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Delivery Time Deemed to Be 'of the Essence' in Informal Contract

on Tuesday, 01 March 2022.

Phrases are commonly used in agreements such as 'time is of the essence,' but what do they mean? And what happens if the contract is silent?

In the case of Pharmapac (UK) Ltd v HBS Healthcare, the High Court deemed time to be of the essence. This is contrary to what is normally expected.

What Was the Case About?

At the outset of the COVID-19 pandemic, in March 2020, the parties had agreed by an informal exchange of email for HBS to supply five million face masks in ten weekly instalments. The email had stated the delivery date for the first tranche, but not the other nine weekly shipments. The email also did not provide that time was to be of the essence or important, nor a consequence for late delivery.

HBS only delivered the first instalment. Pharmapac then issued legal proceedings against HBS and claimed that time was of the essence for the deliveries. Accordingly, HBS would be in breach of contract and Pharmapac was entitled to damages.

What Did the High Court Decide?

The High Court agreed with Pharmapac. Although it was not explicit what was meant by weekly deliveries, time for delivery was of the essence here. The Court looked at what the parties' intentions would have been. They were not perishable goods, but the context was around the COVID-19 pandemic, so there was clearly an urgent commercial need for them.

What Does This Mean for Your Contracts?

The result may be surprising in one sense. The starting point for supply contracts is that time for delivery is not of the essence, unless a different intention appears from the contract terms. Courts are also slow to imply terms into contracts. However, this was one such case when it was obvious what was intended given the context. And as has often been the case in recent years, courts are quick to apply common sense.

'Time of the essence' means a lot more than the parties want time to be important. It actually has the effect of meaning that the slightest delay entitles the other party to terminate the contract and claim damages. The best thing to do is for the parties to have certainty with a well-drafted contract and be clear whether time should be 'of the essence' in a legal sense or not. Failure to set that out could lead to uncertain results and, as here, the parties ending up in court.


If you would like help with reviewing, drafting or negotiating commercial contracts, please contact Paul Gershlick in our Commercial Law team on 07795 570072.

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