Anticipatory Breach Explained
Following the recent Memorandum Decision in the case of Saxton v. Berkner, No. 1 CA-CV 18-0275 (Oct. 1, 2019), there has been a great deal of discussion surrounding the topic of anticipatory breach, also known as anticipatory repudiation. To help clarify this issue, below are some frequently asked questions and corresponding answers.
Q1. What is anticipatory breach?
A1. Arizona law defines anticipatory breach as a “positive and unequivocal manifestation on the part of the party allegedly repudiating that he or she will not render the promised performance when the time fixed for it in the contract arrives.” See Kleeb v. Burns, 5 Ariz.App. 566, 568, 429 P.2d 453, 455 (App. 1967).
Q2. Is the expression of doubt enough to constitute an anticipatory breach?
A2. No. A “positive and unequivocal manifestation is required.” Therefore, an expression of doubt is insufficient.
Q3. Can you provide examples of what does and does not constitute an anticipatory breach?
A3. EXAMPLE ONE – “Unless that raise I’m expecting comes through, I’m not going to be able to complete my purchase of the home.”
EXAMPLE TWO – “I did not obtain the raise I was expecting and, as a result, I will not complete my purchase of the home.”
Example One is an expression of doubt and not a clear manifestation of non-performance. For this reason, Example One does not constitute anticipatory breach. Alternatively, Example Two rises to the level of an anticipatory breach as it is an express refusal to perform.
Q4. In order to constitute an anticipatory breach, must the manifestation of intent not to perform be in writing?
A4. No. A verbal representation can constitute anticipatory breach provided that it is clear and unambiguous. As a practice tip, it may nonetheless be beneficial to confirm in writing the manifestation not to perform which was previously conveyed verbally.
Q5. When using the Arizona REALTORS® Residential Resale Real Estate Purchase Contract, can Party A declare Party B in breach if Party B clearly and unambiguously expresses that they will not perform as required by the Contract?
A5. No. There are no automatic breaches when using the Arizona REALTORS® Residential Resale Real Estate Purchase Contract. Therefore, if one party clearly and unambiguously expresses that they will not perform as required, the other party merely obtains the right to issue a Cure Period Notice.
Q6. Can a party cure their anticipatory breach?
A6. Yes. Should a party wish to cure their anticipatory breach upon receipt of a Cure Period Notice they can do so by: (i) performing; or (ii) reassuring the other party of their intent to perform as required by the Contract.
Q7. If a party, after receipt of a Cure Period Notice, fails to cure their anticipatory breach, can they be declared in breach of Contract?
A7. Yes. Should a party timely fail to cure their anticipatory breach after receipt of a Cure Period Notice, they can be declared in breach of contract.
Q8. In the case of Saxton v. Berkner, what action did the buyer take that resulted in an anticipatory breach.
A8. Although close of escrow was not scheduled to occur until March 31st, on March 27th the buyer “unambiguously and emphatically” communicated his refusal to perform under the contract and close on March 31st. That action led the Arizona Court of Appeals to address anticipatory breach, stating as follows, “While a contract generally cannot be breached until the date of the performance, if one party unequivocally indicates he will not perform when the date arrives, he has committed an anticipatory breach.”