January 01, 2018

The Last Word: Tick, Tock—Time Is Money

Time may be relative in physics and malleable in science fiction, but in contracts, time periods and deadlines mean money and must be set out with precision. We drafters don’t always have the luxury of giving an exact date to define a deadline. Often, a time period depends on a future occurrence. In these situations, the drafter must describe the time period or deadline using words, not exact dates. And words can be slippery.

What Is a Year and What Is a Month, Anyway?

The term year or calendar year might mean either (1) January 1 through December 31 or (2) the period starting on a particular date (for example, a lease commencement date) and ending on the day immediately preceding the same date of the next year (the anniversary of the commencement date). See What 12-Month Period Constitutes “Year” or “Calendar Year” as Used in Public Enactment, Contract, or Other Written Instrument, 5 A.L.R.3d 584 (2016).

Similarly, month or calendar month might mean all of January, all of February, and so on. See 86 C.J.S. Time § 8 (2017). But it might instead mean the period running from a specified day of a Gregorian month through either the corresponding day of the next month or the day immediately preceding the corresponding day of the next month. A physicist planning to travel the multiverse for a month leaving on February 15 should return on March 14 or perhaps March 15, depending on the choice of law for that multiverse and whether it recognizes Gregorian months. Id.; 74 Am. Jur. 2d Time § 8.

In each of these cases, the context determines the meaning of the word, and it is the drafter’s duty to supply that context. In leases, a year for purposes of rent increases is generally termed a lease year and extends from the lease commencement date through the day immediately preceding the first anniversary of that lease commencement date. But if obligations are to be calculated on a January 1 through December 31 basis, the drafter must clarify that when the term calendar year is used, that term means January 1 through December 31. For the same reason, when payments are to be made monthly, the drafter should specify that the payment is to be made on the first day of each month or perhaps another date during the month, and on the same day of each succeeding month.

Computing Time Periods

Statutes tell us that in computing a period of time prescribed by law, the day of the event after which the period begins to run is not included, but the last day is included. See, e.g., Cal. Civ. Proc. Code § 12; La. Civ. Code art. 3454 (prescription); Tex. R. Civ. Proc. 4. This is also the modern rule for contract time periods; however, when the time period is defined by years, the first day of each year is included, and the anniversary of that day is not included. Is this confusing? Yes, and computer programs that create spreadsheets often have to be set to identify properly the last day of a period.

Of course, the words used by the drafter to describe a time period make a difference; for example, “Buyer will have a diligence period of 60 days starting on and including the effective date of the contract” clearly includes the effective day. Most diligence periods, however, are phrased in the more traditional way, which excludes the first day and includes the last day: “Buyer’s diligence period ends 60 days after the effective date.”

This rule has a couple of exceptions. In rules of procedure, if the last day of a period is a Saturday, Sunday, or legal holiday, the last day is extended to the next day that is not a holiday. E.g., 5 Ill. Comp. Stat. 70/1.11. But these exceptions do not generally apply to contract obligations like the obligation to pay rent. See, e.g., Rubloff CB Machesney, LLC v. World Novelties, Inc., 844 N.E.2d 462 (Ill. App. Ct. 2006).

The Pesky Issue of Anniversaries

Why is it so hard to remember that the first anniversary of the commencement date of a lease is also the first day of the second lease year or that the third lease year begins on the second anniversary of the commencement date? It just is. Our brains have to disregard the word before anniversary and simply count the years. To avoid confusion, it’s best to avoid relying solely on successive anniversaries to fix the date of rent increases, and instead to define lease year and provide for the increased rent to begin on the first day of the second lease year, third lease year, and so on.

Getting Courts to Recognize Time Limitations

Courts usually strictly enforce time periods and deadlines as written, even though several doctrines, generally equitable in nature, occasionally allow a party additional time. Consequently, drafters must always assume that time is absolute (not relative) and describe deadlines and time periods with specificity. We have no parallel universes to save us—when our clients sign a document, the deadlines are fixed in the only reality that counts, and we need to get them right.