A purchase contract date extension is sometimes also referred to as a “time is of the essence clause” in commercial real estate transactions. It is often considered as being a part of boilerplate contract but the parties concerned must realize that this date is very important from how a court might interpret a dispute.
A purchase contract date means that the parties are expected to fulfill their obligations by the dates and times that are specified in the contract. Such denoted dates could include dates that specifically states when a down payment is to be made or when the closing of the sale must occur.
Legally, there is some question as to how well the “time is of the essence” clause applies when the parties agree to an extension. This is especially true when only one party agrees to the extension while the other as the other party sticks to the agreed upon dates as they could ask the court for “specific performance” which could be otherwise applied.
For the date to have validity when an extension is considered vital, the best practice is that both parties must agree to the purchase date extensions and reflect this in an appropriate contractual manner. Otherwise if there is no agreement or one party fails to comply with the purchase date extension, the courts could allow the other party to legally terminate the contract.
It is best that both parties clearly negotiate all dates and do so with care. Legally, it may not simply be enough to initial any agreed upon date extensions, but that a more appropriate approach that is recommended would be to prepare a supplementary document to confirm that time remains of the essence and that both parties were in agreement to the extension of time.
The commercial real estate lawyers should be the guiding force in establishing the appropriate legal contractual paperwork to ensure that both parties have agreed to any date extensions, but to also keep in mind that these dates must be honoured by all signatory parties to the purchase contract.
