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Purchaser’s Unjustified Lawsuit To Terminate Purchase Agreement Constitutes Anticipatory Breach And Seller Retains Down Payment

After rejecting a contract purchaser’s lawsuit against the seller as baseless, a court determined that that the purchaser’s filing of the lawsuit constituted an “anticipatory breach” of the contract. As a result, the seller was not required to perform and is entitled to retain the down payment.  Princes Point LLC v. AKRF Engineering, PC, 42 Misc. 3d 1219(A) (Sup. Ct. N.Y. Co. Jan. 31, 2014).


In the contract of sale, the purchaser agreed to acquire the property, which had been designated as a hazardous waste site, “as is,” so long as the seller procured all necessary governmental approvals and permits. Following delays in the permitting process, the parties negotiated an amendment providing for a new outside closing date.  The purchaser further agreed not to sue the seller in the event of further delays.


Delays continued and the closing date was extended several times. Just prior to the expiration of the last extension, the contract purchaser filed a lawsuit against the seller, alleging that the amendment had been procured by fraud and seeking specific performance of the original contract with an abatement of the purchase price.  In a prior decision, the court found that there was no fraud and that the contract and amendment were valid.  The Appellate Division agreed.


Now, addressing the seller’s counterclaims, the court has permitted the seller to cancel the contract and retain the purchaser’s down payment under the doctrine of anticipatory breach. Under this doctrine, “when a party repudiates contractual duties prior to the time designated for performance and before all of the consideration has been fulfilled,” the other party is entitled “to claim damages for total breach.”  Here, by bringing its lawsuit seeking to rescind the amendment and abate the purchase price, the purchaser “unequivocally notified the [seller] of its intention to renounce its contractual duties and avoid performance of its obligations under the Amendment.”


Although the contract terms permitted the seller to retain the down payment in the event of a purchaser default, the purchaser argued that the seller should not be allowed to retain the down payment because it was not “ready, willing and able” to perform its own obligations at the time of the breach. The court held, however, that this requirement applies only where a non-breaching party seeks lost profits or expectation damages, not merely to retain a down payment.  The court also awarded the seller its attorneys’ fees pursuant to a “prevailing party” clause of the parties’ agreement.