The inclusion of a “time is of the essence” clause in a construction contract can be a challenge for contractors. Construction project schedules are delayed fairly often, and if a time is of the essence clause is included, delays can result in some serious implications.
However, what if there isn’t an explicit time is of the essence clause? Are there circumstances in which a court can find an implied time is of the essence clause? A recent Tennessee Court of Appeals declared that a contract which stated “start immediately” with a concrete completion date constitutes an implied time is of the essence contract.
‘Time is of the Essence’ clauses
Unfortunately, construction delays happen on most projects. When a delay arises, a contractor can typically reach out to the owner to request more time, compensation, or both.
But when an owner or developer needs a project to be completed by a certain date, they may include a time is of the essence clause. If included in a construction contract, the contractor may be held liable for failing to complete the project on time. These clauses will typically need to be explicit in order to be enforceable. But that’s not always the case, as a recent Tennessee contractor learned the hard way.
The case in question is Franks v. Bilbrey.
When is a time is of the essence clause implied in a construction contract?
- Owners: Danny R. Franks & Angela M. Franks (Franks)
- Represented by: Nolan R. Goolsby & Bradford G. Wood of Cameron Goolsby & Gross Attorneys at Law
- Contractor: Bilbrey’s Construction, Inc. & Roger Bilbrey (Bilbrey)
- Represented by: Matthew J. McClanahan of McClanahan & Winston, PC
The Franks, who were located in Texas, planned to move to Tennessee and contracted with Bilbrey to build a “barndominium” (a metal building resembling a barn with a stained concrete floor, garage, and living quarters).
The contract was a simple, handwritten agreement with a price of $140,000, and stated that the completion date was Thanksgiving 2018, and construction was to start immediately. The agreement was executed on May 9, 2018.
According to a neighbor, the construction did not begin until June or July of 2018. By January of the following year, the building was not “dried in,” nor was it sealed from the outside.
Bilbrey cited family issues, weather, and changes to the scope of work by the Franks as the causes for delay. The Franks had moved to Tennessee in March 2019, and stayed with a neighbor as the project had still yet to be completed, and numerous flaws/defects were allegedly identified at that time.
Bilbrey, becoming increasingly frustrated with the project, sent a text message to the Franks on April 25, 2019, telling them to “find someone else to finish the job,” and walked off the project. The Franks filed suit against Bilbrey for breach of contract seeking damages for repair/replacement costs, delays, defects, and services performed in a careless, negligent, unworkmanlike manner. The trial court agreed with the Franks and awarded them $32,113.06 in damages, and Bilbrey appealed.
On appeal, Bilbrey argued that a party’s failure to complete a project within the stated completion time doesn’t necessarily constitute a material breach of contract, barring a time of the essence clause, which they assert was not included in the contract.
The appeals court agreed, however, the entire agreement must be taken into account. The existence of a “time is of the essence” provision may be proved by “stipulation, a manifestation of intention from the contract or subject matter involved, or an implication from the nature of the contract or circumstances of the case.”
With this in mind the court turned to the contract between the parties.
“The Agreement contains not only a completion date — Thanksgiving of 2018 — but also the language ‘[s]tart im[m]ediately.’ These words are to be afforded their plain and natural meaning. While Defendants are correct in that a completion date alone does not make time of the essence, the addition of ‘[s]tart im[m]ediately’ reflects additional importance attached to completion of the project by a fixed date. If the completion date is a mere rough estimate, there is no necessity of starting immediately and the importance of a set starting date is diminished or eliminated. Here there is not just a time of completion in the Agreement. There is more in the Agreement because it also requires construction to ‘[s]tart im[m]ediately.’ We are to give effect to the Agreement’s plain terms, not vitiate them. To the extent the Agreement is ambiguous, we construe any ambiguity against its drafter, Mr. Bilbrey. Although the Agreement lacks an explicit ‘time is of the essence’ provision, we conclude that a natural and unstrained reading of the entire Agreement reveals it to be a ‘time is of the essence’ contract.”
Having concluded that time was of the essence under the terms of the contract, the appeals court affirmed the trial court’s decision and awarded the Franks the costs on appeal.
Time may be of the essence — even if the contract doesn’t say so
This case serves as a helpful reminder to contractors to review their contracts thoroughly before agreeing to take on a project. Scheduling a construction project can always be a challenge, but proper scheduling becomes incredibly important when dealing with a time is of the essence clause.
Even when such a clause isn’t explicitly included, the contract and surrounding circumstances may reveal that the parties intended the agreement to be a time is of the essence contract. Thus, it’s important to review the schedule and the contract carefully to ensure that a delay isn’t grounds for a contractual breach or cause for termination.