Anticipatory Breach
An anticipatory breach of contract is the action that occurs when one party in the contract shows their intention to not fulfill their contractual obligations to the other party. The anticipatory breach liberates the counterparty of the contract from the responsibility of respect to their contractual obligations.
Also known as an anticipatory repudiation, an anticipatory breach gives the counterparty basis to begin any legal action. The reason for that is because one party exhibited their failure to meet their contractual obligations. The result is the legal right of the counterparty to take legal actions.
What is an Anticipatory Breach of Contract?
Simply put, when we deal with a party in a contract that demonstrates their intention to not respect their contractual obligations, we are dealing with an anticipatory breach. This intention to breach a contract does not require vocal or written confirmation. It can be the result of simply not performing the contractual obligations in a timely manner.
The counterparty of the contract can declare an anticipatory breach and begin any legal actions deemed just without having to wait for the contract to actually be broken.
When an anticipatory breach occurs, there can be financial consequences. In this case, the counterparty, the party declaring the anticipatory breach, requires to moderate the potential damages of the breach, especially if they intend to seek compensation in court. That can even consist of stopping payments to the party responsible for the anticipatory breach while at the same time minimize the effects of the breach. Another solution for the counterparty would be to seek a third party that can fulfill the original contract so that their damages are as small as possible.
What is required for an Anticipatory Breach of Contract?
In order for an anticipatory breach of contract to be applicable, the intention to breach the contract can not only be based on an assumption. There must be evidence of an absolute refusal to respect the terms of the contract. So how can an anticipatory breach of contract happen in the real estate world?
Well, we can look at a real estate developer, for example. There are contractors, architects, and workers that are contractually bound to complete the construction at a set date. If the developer demands regular updates on how the construction is going and isn’t satisfied with the results received, that is not grounds for an anticipatory breach. However, if the architects, contractors, or workers are taking actions that will make the completion of the construction on the deadline impossible, that constitutes grounds for anticipatory breach. For instance, if the architect focuses their entire workforce on another developer’s project, while the initial project isn’t finalized or on the right track to be completed by the deadline, this can be taken as evidence of refusal to respect the contract and a breach of it.
Popular Real Estate Terms
People often use the term in their everyday discourse, yet many wonder what the meaning of common law genuinely implies. Common law refers to a system of jurisprudence based on court ...
A line on a map or drawing showing equal ground elevation points. See also contour map. ...
Relationship between individuals or entities out of which exists a mutual interest. An example is a privity of contract among the contracting parties concerning the actions each are to take. ...
Federal agency that aids veterans of the armed forces. For example, it guarantees a home loan for up to a predetermined dollar amount or percentage of the loan balance, whichever is less. ...
Goods that are freely substitutable. It is goods of a given class or type, any unit of which is as acceptable as another, and capable of satisfying an obligation expressed in terms of the ...
Mutually binding property sales contract where the title remains with the seller until the purchase price is paid by the buyer. It is a contract to convey title in the future upon ...
Time period for which one expects to keep property such as a real estate investment. ...
Method of construction where part of the structure is supported by a cantilever beam or truss. ...
Accelerated depreciation method in which the amounts recognized in the early years of the property's useful life are greater than those recognized in the later years. The SYD is found by ...

Have a question or comment?
We're here to help.