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

In our world, you can request anyone to perform virtually any task for a little (or bigger) incentive. So, what is the definition of incentive precisely? An incentive can be a service or ...

When you hear the term annuity, you’re often left wondering what is an annuity? The simplest annuity definition is a financial product designed to ensure cash flows at equal intervals ...

Insulating material attached to crevices around doors and windows to prevent air from either entering or escaping from a structure. Tacked, stapled, or glued onto the surfaces of the doors ...

mortgage being reduced through periodic principal and interest payments. ...

Losses arising from damage to or destruction of property. ...

Creates a lien against the mortgagor's property, but does not permit a lien against his or her personal assets. See also non recourse. ...

Created by law usually for the right to travel to landlocked parcel of land ...

Certificate usually granted by a jurisdictions building department certifying a specified premise has satisfactorily complied with all zoning and building ordinances. This certification is ...

Unexpected increase in the price of property not due to any effort on the owner's part. An example is when the appraised value of a house increases because of a population increase in the ...

Popular Real Estate Questions