When a party to a contract promises to do a certain thing at or before a specified time, or certain things at or before specified times, and fails to do any such thing at or before the specified time, the contract, or so much of it as has not been performed, becomes voidable at the option of the promisee, if the intention of the parties was that time should be of the essence of the contract.
Effect of such failure when time is not essential.—If it was not the intention of the parties that time should be of the essence of the contract, the contract does not become voidable by the failure to do such thing at or before the specified time;
but the promisee is entitled to compensation from the promisor for any loss occasioned to him by such failure.
Effect of acceptance of performance at time other than that agreed upon.—If, in case of a contract voidable on account of the promisor's failure to perform his promise at the time agreed, the promisee accepts performance of such promise at any time other than that agreed, the promisee cannot claim compensation for any loss occasioned by the non-performance of the promise at the time agreed, unless, at the time of such acceptance, he gives notice to the promisor of his intention to do so.
Legal Commentary & Landmark Judgments: Section 55
Where time is of the essence in a contract and a party fails to perform at or before the stipulated time, the contract becomes voidable at the option of the promisee. If time was not intended to be of the essence, the contract does not become voidable upon delay, but the promisee remains entitled to compensation for any loss occasioned by the default.
Crucially, under the third paragraph of Section 55, if a promisee accepts delayed performance in a contract where time was essential, they cannot claim compensation for the delay unless they give express notice of their intention to claim compensation at the time of accepting the delayed performance.
In construction and commercial supply contracts, parties frequently insert standard 'time is of the essence' clauses. However, if the employer routinely grants extensions without levying liquidated damages or reserving rights under Section 55(3), courts will hold that the essence of time has been waived by conduct.