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

An individual legally fit and able to undertake an activity or function. ...

In the real estate industry, several professional designations can be awarded to real estate professionals. These professional designations provide real estate professionals with the ...

A Construction method of using twice the number of framing members to provide additional structural strength. ...

Unfortunately, we encounter false advertising daily. False advertising refers to deceptive or misleading ads and commercials that fail to showcase a product’s or service’s ...

Series of intersecting lines dividing a map or chart into equal sections. Series of intersecting bars, wires or support as in a grating or supports in a dropped ceiling. ...

When you hear someone in real estate saying there will be a boring test, they don't mean a dull exam is coming up. What is a soil boring test? Let's find out the meaning of a boring test! ...

A statistical procedure using a body of measurable independent variables to compute an equation that successfully measures and forecasts the variance in another variable, the dependent ...

The meaning of a disclosure statement is a legal document signed by both parties, the lender and the borrower or buyer. This statement outlines the terms and conditions, the potential ...

Written proposals and acceptances applicable to the aspects of the transaction. The escrow agent must follow the purchase and sale agreement. ...

Popular Real Estate Questions