- within Corporate/Commercial Law topic(s)
- with Senior Company Executives, HR and Finance and Tax Executives
- with readers working within the Healthcare, Property and Law Firm industries
"Time is of the essence" ("TOE") is a frequently used clause in Canadian commercial contracts and is often treated as standard boilerplate. Its intended function is to elevate timing obligations into essential terms of the contract, such that delays constitute a breach and may justify termination of the contract.
However, the Newfoundland and Labrador Court of Appeal's decision in Nova Fish Farms Inc. v Cold Ocean Salmon Inc., 2025 NLCA 28 ("Nova Fish Farms") calls into question whether the clause will operate as intended where a contract does not include fixed performance dates and instead relies on flexible standards such as "commercially reasonable efforts" and "as promptly as practicable."
With the Supreme Court of Canada ("SCC") granting leave to appeal on January 22, 2026, from the Newfoundland and Labrador Court of Appeal's decision, the SCC is now poised to clarify whether – and when – time is truly "of the essence" in the absence of fixed deadlines.
Nova Fish Farms: Background and Court of Appeal ruling
The underlying dispute in Nova Fish Farms involved a purchase and sale agreement ("Agreement") pursuant to which Cold Ocean Salmon Inc. ("Cold Ocean") agreed to sell several trout farm sites (the "Proposed Transaction") to Nova Fish Farms Inc. ("Nova Fish"). Because the farm sites were regulated and licensed by both provincial and federal governments and were located on land leased from the provincial government, the Proposed Transaction was conditional on obtaining certain governmental approvals.
The Agreement required the parties to pursue those third-party approvals using "commercially reasonable efforts" and to do so "as promptly as practicable." While the Agreement contained a TOE clause, it did not specify a fixed closing date nor specific deadlines by which approvals were required to be sought or obtained.
Following execution of the Agreement, the Proposed Transaction stalled for a significant period of time. The evidentiary record before the Court showed that after the Agreement was signed in February 2020, neither party took meaningful steps to obtain the required approvals for more than a year. Nova Fish ultimately submitted the necessary applications for governmental approval in June 2021, and the approvals were granted in October 2021.
Nova Fish advised Cold Ocean of this in December 2021 and indicated that it was ready to complete the Proposed Transaction. Cold Ocean declined to close and by May 2022, Cold Ocean had taken the position that it did not intend to proceed with the Proposed Transaction. Nova Fish responded by commencing proceedings seeking specific performance of the Agreement.
The summary trial judge found that Nova Fish had breached the Agreement by failing to act promptly and by not using commercially reasonable efforts to obtain the required approvals. The trial judge further concluded that the TOE clause applied to those obligations and that the delay entitled Cold Ocean to terminate the Agreement. On that basis, Nova Fish's claim for specific performance was dismissed.
On appeal, Nova Fish Farms focused on whether TOE clauses should apply to obligations expressed in indefinite timing terms. The Court of Appeal did not disturb the finding that Nova Fish had breached the Agreement by failing to act promptly. However, it rejected the summary trial judge's ruling that the TOE clause applied to the obligation to act promptly and entitled Cold Ocean to terminate the Agreement.
The Court reasoned that TOE clauses are intended to create certainty about the consequences of missing timelines, but no such certainty can exist where the relevant timing obligation is indefinite and open to interpretation.
The Court also expressed concern that applying TOE clauses to indefinite timing provisions would create uncertainty around waiver, including when a party must elect to terminate or affirm the contract, and when conduct might be treated as waiver.
In articulating what amounts to a bright-line rule, the Court of Appeal held that TOE clauses do not apply to obligations framed in indefinite timing terms. As a result, Cold Ocean did not have the termination right it asserted, and the Court ordered specific performance of the Agreement. The SCC has now agreed to hear Cold Ocean's appeal from that decision.
Contractual interpretation: How have Canadian courts historically ruled?
The appeal in Nova Fish Farms engages deeper principles of contractual interpretation that are central to Canadian contract law. At the centre of the appeal is how a TOE clause interacts with the broader contractual matrix, particularly where agreements combine strict timing language with obligations expressed in flexible terms such as "commercially reasonable efforts" or "as promptly as practicable."
Under established SCC authority in Sattva Capital Corp. v Creston Moly Corp., 2014 SCC 53 and refined in Ledcor Construction Ltd. v Northbridge Indemnity Insurance Co., 2016 SCC 37, contractual interpretation requires determining the objective intentions of the parties and reading the contract as a whole, giving the language used its ordinary and grammatical meaning, in the context of the surrounding circumstances known to the parties at the time of contract formation.
Nova Fish Farms considers whether general timing obligations can, as a matter of contractual interpretation, be transformed into strict conditions simply by the inclusion of a TOE clause. The SCC's guidance will be significant to contractual interpretation in Canadian law, by clarifying how these interpretive tools should be applied where contractual language does not specify fixed timelines but includes both general TOE language and qualitative performance standards.
Key takeaways (Subject to SCC guidance): Drafting and risk allocation considerations
1. TOE clauses may not cure indefinite timing language
The Court of Appeal's decision in Nova Fish Farms signals that TOE clauses should not be assumed to apply to obligations expressed in indefinite terms such as "as promptly as practicable" or "commercially reasonable efforts," particularly where no fixed deadline exists in the agreement. The Court of Appeal emphasized that TOE clauses are intended to provide certainty as to the consequences of missing timelines, but that certainty is difficult to achieve where the time for performance is indefinite and open to interpretation. Whether the SCC will adopt this same narrow interpretation, or articulate a broader or different framework, will be determinative for how contracting parties should consider TOE clauses in future agreements.
2. Clear milestones and outside dates matter – Especially for third-party approvals
Nova Fish Farms underscores the importance of using clear milestones and outside dates in transactions that are dependent on third-party approvals. The Court of Appeal's approach suggests that parties seeking certainty should draft objective trigger points and defined timelines, rather than relying on general or indefinite timing language that may leave contracting parties disputing whether performance was sufficiently prompt or commercially reasonable. The SCC's decision may clarify what level of precision is required to make timing truly enforceable in this context.
3. Delay disputes may result in compelled completion, not just damages
The remedy of specific performance granted in Nova Fish Farms serves as a reminder that commercial disputes do not always resolve through damages alone, particularly where the subject matter is unique or a strategically important resource. The Court of Appeal ordered completion of the Proposed Transaction, not compensation for its failure. Whether the SCC confirms that result, and on what reasoning, may influence how parties assess litigation exposure when attempting to terminate a delayed transaction, including the risk that a court may compel completion rather than treat the dispute as compensable in damages.
Each of these considerations will inform how parties should draft, manage and enforce timing provisions in commercial agreements. Appropriate consideration should be given to timing mechanics at the negotiation stage of commercial arrangements to ensure that parties are able to provide sufficient clarity in the definitive agreement and satisfy such obligations upon entering into the contract.
Concluding remarks
With leave to appeal now granted by the SCC, Nova Fish Farms is a case that has risen to national importance and has the potential to become a touchpoint on how courts across Canada will interpret and enforce TOE clauses.
As we await the SCC's guidance, Nova Fish Farms is a reminder that seemingly standard timing language between contracting parties can carry significant risk if not supported by clear milestones, outside dates, and well-defined remedies. From a planning perspective, parties should consider whether their agreements contain enforceable timing mechanisms that match the commercial realities of the transaction, particularly where third-party approvals or regulatory steps are involved.
To better understand the potential impacts of this upcoming SCC decision, please feel free to reach out to the authors of this article and/or a member of our Corporate or Commercial Litigation teams.
Read the original article on Read the original article on GowlingWLG.com
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
