In Ontario, a time of the essence contract means every deadline may become a deal-breaker. Courts have shown that even being late by 35 or 9 minutes can lead to termination. But this clause does not cover open-ended obligations, such as reasonable efforts or acting as soon as possible. This can cause problems when drafting contracts. To protect your business, always use time of the essence with a clear date and time, and add a final deadline for flexible obligations. Include a non-waiver clause and talk to Ontario counsel before signing.
Introduction:
A time-of-the-essence clause in Ontario contracts is not just standard wording. Recent court cases show that even a short delay can end a deal. For example, a seller was allowed to cancel a home sale because the buyer was 35 minutes late sending funds. In another case, a 9-minute delay ended a new build deal. These cases show that when time is of the essence, every minute matters. But there is a key limit. A case from Newfoundland and Labrador, now at the Supreme Court of Canada, found that time of the essence does not apply to open-ended duties like acting as soon as possible or using reasonable efforts. This creates a real challenge: you might have a strict deadline and a flexible duty in the same contract. This blog covers what time of the essence means, how Ontario courts enforce it, the risks of open-ended obligations, and useful advice to protect your business.
Also Read: Common Contract Clauses and Why You Need Legal Expertise
What Is a “Time of the Essence” Clause?
A “time of the essence” clause turns a simple deadline into a critical deadline. Here’s what you should know about how this clause works in Ontario contracts, where it usually appears, and what it cannot do. TOE, which is abbreviated as TOE, means that the deadline stated in your contract is not simply a target; it is a fundamental term of the entire agreement. If you miss that deadline, no matter how slightly, the other party can walk away from the deal without having to prove that they suffered any real harm. The Ontario Court of Appeal has made clear that a time limit in an agreement is essential, meaning that a breach of that time limit will permit the innocent party to terminate the contract, no matter how minimal the failure (Di Millo v. 2099232 Ontario Inc.,1).
Imagine your contract says, “For example, if your contract says, “closing shall occur by 5:00 p.m. on June 1, time being of the essence,” and you send your funds at 5:01 p.m., the other party can cancel the contract and keep your deposit. The Ontario Court of Appeal enforced this when a buyer was 35 minutes late with funds (3 Gill Homes Inc. v. 5009796 Ontario Inc.2). A two-day delay in paying a deposit was also enough to end a land deal (1473587 Ontario Inc. v. Jackson3).
Time of the essence clauses are common in many commercial contexts across Ontario, including:
- Real Estate Agreements of Purchase and Sale: Most standard-form agreements used by the Ontario Real Estate Association include a time-of-the-essence clause. In residential and commercial land deals, this clause is standard, and Ontario courts enforce it strictly.
- M&A Closing Conditions and Drop‑Dead Dates: In share purchase agreements or asset purchase agreements, a TOE clause attaches to the scheduled closing date. Sophisticated buyers and sellers rely on it to create certainty around deal completion.
- Construction Milestones Tied to Liquidated Damages: Construction contracts often include a TOE clause that ties liquidated damages to substantial completion dates, interim milestones, or occupancy dates.
- Technology Implementation Deadlines: Software development and systems integration agreements frequently include TOE clauses for go‑live dates, acceptance testing windows, or data migration deadlines.
- Supply Agreements with Just‑in‑Time Delivery Requirements: Manufacturers and distributors often require TOE clauses for delivery windows, as any delay can halt an entire production line.
What the Clause Is NOT (Clearing Up Common Misunderstandings): Many business executives misunderstand what a time of the essence clause can and cannot do. Here are three important clarifications based on Ontario case law.
Not a substitute for a missing deadline: A TOE clause does not create a deadline on its own. It attaches consequences only to a deadline expressly stated by the parties. The Ontario Court of Appeal has held that a TOE clause cannot operate in the absence of a stipulated time for performance. If your contract does not specify a date or time for performance, inserting a TOE clause will not help you. You must first identify a concrete deadline, and then make that deadline the essence.
Not a shield if you caused the delay: A party seeking to enforce a TOE clause must itself have been ready, willing, and able to perform on the deadline. The Ontario Court of Appeal has consistently held that to take advantage of a time of the essence provision, the innocent party must itself be ready, desirous, prompt and keen to carry out the agreement. In other words, you cannot complain that the other side missed the closing if you were not prepared to close yourself. A vendor in a commercial real estate transaction cannot force a purchaser to abide by a time-is-of-the-essence clause if they are not prepared to do the same.
Not a bar to waiver: If you accept late performance without objection, you may waive the benefit of a TOE clause. Ontario courts have held that if time is made the essence of the contract, that requirement may be waived by the other party’s conduct. If the time allowed once passes and the parties continue negotiating, time is no longer of the essence. For example, if a vendor fails to appoint a solicitor by the agreed closing date but later takes steps to close, that conduct may waive the strict deadline. To protect against waiver, your contract should include a strong non‑waiver clause.
Not a guaranteed right; equitable relief remains possible: In rare cases, Ontario courts may refuse to enforce a TOE clause where doing so would be inequitable or unconscionable. However, for sophisticated commercial parties who negotiated at arm’s length, courts are reluctant to grant such relief. As the Bennett Jones legal update notes, courts will not always be persuaded that an equitable intervention is merited, particularly where two sophisticated parties have expressly agreed that time is of the essence. If you are a sophisticated business, you should not assume that a court will rescue you from a missed deadline simply because the result seems harsh.
Also Read: A Guide to Limitation of Liability Clause in Contract
The Legal Effect of Time of the Essence Clauses – What Ontario Courts Actually Do?
Ontario courts are known for strictly enforcing these clauses. If you fail to meet a deadline that is declared “of the essence,” you risk losing your contract, even if the delay is very short.
Strict Enforcement:
Two recent Ontario cases show just how strict the rule is.
The first is 3 Gill Homes Inc. v. 5009796 Ontario Inc., 2024 ONCA 6. The Agreement of Purchase and Sale required the buyer to deliver closing funds by 3:00 p.m. The buyer delivered at 3:35 p.m. – only 35 minutes late. The vendor refused to close, and the Ontario Court of Appeal upheld the termination. The court rejected the buyer’s “no harm, no foul” argument, stating that to excuse the delay would effectively “rewrite the contract.”
The second case is Correa v. Valstar Homes (Oakville Sixth Line) Inc., 2024 ONSC 36164. The purchaser’s lawyer wired funds at 4:52 p.m. for a 5:00 p.m. deadline, but they arrived at 5:09 p.m. – just 9 minutes late. The Ontario Superior Court enforced the time‑is‑of‑the‑essence clause and upheld the termination. The vendor then offered to revive the deal for an extra $100,000, plus HST. The court confirmed that this fee was a legal offer for a new contract, not an unenforceable penalty.
The takeaway for executives is simple: in Ontario, being almost on time is not enough. Make sure your internal processes include a buffer so a small mistake does not cost you the deal.
Defences to Enforcement (Narrow but Real):
The law does allow a few limited defences, but they are difficult to prove. A party cannot enforce a time‑of‑the‑essence clause if it was the cause of the delay, or if it previously accepted late performance without objection – a legal concept known as “waiver.” For example, if a vendor consistently ignored late deposit payments, the court might find that it waived its right to enforce the deadline. A vendor that is itself late in preparing closing documents cannot rely on the time‑of‑the‑essence clause, either.
The defence of “unconscionability” also exists, but it sets an extremely high bar. It typically calls for clear proof of unequal bargaining power and a term that is unfairly oppressive. For arm’s‑length commercial contracts, courts are very reluctant to apply this defence. As the Bennett Jones legal update notes, courts will not always be persuaded that an equitable intervention is merited.
What If the Contract Is Silent on the Exact Time of Day?
A very common drafting mistake is to specify the closing date but not the time. What happens then? If the contract includes a time‑of‑the‑essence clause but is silent on the hour, Ontario courts will generally treat the deadline as 11:59 p.m. on that date.
The Ontario Court of Appeal addressed this in More v. 1362279 Ontario Ltd. (Seiko Homes), 2023 ONCA 5275. The purchase agreement had an ending date but no specific time. The vendor tried to terminate the deal at 5:11 p.m., claiming the buyer had missed a 5:00 p.m. deadline. The Court refused to impose a 5:00 p.m. deadline. It held that when the agreement is silent on the time of closing, the deadline for performance is midnight, unless the nature of the transaction requires an earlier cut‑off, such as the land registry’s operating hours.
For Ontario business leaders, the lesson is clear: do not depend on default rules. If a deadline really matters, your contract should state the exact time of day and the time zone. If not, your strict deadline could end up being midnight, giving the other side extra hours to perform.
Also Read: The Role of Indemnity Clauses in Ontario’s Commercial Contracts
Industries and Transactions Where Timing Is Critical in Ontario:
Timing provisions and time‑of‑the‑essence clauses show up across many Ontario business sectors. Understanding where they apply can help you avoid costly surprises:
- Real estate development and construction: Purchase and sale agreements, interim occupancy dates, Tarion deadlines, and closing fund transfers all depend on strict timing. In Ashcroft Homes v. Tarion Warranty Corporation, 2023 ONSC 65276, a builder faced a compensation order for delayed occupancy based on missed deadlines.
- Mergers and acquisitions: Outside closing dates, regulatory approval timelines, and hell-or-high-water clauses create firm deadlines. In 2329131 Ontario Inc. v. Carlyle Development Corp., 2014 ONCA 1327, the court confirmed that a party cannot enforce a time‑of‑the‑essence clause if it is itself not ready to close.
- Manufacturing and supply chain: Just‑in‑time delivery windows and force-majeure notice periods demand precise tracking. Liddell v. Mousavi, 2024 ONSC 64318, showed that bare assertions of frustration do not excuse missed performance deadlines.
- Technology and software-as-a-service: System go-live dates and implementation milestones are common. Atos v. Sapient, 2016 ONSC 68529, involved significant delay claims arising from a subcontractor’s termination just before the go‑live date.
- Shareholder activism: Requisitioned shareholder meetings have statutory timelines. In Paulson and Co. Inc. v. Algoma Steel Inc., 2006 CanLII 11610, the court held that directors must call a meeting within 21 days of a requisition.
Also Read: Shotgun Clauses in Shareholder Agreements for Ontario Business Owners
What Are Indefinite Obligations?
The Core Definition: An indefinite obligation is a contractual duty that does not specify a fixed date, time, or period for performance. Instead of a clear calendar deadline, the contract uses open-ended standards such as “as soon as reasonably practicable,” “commercially reasonable efforts,” “promptly,” “within a reasonable time,” or “as soon as possible.” The key feature of these obligations is uncertainty. Unlike a fixed closing date, an indefinite obligation does not tell you exactly when performance is due.
How Courts Imply a Reasonable Time: When a contract does not state an explicit deadline, Ontario law presumes that performance must occur within a “reasonable time” under the circumstances. What counts as reasonable depends on the nature of the project, industry practice, the parties’ conduct, and other relevant factors. Importantly, each party must act in good faith and take the necessary steps to fulfill its obligations.
A Real-World Example- The Trap of an Open-Ended Closing: The Calibrex case illustrates the danger of indefinite obligations. In 2017, a buyer and seller entered into an agreement of purchase and sale for a residential development project. The contract required the buyer to apply for severance approval from the municipality. Closing was to occur 30 days after the buyer received that approval.
The buyer took no meaningful steps to apply for severance for nearly four years, from 2018 until 2022. The seller refused to proceed, arguing that the agreement had ended. The Ontario Court of Appeal upheld the seller’s position. The Court held that by the time the buyer began taking steps in 2022, it was already in breach of its obligation to perform within a reasonable time. The vendor had no duty to provide a notice or a final deadline before terminating. The Court also rejected the buyer’s argument that the seller had accepted the delay by simply remaining silent.
Key points for Ontario business executives: Indefinite obligations do not mean you have unlimited time. If your contract uses open-ended expressions like “as soon as reasonably practicable,” the law expects you to act within a reasonable time. Waiting too long, as in the Calibrex case, can lead to your contract ending. Do not assume the other side’s silence means they accept your delay. If you want certainty, ask for a fixed deadline. If you agree to an open-ended duty, act quickly or you could lose your deal.
What are the Legal Risks of Indefinite Obligations and How Courts Interpret Them?
An indefinite obligation does not give a clear due date, unlike a fixed deadline. This can create real uncertainty for businesses.
When Is a Breach Actually Committed?
With a fixed deadline, you know the exact moment of breach. With language like “commercially reasonable efforts” or “as promptly as practicable,” both parties may disagree on whether performance is on track. One side may believe it is acting reasonably, while the other considers it already in breach. Often, only a court can decide who is right.
Termination Rights Are Unclear:
If a party fails to use commercially reasonable efforts, can the other side terminate immediately? Must it give a warning notice first? These questions have no simple answers. The outcome depends heavily on the specific facts of each case.
Good Faith Does Not Create a Fixed Deadline:
Since the Supreme Court’s decision in Bhasin v. Hrynew, 2014 SCC 7111, Canadian law requires parties to perform contracts in good faith. However, this duty of good faith does not turn an open-ended obligation into a fixed deadline. It does give you a definite deadline where none exists.
The Nova Fish Decision:
The leading case on this issue is Nova Fish Farms Inc. v. Cold Ocean Salmon Inc., 2025 NLCA 2812, currently under appeal to the Supreme Court of Canada. In that case, an agreement required the parties to obtain regulatory approvals as promptly as practicable, using commercially reasonable efforts. The contract also contained a standard time-of-the-essence clause. The buyer took no meaningful steps for 16 months. The Newfoundland and Labrador Court of Appeal held that the time of the essence clause did not apply to the indefinite time provisions. A TOE clause only operates where the parties have specified a precise time or deadline. The court reasoned that applying a TOE clause to vague performance standards would undermine the very certainty such clauses are designed to promote.
What does this mean for drafting contracts in Ontario?
A time of the essence clause will not help if your contract uses reasonable effort language. If you want a strict deadline, write it as a specific date, not as a standard of effort. Mixing a TOE clause with open-ended duties gives a false sense of security. The clause has no legal effect on an indefinite obligation
The Tension Between Strict Deadlines and Flexible Duties:
Modern commercial contracts often combine two very different types of timing provisions. On one hand, you may have fixed deadlines stated in clear calendar terms. On the other hand, the same contract may impose flexible duties, such as an obligation to use commercially reasonable efforts or to act as promptly as practicable.
The tension arises when the flexible duty is a condition precedent to the fixed deadline. What happens when the contract states the closing date is June 1, with time of the essence, but also states that closing can occur only after the buyer uses reasonable efforts to obtain regulatory approvals? This creates a genuine legal puzzle. If the reasonable efforts obligation is never breached, even if performance is slow, the fixed deadline may never actually arrive. Alternatively, the fixed date may pass while both parties are still acting reasonably. The result is contractual uncertainty.
The Nova Fish case illustrates this problem directly. The agreement required the parties to obtain approvals using commercially reasonable efforts and as promptly as practicable. The contract also contained a standard time-of-the-essence clause. However, because the closing condition was open-ended, the time-of-the-essence clause attached to nothing. The Cold Ocean could not say “you missed the deadline” because there was no deadline. The time-of-the-essence clause, despite its presence, was legally irrelevant to the obligation that mattered.
The Ontario Court of Appeal addressed a related issue in Calibrex Development Group. The agreement required the closing to occur 30 days after receipt of severance approval. The buyer took no steps to obtain approval for nearly four years. The court held that the buyer was already in breach long before the vendor terminated. The law implied a reasonable time for performance, regardless of the absence of a fixed deadline.
There is also a specific trap for concurrent obligations. In some Ontario real estate transactions, a purchaser may have a fixed closing date and also a duty to use reasonable efforts to obtain financing or consents. If approvals take longer than expected, does the fixed closing date still apply, or does the reasonable efforts duty modify it? The answer depends entirely on how the contract allocates the risk of delay. The court will examine whether the fixed date was truly absolute or whether the flexible duty was intended to adjust the timing.
The good faith doctrine from Bhasin v. Hrynew does not resolve this tension. While every contract requires honest performance, good faith does not convert an indefinite duty into a fixed deadline. The duty of honest performance sets a minimum standard but does not create specificity where there is none exists.
Ontario business executives should keep a few strategies in mind. If you want certainty and a clear way out, use fixed deadlines with a time-of-the-essence clause and avoid open-ended duties as conditions. If you need flexibility, use indefinite obligations yet know you cannot end the contract just for delay, you must show a real breach, which is hard. For a mix of both, add an outside closing date, or drop-dead date, so either party can end the deal after that point. This limits the open-ended period and helps avoid confusion.
The key lesson is that mixing strict deadlines with flexible duties without careful drafting creates contractual uncertainty. Each type of obligation serves a different purpose. They do not work well together automatically. Before signing any contract that contains both fixed dates and reasonable efforts clauses, consider how they interact. If the interaction is unclear, clarify it in the agreement itself. Do not assume that a time of the essence clause will override an open-ended duty. As the Nova Fish decision shows, that assumption is likely wrong.
Common Drafting Traps and a Practical Checklist for Ontario Executives:
Mistakes in drafting timing provisions can be expensive. One common error is using a time-of-the-essence clause without a fixed deadline. Without a deadline, the clause has no effect. Always pair a TOE clause with a specific calendar date. An additional mistake is employing terms like ‘reasonable efforts’ without saying what ‘reasonable’ means. Ontario courts will decide what is reasonable, but their decision can be unpredictable.
Instead, set a reasonable time using clear standards, like within 90 days of the agreement date. Problems can happen if you have a fixed closing date but also need to make reasonable efforts to get financing. If financing is not ready by the closing date, the contract often does not say what happens. Fix this by making the closing date unconditional, adding a final drop-dead date, or stating that failing to use reasonable efforts is not a breach. Use mutual time of the essence clauses if deadlines apply to both sides. In Ontario real estate, specify the time for fund delivery to match Teraview registration cutoffs. Finally, a non-waiver clause protects your right to enforce deadlines, even if you accepted late performance before. Always review your contract with Ontario counsel before signing.
Conclusion:
Time-of-the-essence clauses offer strong protection, but only if you use them with a fixed deadline. Ontario courts enforce these clauses strictly, as seen in the 35-minute and nine-minute delay cases. Open-ended obligations, like reasonable efforts, have their own risks. A time of the essence clause will not help if your duty is open-ended. Mixing strict deadlines with flexible duties can lead to drafting mistakes that may ruin your deal.
Before you sign any commercial contract, check every time-sensitive obligation. Decide which deadlines need strict enforcement and write them as calendar dates with a specific time of day. For flexible duties, think about adding a final drop-dead date. Include a non-waiver clause to protect your rights. Timing disputes can be costly and hard to predict. Spending a few extra minutes reviewing your contract now can save your deal later. If you are unsure, talk to Ontario legal counsel.
FAQs
Can a time of the essence clause be added after the contract is signed?
Yes, you can add a time of the essence clause after signing, but only through a formal written amendment signed by both parties. You cannot unilaterally declare that time is now of the essence by simply sending a letter or email. The original contract must specifically allow one party to make that change on its own, which is very rare. Without mutual consent, your notice has no legal effect. Always get the other party’s signature on an amendment.
If the other party is repeatedly late, have I waived my right to enforce a TOE clause?
Possibly. Ontario courts will examine your conduct. If you consistently accepted late payments or missed deadlines without objecting, the other party may reasonably believe the deadline is no longer strict. This is called waiver by conduct. To protect yourself, include a non waiver clause in your contract stating that any waiver must be in writing. Also, send a written notice of default the first time a deadline is missed. Silence can be costly.
What is the difference between time is of the essence and a reasonable time implication?
Time is of the essence and makes a specific deadline a fundamental term. Any breach, even a one minute delay, can justify terminating the contract and claiming damages. You do not need to prove harm. A reasonable time implication applies when the contract sets no deadline. The law says performance must occur within what is reasonable under the circumstances. A minor delay is not necessarily a breach, and you cannot terminate without showing the delay was unreasonable.
How does the Nova Fish decision affect contracts governed by Ontario law?
Nova Fish is a Newfoundland and Labrador Court of Appeal decision currently under appeal to the Supreme Court of Canada. However, its reasoning aligns with existing Ontario law. An Ontario court would almost certainly hold that a time of the essence clause does not apply to indefinite time provisions as promptly as practicable or commercially reasonable efforts. The TOE clause only attaches to a precise calendar deadline. If your obligation is open ended, the clause gives you no protection.
What is the single biggest drafting mistake Ontario executives make?
The biggest mistake is using a time of the essence clause together with an open ended obligation such as Buyer shall use commercially reasonable efforts to close, time being of the essence. This creates false comfort. The TOE clause has no deadline to attach to, so it is legally useless. You end up with a strict consequence attached to no fixed deadline. Always pair a TOE clause with a specific calendar date and time of day, never with reasonable effort language.
References:
[1] Di Millo v. 2099232 Ontario Inc., 2018 ONCA 1051 (CanLII), <https://canlii.ca/t/hwnvq>, retrieved on 2026-05-19.
[2] 3 Gill Homes Inc. v. 5009796 Ontario Inc. (Kassar Homes), 2024 ONCA 6 (CanLII), <https://canlii.ca/t/k20lq>, retrieved on 2026-05-19.
[3] 1473587 Ontario Inc. v. Jackson, 2005 CanLII 4578 (ON SC), <https://canlii.ca/t/1jvbc>, retrieved on 2026-05-19.
[4] Correa v. Valstar Homes (Oakville Sixth Line) Inc., 2024 ONSC 3616 (CanLII), <https://canlii.ca/t/k6wmp>, retrieved on 2026-05-19.
[5] More v. 1362279 Ontario Ltd. (Seiko Homes), 2023 ONCA 527 (CanLII), <https://canlii.ca/t/jzhmg>, retrieved on 2026-05-19.
[6] Ashcroft Homes v. Tarion Warranty Corporation, 2023 ONSC 6527 (CanLII), <https://canlii.ca/t/k19x0>, retrieved on 2026-05-19.
[7] 2329131 Ontario Inc. v. Carlyle Development Corp., 2014 ONCA 132 (CanLII), <https://canlii.ca/t/g35q9>, retrieved on 2026-05-19.
[8] Liddell v. Mousavi, 2024 ONSC 6431 (CanLII), <https://canlii.ca/t/k813f>, retrieved on 2026-05-19.
[9] Atos v Sapient, 2016 ONSC 6852 (CanLII), <https://canlii.ca/t/gvxvn>, retrieved on 2026-05-19.
[10] Paulson & Co. Inc v. Algoma Steel Inc., 2006 CanLII 116 (ON SC), <https://canlii.ca/t/1m9j2>, retrieved on 2026-05-19.
[11] Bhasin v. Hrynew, 2014 SCC 71 (CanLII), [2014] 3 SCR 494, <https://canlii.ca/t/gf84s>, retrieved on 2026-05-19.
[12] Nova Fish Farms Inc. v Cold Ocean Salmon Inc., 2025 NLCA 28 (CanLII), <https://canlii.ca/t/kdnhq>, retrieved on 2026-05-19.
