In real estate, a contract is a legally binding agreement between two or more parties. When one party fails to perform their obligations as stated in the contract, it's considered a "breach of contract". Anticipatory breach, also known as "anticipatory repudiation", occurs when one party makes it clear that they will not fulfill their obligations under the contract, even before the actual performance is due.
For example, let's say you sign a contract to purchase a property from a seller. The contract stipulates that the seller must vacate the property by a certain date. However, a few days before the agreed-upon date, the seller contacts you and informs you that they have changed their mind and will not be vacating the property as per the contract. This is an example of anticipatory breach, as the seller has made it clear that they will not perform their obligations under the contract.
Consequences of Anticipatory Breach
Anticipatory breach can have significant consequences in real estate transactions. The innocent party (in our example, the buyer) has several options available to them, including:
Terminating the contract: The innocent party can choose to terminate the contract due to the anticipatory breach. This relieves both parties of their obligations under the contract and allows the innocent party to seek damages for any losses incurred.
Affirming the contract: The innocent party can also choose to affirm the contract and wait until the performance date to see if the breaching party (in our example, the seller) performs their obligations. If the breaching party fails to perform, the innocent party can then terminate the contract and seek damages.
Seeking damages: The innocent party can seek damages for any losses incurred as a result of the anticipatory breach. This can include costs associated with finding a new property or any other expenses related to the transaction.
In summary, anticipatory breach occurs when one party makes it clear that they will not perform their obligations under a contract before the performance date. This can have significant consequences in real estate transactions, including the termination of the contract and the seeking of damages.