In Construction Contracts
The construction schedule is important to both the contractor and the owner, especially the completion date. However, it is usually the owners who have the most at stake. If the job is not completed on time, they may need to delay a move, rent a place to live temporarily, and incur other expenses.
Without the right contract language, a completion date in a contract is a goal, not a legal commitment. To make the completion date a contractual commitment, you will need to add specific language to the contract.
Time Is Of The Essence
A “time is of the essence” clause indicates that the completion date (or job duration) specified in the contract is really, really important, and that if the contractor misses that date, it is treated as material breach of the contract. Basically, that means that the owner can sue the contractor for damages if the job is not finished on time, although courts do not always enforce these clauses if they are seen as unfair. It doesn’t hurt to have a “time is of the essence” clause to communicate how important the completion date is to you. However, since the last thing you want to do is sue anyone, a “time is of the essence” clause may not prove that useful in practice.
Liquidated Damages or Penalty Clause
If the completion date is truly critical to you (for example, you have sold your house and need to move by a certain date or check into a motel), then you may be better off with a liquidated damages or penalty clause. In this case, the contract stipulates a specific sum for each day that the job is delayed, excluding delays caused by the owner. If you add such a clause, make sure that the amount is reasonable – say the cost of your motel room plus storage and extra moving fees – or the clause may not hold up in court.
Also, expect to pay more for a job with this sort of hammer held over the contractor’s head. He is taking on a lot of risk and may have to hire extra people or pay overtime charges to finish up on time. Just as most construction jobs cost more than originally budgeted, most end at least a little bit later than planned – whether due to bad weather, material delays, or overly optimistic scheduling by the contractor.
Bottom line. It’s always a good idea to add a time-is-of-the-essence clause. Consider using a liquidated damages clause if the completion date is critical to you. However, don’t ask for an unreasonable amount of money – and expect to pay extra for adding this requirement to the contract.