Contracts are legal instruments binding on the parties that enter into them. A breach of a real estate contract in Texas can be particularly costly to the non-breaching party in a number of ways. The real estate market is hard enough when all parties play according to the rules. So, when the other party has breached the contract, making sure you get the remedies you need is critical.
Breaches of Real Estate Contracts in Texas
A breach of contract occurs when a party to a contract does not fulfill its obligations under its terms. The potential for breaches is as many as there are damages. Making sure you satisfy the elements of the breach is a key first step to obtaining a proper remedy.
Property Rental Agreement Breaches
Breaches often occur in residential and commercial property rental agreements. These lawsuits result from breaches involving property usage, termination of the lease agreement, and the responsibility to make repairs.
Property Purchase Agreement Breaches
Property purchase agreement breaches are also frequently the subject of litigation. Buyers' remorse, disagreements over closing costs, and failure of the property to pass inspection are all reasons these types of breaches occur.
Elements Needed to Prove Breaches
The elements needed to prove a breach differ by jurisdiction, but there are four that you generally need to prove to be successful in a breach of contract lawsuit.
- The existence of a valid contract.
- Proof you performed your obligations under the terms of the contract or, alternatively, proof you were justified in not doing so.
- Proof the defendant failed to perform their obligations under the terms of the contract.
- Proof you suffered damages due to the defendant's breach.
These four elements are key to a successful breach of contract action.
Four Ways Real Estate Contracts in Texas Are Breached
Listed below are the four main manners in which contracts are breached.
A minor, or partial, breach occurs when one of the parties fails to follow through with a specific part of the contract although the other party did ultimately acquire what they were contracted to receive. Damages are hard to prove in a minor breach as financial losses are rarely experienced.
An example of a minor breach would be if a builder contracted to use a certain type of insulation in a home, and because that insulation was not available, used a very similar or even superior type of insulation. The minor breach occurred when the builder failed to use the specific insulation in the contract. The damages, however, were inconsequential and thus the remedy may only be nominal damages.
An actual breach is when one of the parties, for whatever reason, does not fulfill some or all of their obligations under the contract.
An example would be if a seller of a home decided they no longer wanted to sell after signing a contract stating that they would. This breach is obviously a serious one and has the potential to cause significant damages to the party harmed by the breach.
A material breach occurs when one party to a contract ends up with something very different than what they contracted for. Damages are generally easy to prove in a material breach because one party definitely suffers a loss.
An example of a material breach would be if the parties agreed that the seller would put a new roof on a home before closing, but then the seller never follows through with that obligation. If the roof was bad and a severe storm swept through the area, you can imagine the damages that could be caused by this type of breach. Further, a new roof is an expensive but necessary endeavor. If the seller was contracted to do it, then it's an added cost for the buyer.
An anticipatory breach is when an actual breach has not yet occurred but is imminent. One party to the contract has indicated, either implicitly or through implied behavior, that they are not going to fulfill their obligations.
An example would be if a builder agreed to have a house completed by a certain date. Then, two weeks prior to that date, it turns out the builder has not yet even cleared the land where the house was to be built. The time delays alone are significant and can result in substantial damages, depending on the circumstances.
Remedies for Breach of Real Estate Contracts in Texas
Remedies for breach of real estate contracts often depend on the damages suffered and the ability to place the damaged party in a favorable position. Listed below are some of the more popular remedies for a breach of a real estate contract.
Money damages are commonly sought by parties that have suffered a loss in a breach of a real estate contract. If it is a case where a buyer backs out of a purchase, the money damages could be the difference between the contract purchase price and the market value. The process to determine money damages varies according to the jurisdiction governing the real estate transaction.
Specific performance is generally awarded when monetary damages are not enough to compensate for the breach. For example, if the property is located in a specific place and there is no other property that is comparable, a purchaser may seek specific performance. If the judge finds for the purchaser, the seller is required to go through with the sale of the property.
Many contracts contain a provision known as liquidated damages. This is an agreed-upon amount indicating what the parties will accept as damages, in advance, in case the other party breaches the contract. Liquidated damages are not intended to be a form of punishment. A court can also determine that they are unenforceable, particularly when it is easy to calculate actual damages.
In some cases, the best remedy may be termination of the real estate contract. In such cases, the buyer is refunded the deposit and all expenses incurred during the failed transaction. These expenses may include but are not limited to attorney fees, survey fees, and title inspection.