Breach of Contract

Definition

A Breach of Contract occurs when one party fails to perform any term of a contract without a legitimate legal excuse. This violation can justify the other party, known as the non-breaching party, to take legal action to enforce the contract or seek damages.

Examples

Example 1: Baker contracts with owner Brown to purchase a property. When the closing date arrives, Brown refuses to convey the title to the property. Brown’s action is not supported by any special conditions in the sales contract and therefore constitutes a breach of contract. Baker may rescind the contract and recover his deposit, sue Brown for any expenses and damages incurred, or sue to force Brown to sell the property.
Example 2: A tenant signs a lease agreement to rent an apartment for one year but leaves the apartment after six months without a legal cause or notice. The landlord can consider this a breach of contract and may have legal grounds to recover rent for the remaining months or other associated damages.

Frequently Asked Questions

What are the common types of breach of contract in real estate?

Material Breach: A severe violation that undermines the entire agreement.
Minor Breach: A partial breach that affects a smaller portion of the contract.
Anticipatory Breach: Occurs when one party expresses an intention not to perform as per the contract in the future.
Actual Breach: Occurs when one party refuses, willfully or otherwise, to fulfill their contractual obligations.

What legal remedies are available for breach of contract?

Damages: Compensation for financial loss caused by the breach.
Specific Performance: Court order requiring the breaching party to fulfill their end of the contract.
Rescission: Cancellation of the contract and return of the parties to their pre-contractual positions.
Restitution: Returning any benefits conferred to the breaching party.

Can a Breach of Contract be enforced without legal action?

In some cases, parties may resolve a breach without legal intervention through negotiation, mediation, or arbitration, aiming to reach an acceptable agreement for both parties involved.

Specific Performance: A legal remedy compelling a party to execute the contract as promised.
Rescission: Legal revocation or annulment of a contract, nullifying its obligations.
Default: Failure to fulfill a contractual obligation or duty.
Damages: Monetary compensation for loss due to the breach.
Deposit: Earnest money placed to indicate good faith in completing a transaction.

Online Resources

References

Black’s Law Dictionary, Standard Ninth Edition
Northcutt, R. (2018). Contracts: Keyed to Courses Using Farnsworth, Sanger, Cohen, Brooks, and Garvin’s (9th ed.).
Restatement (Second) of Contracts, American Law Institute.

Real Estate Basics: Breach of Contract Fundamentals Quiz

### What is a breach of contract? - [ ] A legal action that formalizes a contract. - [x] A violation of the terms of a legal agreement. - [ ] An agreement to modify contract terms. - [ ] A way to cancel a contract by mutual consent. > **Explanation**: A breach of contract refers to the violation of the terms agreed upon within the legal agreement. ### What legal remedy forces the breaching party to fulfill their contractual obligations? - [ ] Rescission - [ ] Damages - [x] Specific Performance - [ ] Arbitration > **Explanation**: Specific performance is a legal remedy requiring the breaching party to perform according to the contract terms. ### Which term is used when monetary compensation is provided for the loss incurred due to a breach of contract? - [ ] Rescission - [ ] Specific Performance - [ ] Default - [x] Damages > **Explanation**: Damages refer to the monetary compensation provided to cover the loss incurred due to a breach of contract. ### What type of breach occurs when one party expresses an intention not to fulfill contractual obligations in the future? - [ ] Material Breach - [ ] Actual Breach - [x] Anticipatory Breach - [ ] Minor Breach > **Explanation**: An anticipatory breach occurs when one party declares their intention not to fulfill their future contractual obligations. ### Which type of breach significantly undermines the entire agreement? - [x] Material Breach - [ ] Minor Breach - [ ] Actual Breach - [ ] Anticipatory Breach > **Explanation**: A material breach is a severe violation that significantly undermines the entire agreement. ### Can parties settle a breach of contract without legal intervention? - [x] Yes, through negotiation, mediation, or arbitration. - [ ] No, legal intervention is always necessary. - [ ] Only through formal litigation. - [ ] Only if the contract states so. > **Explanation**: Parties can choose negotiation, mediation, or arbitration to resolve a breach without going to court. ### What does rescission imply in the case of a breach of contract? - [ ] Monetary compensation for losses - [x] Cancellation of the contract - [ ] Enforcing the contract terms - [ ] Negotiation of new terms > **Explanation**: Rescission implies the cancellation of the contract and reverting the parties back to their pre-contractual position. ### What is the implication of a tenant leaving a rental unit early without a legitimate reason? - [x] Breach of Contract - [ ] Specific Performance - [ ] Deed in Lieu - [ ] Novation > **Explanation**: Leaving an apartment early without a legitimate reason constitutes a breach of contract by the tenant. ### Who is the non-breaching party? - [ ] The party who breaches the contract. - [ ] The party avoiding the contract. - [x] The party suffering due to the breach. - [ ] Any third party involved. > **Explanation**: The non-breaching party is the one who suffers due to the breach of the contract’s obligations. ### What term describes the failure to fulfill a contractual obligation? - [ ] Rescission - [ ] Specific Performance - [ ] Novation - [x] Default > **Explanation**: Default describes the failure to fulfill a contractual obligation, leading often to a breach of contract.