First Principles of Business Law

4. Termination of performance

4.9. The decision to terminate performance

In March, A agrees to sell his house to B for $500,000. It is agreed that payment of the price to A and transfer of ownership to B will take place on the first day of May. In April B, who has noticed that the market price of houses is rapidly falling, tells A that he has changed his mind that he no longer wants to proceed with the sale. A accepts that B will not perform the contract. He tells B that he is terminating performance of the agreement. Then he re-advertises the house and manages to find another buyer, but only at a price of $400,000.00. A sues B for breach of contract, claiming $100,000.00 as damages.

(a) Because A terminated performance of the contract with B, he cannot claim damages from B on grounds of breach of contract.

(b) Although A terminated performance of the contract with B, he is still entitled to claim damages from B on grounds of breach of contract.