Contracts set down in writing constitute an agreement between two parties. When one party offers to provide goods or services, and the other party agrees, a contract formalizes the understanding. Contracts cover a variety of subject matter and types of agreements. Contracts of sale, for example, govern the rules for acquisition of property in exchange for payment. Breaches of contract are the most common causes of real estate litigation identified in a previous post by Hoogbruin & Company.
What is anticipatory breach?
Parties to a real estate transaction can, through words or conduct, repudiate an agreement or show an intention before the closing date to not complete the contract. This is known as anticipatory breach. The test is whether a reasonable person would conclude that the breaching party no longer intends to be bound by it.
The Ontario Superior Court dealt with the doctrine of anticipatory breach in a recent case called Sheik v Lebovik Enterprises Limited. In that case, the purchaser of a pre-construction home, Sheik, expressed disappointment with the builder and even threatened to start a lawsuit because of the decision of the builder to not place a door between the house and the garage. In response to Sheik’s threat, the builder, Lebovik Enterprises Limited, was no longer interested in selling the house or corresponding with Sheik. The builder transferred the house to a third-party and refused to correspond with Sheik. Sheik sued the builder for damages. The builder argued that, among other things, Sheik’s threat to start a lawsuit constituted an anticipatory breach of the agreement of purchase and sale. The Court disagreed with the builder and found that at all times, Sheik indicated a clear intention to continue with the purchase and sale of the home.
This case makes it clear that in a contract dispute, disagreements between the parties about whether a party is holding up their end of the bargain, does not constitute a breach of the contract if the party continues to show that they intend to complete the contract.
If you are looking for a real estate litigation lawyer or a lawyer for contract dispute, Arsen Krekovic at Hoogbruin & Company can help you.