Breach of Contract
Definition and meaning of Breach of Contract in real estate.
A breach of contract is a legal violation that occurs when one party to a binding agreement fails to perform their specified obligations without a lawful excuse. In real estate, this can occur if a buyer fails to secure financing or if a seller refuses to deliver the deed.
In more detail
Real estate purchase agreements are legally binding contracts with strict deadlines and conditions. When a party breaches a contract, the injured party has several legal remedies available, depending on the terms of the agreement and state laws. These remedies include suing for damages, demanding specific performance to force the sale, or rescinding the agreement and reclaiming earnest money.
To protect themselves, both buyers and sellers should consult with a real estate attorney to understand the contract terms before signing.
Key facts
| Category | Legal, Titles & Closing |
|---|---|
| Remedies | Specific performance, compensatory damages, or contract rescission |
| Common triggers | Missing deadlines, failing to secure financing, or backing out of a sale |
| Prevention method | Including contingency clauses in the purchase agreement |
A buyer signs a contract to purchase a home but fails to deposit the agreed earnest money by the deadline, resulting in a breach of contract that allows the seller to cancel the deal.
Frequently asked questions
What is the difference between a material breach and a minor breach?
A material breach is a significant violation that ruins the contract's purpose, while a minor breach is a small issue that does not void the agreement.
Can a seller keep the earnest money if the buyer breaches the contract?
Yes, in many states, if the buyer backs out without a valid contingency, the seller can keep the earnest money deposit as liquidated damages.
Related terms
Sources & references
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