When is Time of the Essence?

Question: “My client wants a completion deadline written into our construction contract. What should I do?”

My advice: Avoid committing to a firm completion date. Instead, lay out a proposed schedule – beginning date, milestones, completion estimate. Explain the contingencies you can’t control: weather, permits, inspections, changes, labor and material shortages, conflicts between trades, etc. Be blunt: Anything can be done either good or cheap or fast – but not all three. Don’t concede to unreasonable expectations.

Many states require beginning and completion dates in home improvement contracts. Courts usually consider these to be estimates, not firm deadlines. Writing “time is of the essence” into your contract is entirely different. If those words are in your agreement, missing a deadline gives an owner the right to bail out of the deal – or maybe worse. A Connecticut case decided last month illustrates the point.

Janet Lazzaro wanted her home on Casement Street in Darien, CT demolished and rebuilt. She had WBG Holdings prepare the plans and accepted their bid of $471,000.00 to do the work. That was in December 2016. Page one of their agreement made “time of the essence.” Work was to be completed within seven months after the start of demolition.

WGB had the good sense to write contingencies into the schedule. Delay due to a host of conditions (weather, acts of god, fire, flood etc.) would extend the completion date. Janet paid WGB $7,000.00 in December 2016 and another $52,000.00 in January 2017.

Demolition began March 10, 2017 and continued for the rest of the month. Work was delayed by winter storms, late winter and spring rain which required pumping out the site, muddy ground, extra engineering and drainage requirements, equipment breakdown, delays in permitting, inspection and site requirements imposed by town officials. (Does any of this sound familiar?) Nearly eight months after the contract was signed, WGB still didn’t have a permit to begin construction. On October 18, 2017, seven months after demolition started, the Town of Darien granted a permit for foundation work. Janet terminated the contract the same day and hired another contractor.

But WGB still wasn’t done with the Lazzaro job. Janet filed suit, claiming:

• A partial refund on the $85,000 paid to the date of termination.
• The extra $116,400 she had to pay another contractor to finish what WGB started.
• Lost rental income, real estate taxes, bank charges, mortgage interest and living expense caused by missing the completion date.
• Recovery of attorney fees for violation of Connecticut’s New Home Construction Contractors Act.
• Compensation for breach of the common-law covenant of good faith and fair dealing.

The Court’s Judgment

WGB did some things right. For example, WGB kept a job log that documented reasons for delay. Still, making time of the essence was plainly a mistake. Judge Sommer ruled those words gave plaintiff a right to terminate the agreement and hire another contractor. That contractor offered testimony at the trial: In his opinion, both Janel Lazzaro and WGB “significantly underestimated both the cost of the project and the time required to complete it.” The actual cost of construction was $587,400. Duration from breaking ground to certificate of occupancy was 13 months.

Judge Sommer awarded Lazzaro only $33,840 plus costs and attorney fees. Of that, WGB admitted $32,000 was due as a refund. Lazzaro v. Deverin, December 6, 2019

If you have a client who insist on a hard deadline for completion, have a look at Construction Contract Writer. Discover how easy it is to protect against unreasonable expectations.