Nova Fish Farms Inc. v. Cold Ocean Salmon Inc., 2025 NLCA 28
In Nova Fish Farms Inc. v. Cold Ocean Salmon Inc., the Court of Appeal of Newfoundland and Labrador delivered an important decision on the interpretation of “Time is of the Essence” clauses in commercial agreements.
The case is a strong reminder that a Time is of the Essence (“TOE”) clause does not automatically apply to every obligation in a contract. If parties want the right to terminate for delay, they should use clear deadlines and express termination provisions.
Background
Cold Ocean Salmon agreed to sell several trout farms to Nova Fish Farms.
The farms operated under provincial leases and regulatory licences, meaning government approval was required before the transaction could close.
The agreement:
- did not contain a fixed closing date;
- required the parties to act “as promptly as practicable”;
- required “commercially reasonable efforts” to obtain approvals; and
- included a standard “Time is of the Essence” clause.
After signing the agreement in February 2020, Nova Fish took no steps toward obtaining government approval for approximately 16 months. Nova Fish explained that the delay was caused by business concerns arising from the COVID-19 pandemic.
Eventually, the approvals were obtained and Nova Fish attempted to close the transaction. Cold Ocean refused, arguing that Nova Fish’s delay breached the agreement and entitled Cold Ocean to terminate the deal.
The Trial Decision
The Trial Judge agreed with Cold Ocean.
The Court found that Nova Fish breached the agreement by failing to:
- act “as promptly as practicable”; and
- use “commercially reasonable efforts.”
The Trial Judge further held that the “Time is of the Essence” clause applied to those obligations, meaning Cold Ocean was entitled to terminate the agreement.
Nova Fish’s request for specific performance was dismissed.
The Court of Appeal Reverses the Decision
The Court of Appeal reached a very different conclusion.
Importantly, the Court agreed that Nova Fish breached the agreement. Waiting 16 months to take any action was inconsistent with acting promptly or using commercially reasonable efforts.
However, the Court held that the breach did not automatically allow termination of the agreement.
Legal Principle
The Court stated that “Time is of the Essence” clauses apply only to definite and specific time limits.
They do not apply to vague or indefinite obligations such as:
- “as promptly as practicable”;
- “reasonable efforts”; or
- “commercially reasonable efforts.”
The Court emphasized that “Time is of the Essence” clauses exist to create certainty. Parties must know exactly:
- when performance is due;
- when a breach occurs; and
- when termination rights arise.
Indefinite timing provisions do not provide that certainty.
As the Court explained, if timing obligations are vague, parties cannot know with precision whether:
- the contract has been breached;
- the breach is serious enough to terminate; or
- conduct amounts to waiver of the breach.
Accordingly, although Nova Fish breached the agreement, Cold Ocean could not rely on the “Time is of the Essence” clause to terminate the contract.
Specific Performance Ordered
Because Cold Ocean was not entitled to terminate the agreement, the Court ordered specific performance.
In other words, the transaction had to proceed according to the terms of the agreement.
Importance
This decision is significant for commercial and real estate agreements alike.
Parties frequently include broad wording requiring actions to be taken:
- promptly;
- diligently; or
- using commercially reasonable efforts.
However, this case confirms that such wording may not be enough to support termination rights under a “Time is of the Essence” clause.
If parties intend delay to create a right of termination, the agreement should contain:
- a fixed deadline;
- an outside closing date;
- milestone dates; and/or
- express termination language.
Without those provisions, a breach may support damages but not necessarily cancellation of the contract.
Practical Drafting Lesson
This case highlights an important drafting principle:
A “Time is of the Essence” clause does not create deadlines. It only strengthens deadlines that already exist.
If the timing obligation itself is uncertain, the “Time is of the Essence” clause may not provide the protection parties expect. The time limit exists independently of the clause.
NOTE: the Supreme Court of Canada has agreed to hear an appeal. We are presently awaiting a date. The appeal will be determinative on this issue.
Brian Madigan LL.B., Broker
www.OntarioRealEstateSource.com