A contract clause making strict adherence to stated deadlines a material term of the agreement.
Why Time Is of the Essence matters on the exam
This term belongs to Contracts. The questions below are real items from Freehold's bank that use it - each one cites its source.
Exam questions using Time Is of the Essence
Every Freehold question shows why the right answer is right — and cites its source.
A contract requires the buyer to remove the financing contingency in writing by a specific date, and the contract states time is of the essence. The buyer secures loan approval but simply forgets to send the written removal notice by the deadline. The most likely legal consequence is:
Nothing happens, because the loan approval alone satisfies the contingency
The contract automatically becomes void, with no earnest money issues arising
The seller may treat the contingency as not properly removed and the contract's terms regarding the missed deadline control
The buyer automatically forfeits all of their ownership rights in the property to the earnest money escrow holder instead
Show answer & explanation
The seller may treat the contingency as not properly removed and the contract's terms regarding the missed deadline control — When a contract requires written notice by a specific deadline and states time is of the essence, failing to deliver that notice on time can trigger the consequences spelled out in the contract, regardless of the buyer's underlying loan status.
Source: PSI National Real Estate Exam Content Outline §7 Contracts
A "time is of the essence" clause in a purchase contract means that:
Only the seller's deadlines matter
The contract automatically extends every deadline by 30 days
The parties may close whenever it is convenient with no penalty
Deadlines stated in the contract are strictly enforced and material to performance
Show answer & explanation
Deadlines stated in the contract are strictly enforced and material to performance — A time-is-of-the-essence clause makes the dates and deadlines specified in the contract material terms, meaning a failure to meet them on time can be treated as a material breach.
Source: PSI National Real Estate Exam Content Outline §7 Contracts
A contract states time is of the essence for the closing date. The buyer, without any lawful excuse, fails to close on the stated date. The seller may most likely treat this as:
Automatic grounds for a contract novation
A material breach entitling the seller to pursue contractual remedies
Grounds to directly sue the buyer's own mortgage lender instead of the buyer
An immaterial delay that carries no legal consequence for either party
Show answer & explanation
A material breach entitling the seller to pursue contractual remedies — Because the clause makes the closing date a material term, missing it without excuse can be treated by the non-breaching seller as a material breach, opening the door to remedies such as retaining earnest money or suing for damages.
Source: PSI National Real Estate Exam Content Outline §7 Contracts
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