Could “Time is of the Essence” Be Implied in Your Contract?

Recently, the Fourth Appellate District of Ohio upheld a lower court ruling that created a “time is of the essence” clause in the dealings between the parties, when no such clause existed in their written purchase order, and no terms or conditions were incorporated by reference.  S.P. Drilling Servs. v. Cooper’s Excavating, LLC, 2019-Ohio-55 (4th Dist).
 
Cooper’s Excavating was awarded an ODOT contract and S.P. Drilling submitted a bid for drilling.  S.P. Drilling was awarded the subcontract to install drilled shafts at a price of $14,000.  Cooper’s Excavating and S.P. Drilling had several verbal and email communications regarding the number of holes to be drilled and the time in which that was to be accomplished, after which, Cooper’s Excavating issued a purchase order to S.P. Drilling that simply stated "INSTALL DRILLED SHAFTS FOR EXC. BRACING,” quantity "1" at the "Unit Price" of "$14,000.00" for a "Total" of "$14,000.00."  No other terms, conditions, or specifications were contained, referenced, or incorporated into the purchase order.
 
S.P. Drilling delivered equipment to the site on Tuesday, but could not commence the work until Friday.  Upon seeing the equipment delivered but no work performed, Cooper’s Excavating engaged a different subcontractor to perform the work on Wednesday at a substantially lower price.  Cooper’s Excavating then notified S.P. Drilling, on Thursday that the work had been completed and S.P. Drilling should remove its equipment.  S.P. Drilling sent an invoice for $12,204.92 for “Mobilization costs and Profit caused by Cooper’s Excavating LLC breach of contract,” which Cooper’s Excavating refused to pay.  S.P. Drilling sued.
 
S.P. Drilling alleged that Cooper’s Excavating knew S.P. Drilling intended to perform the work on Friday and that this was always the intention of the parties.  Cooper’s Excavating argued that the parties had conversations regarding specific dates for performance and that Cooper’s Excavating had issued the purchase order expecting the work to be completed on Tuesday.  Cooper’s Excavating alleged that failure to perform the work on Tuesday would have put the job three days behind schedule had Cooper’s Excavating not been able to mitigate damages by finding another subcontractor to do the work on Wednesday.
 
The trial court found that S.P. Drilling, not Cooper’s Excavating, breached the subcontract.  The trial court held that the written purchase order merely served as the “core” of a larger agreement, which included verbal and email communications, and that the work was to be at least started, if not completed, on Tuesday. 
 
The Fourth District agreed that time was of the essence, and S.P. Drilling breached the contract by failing to perform the work on Tuesday, even though no such language, dates, deadlines, or schedule were present on the face of the purchase order, nor referenced or incorporated therein.  As the Fourth District stated:
 
 “Ohio courts are split as to whether and when ‘time is of the essence’ may be implied in a contract. Generally, time of performance is not of the essence to a contract unless expressed.  However, some courts have found it may be implied that time is of the essence depending on the nature of the contract or circumstances under which it was negotiated.  Other courts have found that it may be implied whenever a definite date is fixed for compliance.  Finally, there are courts that combine the above approaches and consider both the nature and circumstances of the negotiation, as well as the fixed date of the contract in determining whether to imply that time is of the essence. ”
 
As a reminder, it is always best to make sure a contract or purchase order includes or incorporates all essential and necessary terms.  Cooper’s Excavating was fortunate here that the trial court allowed evidence of contemporaneous emails and conversations to fill in or add terms that were not included in the contract and that those other communications indicated an agreement for the drilling to be performed (or at least started) on Tuesday. S.P. Drilling lost the work, incurred costs, and could have potentially been held responsible for additional costs if the replacement subcontractor’s costs were not less than S.P. Drilling’s bid. 
 
The better approach would have been for Cooper’s Excavating to specify that the work should be performed or started on Tuesday or for S.P. Drilling to specify that the work would not be performed or started until Friday.  If either party had included the time for performance, this discrepancy could have been negotiated immediately and litigation avoided.