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

Indicators reflecting future changes in economic conditions; referred to as the Composite Index of 11 Leading Indicators. This index indicates the direction of the economy in the next six ...

The reason a property appraisal is being made. The purpose of the appraisal is the first step in the appraisal process. The purpose of the appraisal should answer several questions: ...

Ability of the size of the land to accommodate the desired economic purpose. An example is having enough space to build a supermarket to meet the needs of the community. ...

Underground pit or tank used to store sewage. ...

You may have heard the term codicil in a conversation but might have yet to understand it entirely. What’s the codicil definition? “Codicil meaning” refers to a supplement ...

Individually owned lots and houses with community ownership of common areas. ...

Lender (such as a bank) that has the property of the borrower as collateral (security, lien). If the mortgage is not paid, the property may be sold to make payment on the outstanding ...

Building that is elaborately built with columns in a symmetrical way, generally with three floors and a gabled roof. ...

Large scale map of an urban area detailing land use. City plans are essential for projecting the growth, development, and redevelopment of the urban area. The major objective of a city plan ...

Popular Real Estate Questions