Definition of "Anticipatory breach"

James  "Jim" Stairs real estate agent

Written by

James "Jim" Stairselite badge icon

New Abode, LLC

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.

image of a real estate dictionary page

Have a question or comment?

We're here to help.

*** Your email address will remain confidential.
 

 

Popular Real Estate Terms

Person chosen by a testator/testatrix to handle and conduct the terms of a will to an estate. Duties include collecting and selling of properties and paying debts of the state. ...

You’ve put your home on the market and are receiving offers. The next logical step is to sell your house to the buyer who offers you the highest amount of money and start the closing ...

Keeps something under control, such as water and sand. It blocks natural flow and settling of earth. It performs the same function as a dam would for water. ...

To fulfill , complete, implement, perform, or carry out terms of an agreement including completing a signature on a contract and delivering a document to the intended party. ...

Method of valuing a property through examination and comparison of recent sales of comparable properties. ...

Refurbishing or rebuilding a property, such as a house, back to its original or earlier condition. ...

Process of developing an area by planning and building homes, shopping centers, schools or churches. The development process includes the construction of streets, sewers, utilities, parks, ...

What is a turnkey property? A turnkey property is a very popular type of investment property that real estate investors prefer because it starts bringing a return on investment quickly. ...

An attorney's opinion of the status of a title, which is attached to the abstract of title. ...

Popular Real Estate Questions