Tag Archives: anticipatory repudiation

ANTICIPATORY REPUDIATION OF A CONTRACT — THE PROSPECTIVE BREACH

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There are instances where a party can engage in the anticipatory repudiation of their obligations under a contract.  In essence, this is basically a party prospectively breaching the contract by repudiating their obligations in the contract.

A prospective breach of contract occurs where there is absolute repudiation by one of the parties prior to the time when his performance is due under the terms of the contract.  Such a repudiation may be evidenced by words or voluntary acts but the refusal must be distinct, unequivocal, and absolute. Moreover, repudiation can be shown where one party makes additional demands not included in the initial agreement:

            The law is clear that where one party to the contract arbitrarily demands performance not required by the contract and couples this demand with a refusal to further perform unless the demand is met, the party has anticipatorily repudiated the contract, which anticipatory repudiation relieves the non-breaching party of its duty to further perform and creates in it an immediate cause of action for breach of contract.

24 Hr Air Service, Inc. v. Hosanna Community Baptist Church, Inc., 46 Fla. L. Weekly, D1344a (Fla. 3d DCA 2021) (quotations and citations omitted).

In 24 Hr Air Service, an air conditioning contractor agreed to perform repairs to a Church’s air conditioning unit.  However, when the contractor went into the attic to start the repairs, the wooden platform in the attic was unstable and a portion of the ceiling collapsed.  The Church repaired the ceiling.  However, the contractor refused to return to complete its repairs citing safety reasons.  The contractor requested proof the repairs to the ceiling were made before it returned to complete its contracted work and such proof was never provided.

Did the contractor’s refusal to complete its work amount to anticipatory repudiation of its contract by imposing the additional demand of proof of repairs to the ceiling before completing its contracted work?  Both the trial and appellate court believed so.

The Contractor’s request that the Church provide safety assurances of the ceiling repairs constitutes an additional demand that was not agreed to by the parties under the service contract.  Despite the Contractor’s argument that it never abandoned the job, its demand for safety assurances coupled with its refusal to complete the agreed repairs until such assurances were provided was an anticipatory breach of the contract. 

24 Hr Air Service, Inc., supra.

Based on the anticipatory repudiation or breach of the contract, what were the Church’s damages?

The proper measure of damages “would be either the reasonable cost of completion, or the difference between the value the repair would have had if completed and the value of the repair that has been thus far performed.”  24 Hr Air Service, Inc., supra (quotation and citation omitted).  This is referred to as benefit-of-the bargain damages, with the objective to place the damaged party in the position “he would have been in had the contract been completely performed.”  Id.    The party, however, cannot seek what is known as “betterment” or a better deal than what it originally bargained for—a party “can neither receive more than [it] bargained for nor be put in a better position than [it] would have been had the contract been performed.”  Id.

If you are dealing with a breach of contract, or even a prospective breach / anticipatory repudiation of an existing contract, it is advisable to seek legal counsel to assist you in preserving your arguments, the proper measure of damages for the breach, and any potential betterment associated with your damages.

Please contact David Adelstein at dadelstein@gmail.com or (954) 361-4720 if you have questions or would like more information regarding this article. You can follow David Adelstein on Twitter @DavidAdelstein1.

 

MORE ON PRECONSTRUCTION AGREEMENTS AND DEPOSITS (an update to 7/16/11 post)

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Craigside, LLC v. GDC View, LLC, 36 Fla. L. Weekly d1577e (Fla. 1st DCA 2011) is another case dealing with a buyer of a preconstruction condominium unit trying to recover its deposit from a developer/seller.  In this case, the preconstruction contract was entered on September 2, 2004.  The buyer tendered an initial deposit and then paid the balance of the purchase price  on a later date.  The purchase price of the unit was paid prior to the commencement of construction on the unit.  The contract required the developer  “to complete the condominium unit…within two (2) years of the date of this Agreement but in no event later than May 1, 2007.”  The contract allowed for extensions only for “delays caused by events which would support a defense based on impossibility of performance for reasons beyond [the seller’s] control.”

 

The seller sent the buyer a letter advising that closing was anticipated for May 1, 2007.  In response, the buyer sent the seller a letter on April 16, 2007 (notably, more than two years from the date of the contract)  notifying the seller that the seller failed to complete the condominium unit per the agreement and further demanding a return of the purchase price.   The seller refused to return the initial deposit, although it returned the additional deposit (balance of purchase price).

 

An issue at trial was the number of days the seller was entitled for delays to the completion date of the unit — these days allowed the seller to extend the completion date of the unit.   The trial court granted the seller 253 days of delay, but unfortunately, this case does not discuss the basis for the delays.  An understanding of these delays are critical because these delays allowed the seller to complete the unit more than two years from the date of the preconstruction contract.

 

The First District affirmed the trial court holding that the buyer committed an anticipatory breach of the contract by notifying the seller that it was not going to close on May 1, 2007 and demanding its money back.   The First District explained:

 

“In dealing with anticipatory repudiations the law is clear that a repudiation gives rise to a claim for damages by the nonbreaching party. As stated in Restatement (Second) of Contracts § 253 (1979):

(1) Where an obligor repudiates a duty before he has committed a breach by non-performance and before he has received all of the agreed exchange for it, his repudiation alone gives rise to a claim for damages for total breach.

(2) Where performances are to be exchanged under an exchange of promises, one party’s repudiation of a duty to render performance discharges the other party’s remaining duties to render performance.

Therefore, the nonbreaching party is relieved of its duty to tender performance and has an immediate cause of action against the breaching party.”

 

In other words, because the buyer notified the seller that it was not going to close on the unit, the buyer committed a breach of the contract.  This decision provide crucial because it authorized the seller to keep a substantial initial deposit as liquidated damages associated with the buyer’s refusal to close on the unit.   This case reinforces the position that a buyer seeking to avoid closing on a unit takes a certain degree of risk by not closing (i.e, that risk being a loss of its deposit).   For this reason, it is important that this business decision is made with the input of an attorney to ensure all arguments are preserved and understood.  In this case, the fundamental issue was how many days the seller was given to extend the completion of the unit.  While the case did not discuss this issue in any detail, these days put the buyer in the position that when it notified the seller it was not going to close on the unit, the buyer breached the contract  allowing the seller to retain the deposit and resell the unit to another buyer.

 

For more information on preconstruction contracts and recovering deposits, please see: https://floridaconstru.wpengine.com/preconstruction-and-purchase-sale-contracts-arguments-to-revoke-the-contract-and-recover-the-deposit/

 

Please contact David Adelstein at dadelstein@gmail.com or (954) 361-4720 if you have questions or would like more information regarding this article. You can follow David Adelstein on Twitter @DavidAdelstein1.