Breach of contract, remedies, rescission, and termination

Diagnose the failed performance

A breach is an unexcused failure to perform a contractual duty. Check the duty, deadline, conditions, and notice requirements before calling a failed closing a default. A material breach substantially defeats the bargain; a minor breach may justify damages without excusing all remaining performance. Anticipatory repudiation is a clear, unequivocal refusal before performance is due, not merely a request to negotiate a change.

Match the remedy to its purpose

• Compensatory damages compensate proven loss caused by breach. The injured party generally must reasonably mitigate avoidable loss.
• Liquidated damages are an agreed advance amount or measure for breach, subject to enforceability rules distinguishing compensation from a penalty. Earnest money is a deposit, not inherently a forfeiture.
• Specific performance asks a court to require the promised performance. Land's uniqueness can support this discretionary equitable remedy.
• Rescission unwinds the agreement and generally involves restoring benefits received. It may be mutual or supported by a legal ground such as fraud.
• Termination ends the contract under an applicable right or agreement; accrued claims may survive. Proper exercise of a termination right is not itself breach.

Available remedies depend on the contract, governing law, and facts; disputed remedies require legal advice. Do not assume inconsistent remedies may all be collected.

Texas contract example

Under Texas's TREC resale contract, paragraph 15 gives the seller, on buyer default, an enforcement and lawful-relief route or a termination and earnest-money-as-liquidated-damages route that releases both parties. On seller default, the buyer may seek enforcement and other lawful relief or terminate and recover earnest money. The buyer's refund is not liquidated damages paid by the seller.

Under paragraph 5, timely exercise of an available Texas termination option returns earnest money but leaves the option fee nonrefundable. Under paragraph 18, escrow release has its own procedures. Entitlement to funds and the procedure for disbursement are separate questions.