Conditional contracts will usually contain a longstop date in respect of a condition (eg the grant of planning permission). If the event does not take place by that date then the contract will usually say that either party can end the contract. But, when agreeing such a longstop date, always consider whether or not time should be of the essence. 


This is illustrated by a recent case which involved an agreement to grant a lease, but which was conditional upon the grant of a headlease to the seller (and if this was not done by the date stated then ‘either party shall have the right to rescind this contract by serving written notice of rescission upon the other’). In fact, what happened was that the headlease was not granted by the longstop date, but neither party then tried to back out of the contract by serving a notice of rescission. Eventually the headlease was granted, but by then the property market had collapsed and the buyer could not get a mortgage and so he served notice of rescission. But, was it too late to serve the notice of rescission? 


The contract was clearly conditional on the grant of the headlease. But, was it (i) conditional on the grant of the headlease at any time, or (ii) on the grant of the headlease by the longstop date. The answer lay in the fact that the agreement did not make time of the essence, which meant it was not clear that the longstop date was crucial. Accordingly, the agreement became unconditional as soon as the headlease was granted (even though that was after the longstop date). 


The lesson is clear. If a longstop date is being used then make it clear whether time is of the essence. Also, use clearer wording; in this case, problems could have been avoided if the right to rescind applied ‘at any time after... but before the headlease has been granted’. See McGahon v Crest Nicholson [2010] EWCA Civ 842 (access free at www.practicalconveyancing.co.uk). Source: Dechert.