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

Circumstance where no people or contents occupy or are kept in a building for at least 60 consecutive days. The same stipulations apply to property coverages as found in unoccupancy. ...

Construction materials from stone, brick, and concrete block. Masonry materials play an important role in providing structural support as well as being used as decorative finish surfaces. ...

When we talk about adverse environmental impacts, we always refer to the man-made negative impact on the environment. An adverse environmental impact can be defined as negative changes that ...

Annual Percentage Rate (APR) is a measure of the cost of credit that must be reported by lenders under the Truth in Lending regulations. The Annual Percentage Rate (APR) takes into ...

The term market segmentation is mostly used in marketing for assembling prospective buyers in groups based on their needs and their response to a marketing action. One definition of market ...

Buffer amount between the value of the collateral and the principal balance of the obligation. For example, if the mortgage has a principal balance of $200,000 and the appraised value of ...

Usually a fairly large site zoned and planned for the purpose of industrial development and located outside the main residential area of a city. Industrial parks normally are provided with ...

Counter action by a defendant against a plaintiff. It is an independent action and just a denial of plaintiff's action. ...

The Real Estate Settlement Procedure Act (RESPA) is a piece of law passed by the US Congress in 1974 to protect homebuyers and home sellers against bad settlement practices. The Real ...

Popular Real Estate Questions