Summary of a Recent
Judicial Development in
Commercial Transactions

Anticipatory Breach of Real Estate Purchase Contract

Walt McCarter
National AgLaw Center Research Associate

Summary of Decision

In Ratliff v. Hardison, 199 P.3d 696, 2008 WL 5047015 (Ariz. Ct. App. 2008), the Arizona Court of Appeals held that a defendant had anticipatorily breached his contract to purchase farm land, and therefore it was irrelevant whether an Arizona statute requiring a disclosure affidavit for the property prior to transfer applied because any duty the plaintiff would have had under the statute was extinguished by the defendant's breach.

Background

The defendant entered into a contract to purchase over 1,000 acres of farmland from the plaintiff and deposited $100,000 in escrow as earnest money. Id. at *1. When he became aware of A.R.S. § 33-422, which requires, in certain circumstances, that the seller of land execute an affidavit disclosing information about the property at least seven days before it is transferred, the defendant left the plaintiff a telephone message with a lesser offer than had previously been agreed upon. Id. After the escrow did not close at the set date, the plaintiff demanded that the sale close, and the defendant attempted to renegotiate the deal. Id. The defendant requested a disclosure affidavit pursuant to § 33-422, but the plaintiff denied the request and sued for breach of contract. Id. at *2. The defendant filed a counterclaim seeking a declaratory judgment that § 33-422 applied to the transaction, entitling him to the return of his $100,000 earnest money deposit, and both parties moved for summary judgment. Id. The trial court found that the defendant had repudiated the contract and concluded that § 33-422 did not apply to the transaction, and the defendant appealed. Id.

Arguments

The defendant argued that the facts did not establish beyond any issue of fact that he gave a "clear and unequivocal" manifestation of intent to breach or repudiate the agreement; rather, he claimed he only attempted to modify the contract or warn that he might be unable to close escrow. Id.

Analysis and Holdings

The court affirmed the lower court's finding that the defendant had repudiated the contract, explaining that a party anticipatorily repudiates a contract when he or she provides a "positive and unequivocal manifestation" that the party will not perform when his or her duty to perform arises, and the undisputed facts supported the finding that the defendant had clearly repudiated. Id. at *2-3. The court added that there was no evidence to support his contention that he retracted the repudiation. Id. at *3-5. As a result, the court did not have to consider whether A.R.S. § 33-422 applied to the transaction because, even if it did apply, the defendant's anticipatory breach extinguished any duty the plaintiff would have had under the statute. Id. at *5. The court therefore affirmed the ruling of the trial court granting partial summary judgment to the plaintiff. Id. at *6.

The case was decided on November 26, 2008.