SC Upholds Right to Re-assert Deadlines in Contracts

The Supreme Court has finally put an end to a property dispute that dragged on for over 45 years, while clarifying a key legal principle in contract law, the importance of deadlines in agreements, also known as the “time of the essence” principle.

In this case, the seller had allowed the buyer to occupy a property and later agreed to sell it, with the condition that the full payment be made within three months. Under contract law, when parties set a specific date for performance, that deadline is considered crucial — or “of the essence” — meaning the deal depends on that deadline being met.

However, when the buyer couldn’t pay on time, the seller gave more time, eventually extending the deadline until July 31, 1977. The buyer still failed to complete the payment by that extended date. This led to the question the Court had to answer: if the original deadline was extended, can the seller still treat the new date as equally important — and can they make time “of the essence” again with proper notice?

The Court answered yes. It held that when a contract originally makes time important, and the parties later agree to extend the time, the new deadline can also be made essential — if clear notice is given by one party to the other.

Justice Janak De Silva, delivering the judgment, emphasized the need to protect commercial certainty. 

“Modern commercial requirements require parties to commercial transactions to have the freedom to continue with their commercial activities without being held for ransom by intransigent counterparts. That can only be done by recognizing the right of a party to make time of the essence of an agreement once again by giving due notice to the other party.” – Justice Janak De Silva

Case No: S.C. Appeal No. 89/2018 [Decided on 02.04.2025]

Before:   Hon. E. A. G. R. Amarasekara, J.  Hon. Kumudini Wickremasinghe, J.  Hon. Janak De Silva, J.