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TIME IS THE ESSENCE OF THIS CONTRACT - IS IT REALLY

INTRODUCTION

Negotiated, as also standard format contracts, are rife with clauses proclaiming time is of the essence. Parties are usually rest assured after spelling this out, hoping (nay assured) that such words employed would by themselves be adequate to enforce rights through a Court or an arbitral process. Sadly, mere words are usually never enough.

The Supreme Court, in the recent judgement of Welspun Specialty Solution Limited vs. Oil and Natural Gas Corporation Ltd.[i], has reiterated the principles basis which Courts are required to construe whether time is of the essence of a contract. The Court held that a collective reading of the entire contract and its surrounding circumstances is imperative to come to such a conclusion. Merely having an explicit clause in the contract may not be sufficient to make time the essence of it. The Court also held that the availability of extension procedures to fulfil obligations under a contract, along with consequent imposition of liquidated damages, are good indicators to hold that time is not of the essence.
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Contract of service or contract for service - The Supreme Court Test

In Sushilaben Indravadan Gandhi v. The New India Assurance Company Limited,[1] the Supreme Court crystallised and clarified the tests to differentiate between a contract of service and a contract for service, while also interpreting an exemption of liability clause in an insurance policy.

Factual Background

Respondent No. 3 viz. the Rotary Eye Institute, Navsari (“Institute”) subscribed to a Private Car ‘B’ insurance policy offered by Respondent No. 1 viz. New India Assurance Company Limited (“Insurance Company”) on April 17, 1997 (“Insurance Policy”). The Insurance Policy, which inter alia covered death of or bodily injury to any person including occupants in the relevant motor car, expressly excluded the Insurance Company’s liability in cases of death or injury arising out of and in the course of the employment of the person so affected, by the Institute. The Insurance Policy also provided for compensation on a particular scale for bodily injury sustained by any passenger other than inter alia a person in the employ of the Institute, coming within the scope of the Workmen Compensation Act, 1923, and engaged in and upon the service of the Institute at the time when such injury is sustained.
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