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

Involves the transfer of property from one individual to another for a consideration in the form of sale. It is the most widely used type of real estate deed with a period of bargaining ...

Builder's ten-year guarantee that their workmanship, materials, and construction are up to established standards. The HOW provides reimbursement for the cost of remedying specified defects. ...

lender who charges an exorbitant interest rate, which is typically illegal because it exceeds the interest rate allowed in the state. A borrower may go to a loan shark if he cannot obtain ...

In commerce and business, margin as a general term is defined as by the difference between the amount of money spent on a product and the selling price of it. The margin usually appears as ...

Managing property directly at its location. The management functions may include showing prospective tenants the facilities, collecting rents, and doing upkeep on the property. ...

Landlords act of seizing a tenants property to satisfy defaulted rent payments. To distrain a tenants property the landlord must give proper legal notice and is often accompanied by ...

All expenses related to maintaining and operating a household. These expenses include the cost of rent or mortgage payments, taxes, utilities, maintenance and structural improvements. The ...

Also called a teaser. The starting interest rate of an adjustable rate loan. It generally lasts between 1 and 12 months, at which time the loan rate increases based on prearranged criteria. ...

Also called triple net lease. The lessee pays not only a fixed rental charge but also expenses on the tented property, including maintenance. ...

Popular Real Estate Questions