Anticipatory Breach

Anticipatory Breach: Explained

In real estate, an anticipatory breach refers to a situation where one party to a contract communicates their intention to not fulfill their contractual obligations before the agreed-upon date of performance. It occurs when a party explicitly or implicitly indicates their unwillingness or inability to perform their duties as specified in the contract.

An anticipatory breach can take various forms:

  1. Express repudiation: This occurs when one party directly communicates their intention not to fulfill their contractual obligations. For example, if a buyer explicitly states that they will not proceed with the purchase of a property despite having a signed agreement of purchase and sale.
  2. Conduct inconsistent with performance: It refers to actions or behaviors that indicate a party’s inability or unwillingness to fulfill their obligations. For instance, if a seller actively markets the property to other potential buyers after entering into an exclusive listing agreement with a real estate agent.

When an anticipatory breach occurs, the non-breaching party has several options:

  1. Termination of the contract: The non-breaching party may choose to terminate the contract immediately. This relieves both parties of their obligations under the agreement.
  2. Affirmation of the contract: The non-breaching party can choose to affirm the contract, indicating their willingness to continue with the agreement and hold the breaching party responsible for any damages resulting from the breach.
  3. Demand for assurances: The non-breaching party may request the breaching party to provide adequate assurances that they will fulfill their obligations as specified in the contract. This allows the non-breaching party to continue with the contract while seeking reassurances of performance.

Damages will have to be mitigated effective the date of the anticipatory breach rather than the date of completion.

Brian Madigan LL.B., Broker

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