Harrell v. Sea Colony, Inc.

Court of Special Appeals of Maryland · Contracts

ContractsAnticipatory breachAgencyMutual rescissionanticipatory repudiationdefinite and unequivocal manifestationpositive and unconditional refusalrequest for cancellation

Facts

Harrell contracted to buy a condominium from Sea Colony for $74,900, paid a $5,000 cash deposit, and executed a $6,235 note payable at settlement. The contract required settlement within 30 days after written notice of substantial completion, prohibited assignment without the seller's written consent, and allowed the purchaser to terminate if the unit was not delivered by the extended date of December 31, 1974. In May 1974, after being told he could not assign the contract, Harrell said he was interested in getting out of the contract and later submitted a cancellation request expressly contingent on refund of his deposit by July 25, 1974. Before giving any written notice of substantial completion shown in the record, Sea Colony resold the unit to a third party, then informed Harrell it was accepting his request to cancel but keeping his deposit as liquidated damages and returning his promissory note with an executed release that crossed out the deposit-refund contingency.

Issue

Whether the evidence was legally sufficient to show that Harrell anticipatorily breached the contract by unilaterally cancelling it, thereby permitting Sea Colony to retain his deposit and resell the property. A related issue was whether Freeman, as Sea Colony's disclosed agent, could be liable on the contract.

Rule

To constitute an anticipatory breach of contract, there must be a definite and unequivocal manifestation of intention that the promisor will not render the promised performance when the time for performance arrives. Doubtful or conditional statements, statements depending on circumstances not yet existing, and a mere request for a change in terms or for cancellation do not amount to repudiation; likewise, an agent for a fully disclosed principal is generally not personally liable on the principal's contract absent contrary agreement or a nonexistent, fictitious, or legally incompetent principal.

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One of 10 multiple-choice questions for this case. Pick an answer to see why.

In Miami, Lena Ortiz signed a contract to buy a townhouse from Bayshore Vista Homes, LLC. Two months before closing, she sent a letter stating, "I want out of this deal if you will return my $8,000 deposit by Friday," and enclosed a signed release form expressly conditioned on that refund.

If Bayshore Vista immediately resells the townhouse and keeps Lena's deposit on the theory that she anticipatorily breached, which is the best answer?

Explanation. Anticipatory breach requires a definite and unequivocal manifestation that the promisor will not perform when performance is due. A mere request for cancellation or release, especially one expressly conditioned on return of the deposit, is an offer to rescind, not a positive and unconditional repudiation. Thus the seller cannot treat Lena's conditional release request as anticipatory breach. (Derived from Harrell v. Sea Colony, Inc. (n.d.).)