When “Time Is of the Essence” Is Not Enough: Lessons for Businesses on Terminating a Contract for Delay
A buyer sat on its obligations for sixteen months, breached the agreement, and still won. The seller, convinced the delay let it walk away, refused to close and was ordered to complete the sale and pay costs. That is the surprising shape of Nova Fish Farms Inc. v. Cold Ocean Salmon Inc., and it is a sharp warning for any business that assumes a "time is of the essence" clause and a counterparty's delay are enough to terminate a deal. The Newfoundland and Labrador Court of Appeal decided the case by applying the Ontario Court of Appeal's own framework for these clauses, which makes it directly relevant guidance for Ontario businesses negotiating, drafting, and enforcing commercial agreements.
Without a clear contractual right to terminate or a substantial non-performance, the remedy for a breach is usually damages, not ending the contract. The caveat cuts hard: if you terminate when you were not entitled to, you can be the one in the wrong. Here, the seller's refusal to close was treated as unjustified, and the breaching buyer was awarded specific performance, forcing the sale through.
Thinking of terminating a deal because the other side is dragging its feet?
Walking away from a contract is one of the riskiest moves a business can make. If your right to terminate is not clear, you can turn yourself from the innocent party into the party in breach, and be ordered to perform anyway. Get advice before you treat a contract as over.
Call: 1-800-771-7882 Speak With a Litigation LawyerBackground: a delayed sale and a refusal to close
In February 2020, Cold Ocean Salmon agreed to sell several trout farms to Nova Fish Farms. Because the farms sat on leased Crown land and were government-licensed, the sale depended on government approval. The agreement set no fixed closing date. Instead, closing was to occur a set number of days after the conditions, including government approval, were met. The parties agreed to take the necessary steps "as promptly as practicable" and to use "commercially reasonable efforts" to obtain approval, and the agreement included a clause stating that time was of the essence.
Neither side did anything for about sixteen months. The buyer finally applied for government approval in mid-2021, obtained it that fall, and told the seller it wanted to close. By spring 2022, the seller said it would not proceed. The buyer sued for specific performance. The seller defended on the basis that the buyer's delay was a breach and that the time is of the essence clause entitled it to terminate. The summary trial judge agreed with the seller, found the clause applied, and refused to order the sale. The buyer appealed.
What the Court of Appeal decided
The delay was a breach
The Court did not disturb the finding that sitting idle for sixteen months breached the obligations to act promptly and to use commercially reasonable efforts. On that point the buyer lost. Breaching the contract, however, was only the start of the analysis.
A TOE clause does not apply to open-ended obligations
As a matter of law, a "time is of the essence" clause attaches only to precisely stipulated deadlines. It cannot make time the essence of vague obligations like acting promptly or using reasonable efforts, because such clauses exist to create certainty about the consequences of missing a fixed time, and no certainty is possible where the time is indefinite.
So there was no right to terminate
Because the clause did not apply to the obligations the buyer breached, the seller had no contractual right to terminate. Its remedy, if any, was damages, which it never claimed or proved. The trial judge erred in law by merging two separate exercises: implying a reasonable time and applying the time is of the essence clause to it.
The buyer got specific performance
The only reason the trial judge had refused specific performance was the erroneous finding that the seller could terminate. With that gone, the buyer was entitled to an order completing the sale on the agreement's terms. The appeal was allowed, with costs to the buyer.
Key lessons for businesses
A TOE clause only enforces real deadlines
"Time is of the essence" does not create a deadline. It dictates the consequence of missing one that the contract actually stipulates. If you want a hard, enforceable deadline, write a specific date or time into the agreement.
"Reasonable efforts" is not a deadline
Open-ended obligations like "commercially reasonable efforts" or acting "as promptly as practicable" cannot be terminated on through a time is of the essence clause. If timing matters, tie the obligation to a concrete date.
A breach is not a licence to walk away
Most breaches give a right to damages, not a right to end the contract. Termination requires a clear contractual right or a substantial non-performance. Assuming otherwise is where businesses get into trouble.
Terminate wrongly and you may be forced to perform
If you refuse to complete a deal without a real right to do so, a court can order specific performance against you, especially for land or unique assets, and award costs to the other side.
Plead and prove your alternatives
The seller here bet everything on termination and claimed no damages, so when termination failed, it recovered nothing. Always advance and support alternative remedies rather than relying on a single theory.
If a counterparty stalls, set the clock by notice
Where an obligation is open-ended and the other side delays, the safer route is often to make time of the essence by serving clear notice of a firm deadline, rather than treating the contract as ended. Get advice before you act.
Facing a contract dispute over delay, breach, or termination?
Whether you are trying to enforce a deal, defend a termination, or decide whether you can walk away, the difference between damages and termination, and between a real deadline and a vague one, can decide the outcome. A focused assessment early protects your position.
Get a Case Assessment Or call us: 1-800-771-7882How Achkar Law's litigation team helps
We act for businesses, owners, and individuals across Ontario and British Columbia in commercial disputes, including the interpretation and enforcement of commercial agreements, claims involving delay, breach, and termination, and applications for or against specific performance. Our work spans commercial litigation and business and partnership disputes, from the first letter through to trial and appeal.
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