rely on mutual assent and reliance: if both parties act as though the contract has been abandoned, equity will rarely force them back into it.

Worked Example 1.7

Buyer and Seller enter a written contract for the sale of land. The contract satisfies the Statute of Frauds but does not specify a closing date. Ten days later, Buyer and Seller orally agree to rescind. The next day, Seller sells the land to Third Party. Two days after that, Buyer changes her mind and tells Seller she wants to go forward with their original contract. Seller refuses. Buyer sues Seller for breach of the written contract. Who prevails?

Answer:
Seller. When the original contract contained no closing date, performance was due within a reasonable time. However, Buyer and Seller orally agreed to rescind before either had demanded performance. That oral rescission is effective; there is no requirement that rescission itself be in writing. Once the contract was rescinded and Seller sold to Third Party, Seller had no obligation to perform for Buyer. Buyer cannot revive the rescinded contract by changing her mind a few days later.

This illustrates that “reasonable time for performance” does not prevent the parties from mutually terminating the contract before that time passes.

Note also:

If one party had already substantially performed (e.g., Buyer had taken possession and made improvements), an oral rescission might raise issues of restitution or reliance, but the timing obligation would still be extinguished.
If the parties orally “rescinded” but continued acting as though the contract remained in force (e.g., Buyer continued making installment payments), courts might find that no real rescission occurred.

Exam Warning: Minor Delay vs. Material Breach

Exam Warning

Be careful to distinguish a minor delay (when time is not of the essence) from a material breach (when time is of the essence). The remedies differ significantly. A minor delay only gives rise to incidental damages, whereas a material breach excuses the non-breaching party's performance entirely.

On MBE questions:

Look for express language making time essential or describing timely performance as a condition.
Look at the length of the delay and its impact. A short delay with no prejudice is more likely minor; a long delay with changed market conditions is more likely material.
Check whether the complaining party was ready, willing, and able to perform.
Consider whether there was waiver or conduct inconsistent with strict enforcement of the date.
Distinguish timing issues from marketable title issues: the seller need not have perfect title until closing (or until the reasonable-time closing), unless time is of the essence and a defect is still uncured at that time.
Remember that the UCC perfect tender rule applies to goods, not land. Do not import perfect tender into real estate contracts; instead use substantial performance and reasonable time, unless time is of the essence.

Worked Example 1.8

Seller contracts to sell Whiteacre to Buyer. Closing is set for June 1; the contract explicitly states that time is of the essence. A week before closing, a title search reveals an undisclosed recorded easement that significantly reduces Whiteacre’s value. Seller tells Buyer that Seller will get the easement released “within a couple of weeks after closing.” On June 1, Seller cannot deliver marketable title, and Buyer refuses to close. Seller argues that Buyer is in breach because time is of the essence. Who is in breach?

Answer:
Seller. Because time is of the essence and marketable title must be delivered at closing, Seller’s inability to convey marketable title on June 1 is a material breach. Buyer is justified in refusing to close and is not in breach. Seller cannot insist that Buyer close and hope for a later cure of the title defect. Buyer may rescind and seek return of any deposit, plus damages if provable.

Worked Example 1.9

Assume the same facts as Example 1.8 except that the contract does not say time is of the essence. On June 1, Seller cannot deliver marketable title because of the easement, but Seller obtains a valid release and clear title on June 20 and tenders a deed. Buyer, whose financing is still available and who has not incurred significant additional costs, refuses to close and sues for return of her deposit. Is Buyer likely to succeed?

Answer:
Probably not. Without a time‑of‑the‑essence clause, Seller has a reasonable time after the scheduled closing to cure title defects and tender marketable title. A 19‑day delay to obtain a release, with no serious prejudice to Buyer, is likely reasonable. Seller’s tender on June 20 satisfies the constructive condition to deliver marketable title within a reasonable time. Buyer’s refusal to close at that point is a breach, and Seller may be entitled to retain a reasonable deposit or seek damages.

Remedies

Remedies for timing-related breaches depend on (1) whether time is of the essence and (2) whether the delay is reasonable.

When Time Is of the Essence

Failure to perform on the specified date is a material breach. The non-breaching party may:

Rescind the contract and recover any deposit or payments made.
Retain a deposit as liquidated damages if the contract so provides and the liquidated sum is reasonable (not punitive).
Sue for damages for total breach, including:
- Out‑of‑pocket expenses incurred in reliance on the contract (title searches, inspection costs, loan fees).
- Loss of the bargain (difference between contract price and market value at the time of breach).
Seek specific performance if the breaching party is the other side and the non-breaching party was ready, willing, and able to perform.

Specific performance is especially common for buyers, because land is unique and money damages may be inadequate. For sellers, specific performance is technically available, but courts more often award the seller the price or the difference between contract price and resale price.

Key Term: Liquidated Damages
A contractually specified sum payable upon breach, enforceable if (1) actual damages were difficult to estimate at the time of contracting and (2) the amount is a reasonable forecast of probable loss, not a penalty.

In real estate contracts, a standard 5–10% earnest money deposit is often treated as a valid liquidated damages clause if the buyer defaults, especially when time is of the essence. A much larger deposit (for example, 30–50% of the price) is more likely to be viewed as a penalty and limited to actual damages.

When Time Is NOT of the Essence

Two possibilities:

Delay is reasonable:
- The late party has committed a minor breach.
- The non-breaching party must perform (e.g., must close) but can sue for incidental damages caused by the delay (additional interest, taxes, insurance, rent, storage, or moving costs).
- Specific performance is often awarded, with an adjustment to address any minor monetary harm caused by delay.
Delay is unreasonable:
- The delay becomes a material breach, even though time was not originally of the essence.
- The non-breaching party may rescind, refuse to close, and sue for damages for total breach, just as if time had been of the essence from the start.

In either case, the measure of damages follows general contract principles:

Expectation damages (benefit of the bargain): difference between contract price and market value at breach, plus consequential and incidental damages if proven and foreseeable.
Reliance damages: costs incurred in reliance on the contract, useful when expectation damages are too speculative.
Restitution: value of any benefit conferred on the breaching party (e.g., deposit, improvement costs), particularly if the contract is rescinded.

Timing, Risk of Loss, and Equitable Conversion

Timing breaches can interact with risk of loss under equitable conversion:

In majority jurisdictions, once the contract is signed (and is specifically enforceable), the buyer bears the risk of casualty loss to the property before closing.
If the property is destroyed without fault before the closing date, Buyer must still tender the price (unless the contract says otherwise), and Buyer’s remedy is often against the insurance policy.

But if the seller is in material breach because of a timing failure (for example, cannot deliver marketable title on the time‑of‑the‑essence date), the buyer can:

Refuse to close,
Treat the contract as terminated, and
Avoid the risk of loss from that point forward.

Some jurisdictions reverse the default risk-of-loss rule by statute (e.g., Uniform Vendor and Purchaser Risk Act), placing the risk on the seller until legal title or possession passes. On the MBE, unless the problem mentions such a statute, apply the majority equitable conversion rule.

Key Point Checklist

This article has covered the following key knowledge points:

Default rule: Time is generally NOT of the essence in land sale contracts; timely closing is a constructive condition that can be satisfied within a reasonable time.
“Time is of the essence” clauses operate as express conditions; failure to perform on time is a material breach that excuses the other party’s performance.
Courts may infer time‑of‑the‑essence status from clear language, circumstances, or subsequent notice, but the presumption runs the other way.
When time is not of the essence, performance within a reasonable time after the stated date is sufficient; delays that are too long or prejudicial can still be material breaches.
What constitutes a “reasonable time” is fact‑dependent and may differ between residential and commercial deals and between minor and major title problems.
The party invoking a timing breach must be “ready, willing, and able” to perform on the critical date, unless tender would have been futile.
The “time is of the essence” condition can be waived by words or conduct; after waiver, performance is due within a reasonable time unless strict timing is properly reinstated with notice and a reasonable opportunity to comply.
Timing rules interact with marketable title and equitable conversion: sellers must deliver marketable title at (or within a reasonable time of) closing, and buyers usually bear risk of loss after contract formation in most jurisdictions.
Oral rescission of a written land sale contract is generally valid, even though the original contract had to satisfy the Statute of Frauds.
Remedies for timing breaches range from incidental damages for minor delay to rescission, deposit forfeiture (if validly liquidated), full damages, or specific performance for material timing breaches.

Key Terms and Concepts

Closing
Equitable Conversion
Marketable Title
Express Condition
Time is of the Essence
Reasonable Time
Material Breach
Waiver
Liquidated Damages

Real estate contracts - Time for performance