Approved-source preservation: The recovered contracts working manuscript remains preserved in Chapter 17. This chapter develops performance, termination, breach, and remedies as a separate complete destination.

Learning Objectives

• Distinguish full performance, substantial performance, tender, breach, and anticipatory breach.
• Explain termination by performance, agreement, contingency, expiration, impossibility, and operation of law.
• Distinguish rescission, cancellation, release, waiver, and amendment.
• Compare compensatory damages, liquidated damages, specific performance, restitution, and injunction.
• Explain mitigation, election of remedies, earnest-money disputes, and default notices.
• Apply casualty, title, financing, inspection, and closing-failure scenarios.
• Recognize Indiana remedy statements requiring current legal verification.

Key Vocabulary

Term	Definition
Performance	Completion of a contractual duty.
Tender	Ready, willing, and able offer to perform as required.
Material Breach	A substantial failure defeating an essential contract purpose.
Minor Breach	A less substantial failure that may permit damages without excusing all counterperformance.
Anticipatory Breach	Clear repudiation before performance is due.
Rescission	Undoing the contract and seeking to restore parties toward their precontract positions.
Mutual Release	Agreement releasing parties from identified obligations or claims.
Waiver	Intentional relinquishment of a known right.
Compensatory Damages	Money intended to compensate for proven loss caused by breach.
Consequential Damages	Additional foreseeable losses caused by breach, subject to legal limits.
Liquidated Damages	An agreed amount or formula for damages intended as a reasonable estimate rather than a penalty.
Specific Performance	Equitable remedy ordering performance of the contract.
Restitution	Restoration of benefits to prevent unjust enrichment.
Mitigation	Reasonable action to reduce avoidable loss after breach.
Impossibility / Impracticability	Doctrines that may excuse performance under narrow circumstances defined by law.

Core Lesson

Performance Is the Expected Ending

Most purchase contracts terminate through successful performance: inspections are resolved, financing and title conditions are satisfied, documents and funds are delivered, deed transfers, and possession occurs as agreed. The broker’s best risk-control tool is preventing default through accurate timelines, communication, documentation, and early escalation.

Full and Substantial Performance

Full performance satisfies the agreement. Substantial performance means essential obligations were completed with minor defects that may support damages but not total avoidance. Whether a breach is material depends on importance, benefit received, ability to cure, hardship, good faith, and governing law.

Tender and Concurrent Duties

Closing duties are often concurrent: the seller tenders marketable title and deed while the buyer tenders funds. A party seeking a remedy may need to show readiness, willingness, and ability to perform. A buyer who lacked funds cannot automatically claim seller breach merely because closing did not occur.

Anticipatory Breach

A clear, unequivocal refusal to perform before the due date may be anticipatory breach. The other party’s options are legally sensitive; careless declarations or premature termination can create a second breach. Brokers document the statement and obtain legal direction rather than declaring the contract dead.

Termination Without Breach

• Performance: duties are completed.
• Mutual agreement: parties sign cancellation or release terms.
• Contingency: a party timely exercises an agreed termination right.
• Expiration: an option, offer, or right ends under its terms.
• Operation of law: law discharges duties in defined circumstances.
• Impossibility or impracticability: narrow doctrines may apply to extraordinary events; difficulty or higher cost alone is not automatically enough.

Casualty and Condemnation

If property is materially damaged or government action affects it before closing, the contract’s casualty or condemnation clause allocates risk and choices. Do not rely on a broad common-law assumption when the agreement states notice, restoration, insurance, credit, termination, or closing rights.

Default Procedure

Read the contract in order: identify the duty, deadline, notice method, cure period, contingency, default clause, remedy limitation, attorney-fee provision, and dispute process. Send notices exactly as authorized. A text to the wrong person may not satisfy formal notice.

Rescission, Cancellation, and Release

Rescission seeks to unwind the contract. Cancellation may end future performance without necessarily resolving every past claim. A mutual release can define deposit disposition and release claims. The words are not interchangeable in every document. Brokers should use authorized forms and avoid promising that a signature eliminates unknown claims.

Money Damages

Compensatory damages aim to place the nonbreaching party in the economic position expected from performance, subject to proof, causation, foreseeability, certainty, and mitigation. Consequential damages cover additional foreseeable loss under legal standards. Punitive damages are generally not ordinary contract compensation and usually require an independent legal basis.

Liquidated Damages

A liquidated-damages clause sets an agreed remedy when actual loss would be difficult to estimate. Courts distinguish enforceable estimates from penalties. Earnest money becomes liquidated damages only if the contract and governing law make that result available and the seller properly elects it. The deposit is not automatically forfeited.

Specific Performance

Because each parcel is considered unique, a buyer may seek specific performance ordering the seller to convey. Sellers may have specific-performance rights in some jurisdictions and circumstances. The remedy is equitable, discretionary, and subject to defenses; a broker cannot promise it.

Restitution and Injunction

Restitution restores benefits to prevent unjust enrichment. An injunction orders or prohibits conduct, such as preventing an improper transfer while a dispute is litigated. Remedy selection is legal strategy.

Mitigation

A nonbreaching party generally must take reasonable steps to reduce avoidable loss. A seller may need to remarket rather than allow damages to accumulate; a buyer may need to seek reasonable alternatives. Mitigation does not require unreasonable sacrifice or waive valid claims.

Earnest-Money Disputes

The escrow holder should follow the contract, law, and authorized instructions. Conflicting demands may require notice, interpleader, mediation, arbitration, court order, or another statutory/form procedure. The broker must remain neutral in custody and preserve complete records.

Indiana Law Spotlight

Partially verified against current authority. Indiana remedies arise from the parties' agreement together with applicable statutes, procedural rules, equitable principles, and controlling decisions. A breach does not create one automatic remedy. Indiana Code Title 25 and 876 IAC Article 8 regulate brokerage conduct and transaction-fund handling, supporting a central rule for licensees: a broker holding disputed earnest money must remain within the authorized escrow process and must not personally decide which party deserves the funds.

Indiana Code Titles 32 and 34 provide property and civil-action frameworks. Indiana appellate decisions determine fact-specific standards for material breach, proof of damages, liquidated damages versus an unenforceable penalty, specific performance, mitigation, waiver, and equitable defenses. The contract's exact default, notice, remedy, and deposit language must be reviewed before anyone declares termination or forfeiture.

Practical brokerage application: When a possible default occurs, preserve the agreement, amendments, timeline, notices, delivery proof, deposit ledger, communications, and reports. Escalate to the managing broker and legal counsel; do not release disputed funds, promise a remedy, or advise a party to abandon performance.

Verification flag: Exact damage measures, deposit disposition, liquidated-damages validity, specific-performance availability, mitigation, attorney fees, notice and cure, electronic notice, interpleader, mediation, arbitration, limitation periods, casualty risk, current form language, and controlling decisions remain queued. No remedy, deadline, forfeiture, or fee award is taught as automatic.

Official sources: Current Indiana Code Titles 25, 32 and 34; 876 IAC Article 8; Indiana Real Estate Commission; Indiana Rules of Trial Procedure; Indiana appellate decisions.

National Exam Alert

Specific performance orders performance; rescission unwinds; compensatory damages pay proven loss; liquidated damages are agreed in advance; mitigation reduces avoidable loss.

Common Exam Trap

Do not assume every breach ends the contract or forfeits earnest money. Do not confuse a minor breach with a material breach. Do not treat a broker as the judge of a deposit dispute.

PASS FIRST Memory Trick

R-D-S-M: Rescind · Damages · Specific performance · Mitigate.

Broker Insight

When default appears, stop casual texting. Build a document packet: contract, amendments, timeline, notices, delivery proof, deposit record, communications, and relevant reports. Then obtain managing-broker and legal direction.

Chapter Summary

• Performance is the normal contract ending.
• Material breach affects the contract’s essential purpose; minor breach may support limited damages.
• Tender can establish readiness to perform concurrent closing duties.
• Contracts may terminate by performance, agreement, contingency, expiration, or operation of law.
• Rescission, damages, specific performance, restitution, and injunction serve different purposes.
• Liquidated damages must operate as a lawful estimate, not an automatic penalty.
• Mitigation limits avoidable loss.
• Indiana's contract-plus-law remedy framework and regulated escrow process are partially verified; exact damages, forfeiture, equitable relief, notices, procedures, deadlines, fees, and case-specific outcomes remain queued.

Practice Questions

1. All parties complete every required closing duty. The contract ends by:
   1. Rescission
   2. Breach
   3. Performance
   4. Escheat
2. A small repair defect remains after essential work is complete. This may be:
   1. Substantial performance with a minor breach
   2. Always total failure
   3. Void contract
   4. Condemnation
3. A party clearly refuses before closing to perform. This may be:
   1. Appraisal
   2. Proration
   3. Novation automatically
   4. Anticipatory breach
4. Ready, willing, and able offer to perform is:
   1. Escheat
   2. Waiver
   3. Tender
   4. Assignment
5. Which remedy seeks to undo the contract?
   1. Specific performance
   2. Rescission
   3. Tax sale
   4. Reconciliation
6. Which orders a seller to convey?
   1. Variance
   2. Liquidated damages
   3. Proration
   4. Specific performance
7. Money intended to compensate proven loss is:
   1. Compensatory damages
   2. Escheat
   3. Assessment
   4. License
8. Damages agreed in advance are:
   1. Specific performance
   2. Consequential use
   3. Liquidated damages
   4. Reversion
9. Earnest money is automatically forfeited on any buyer breach. This is:
   1. A tax rule
   2. Always true
   3. True without notice
   4. False; contract and law control
10. Reasonable steps to reduce loss are called:
    1. Novation
    2. Mitigation
    3. Condemnation
    4. Accession
11. A casualty before closing should first be analyzed under:
    1. The contract’s casualty clause and governing law
    2. Broker guess
    3. Tax bill only
    4. MLS remarks
12. A timely contingency termination is:
    1. Always fraud
    2. Termination under contract, not necessarily breach
    3. Specific performance
    4. Escheat
13. A mutual release should:
    1. Set tax value
    2. Be assumed verbally
    3. Change title automatically
    4. State released obligations and deposit disposition clearly
14. Which statement about impossibility is safest?
    1. It is a narrow legal doctrine requiring fact-specific analysis
    2. Any inconvenience excuses performance
    3. Higher cost always cancels
    4. A broker decides it
15. A buyer lacked funds at closing but claims seller default. Key issue?
    1. Lot size only
    2. Zoning only
    3. Buyer’s ability and tender of performance
    4. Tax deduction
16. A broker holding disputed earnest money should:
    1. Choose the winner
    2. Pay the seller immediately
    3. Follow contract, law, escrow procedure, and authorized direction
    4. Split secretly
17. A court order preventing an improper sale is a(n):
    1. Appraisal
    2. Injunction
    3. Variance
    4. Assessment
18. Restoring a benefit to prevent unjust enrichment is:
    1. Delegation
    2. Rezoning
    3. Reproduction
    4. Restitution
19. A nonbreaching seller refuses all reasonable resale efforts and lets loss grow. This implicates:
    1. Mitigation
    2. Escheat
    3. Accession
    4. Survey
20. Before declaring an Indiana contract terminated, a broker should:
    1. Send informal guess
    2. Review the agreement, notices, current law, and obtain authorized guidance
    3. Delete records
    4. Release funds personally

Detailed Answer Explanations

1. C. Successful completion of duties discharges the contract by performance.
2. A. Substantial performance can satisfy the essential purpose while leaving a minor breach and possible damages.
3. D. Unequivocal pre-deadline repudiation may be anticipatory breach, but legal guidance is needed before acting.
4. C. Tender is an offer and ability to perform according to the contract.
5. B. Rescission unwinds and seeks restoration toward the precontract position.
6. D. Specific performance is the equitable order to complete the promised conveyance.
7. A. Compensatory damages address proven economic loss caused by breach.
8. C. Liquidated damages are set by agreement in advance, subject to enforceability.
9. D. Deposit disposition depends on remedy clauses and law; breach alone does not authorize self-help.
10. B. Mitigation requires reasonable reduction of avoidable damages.
11. A. The negotiated clause and governing law allocate casualty risk and choices.
12. B. Proper exercise of a contractual right is not necessarily default.
13. D. Precision prevents later disputes about claims and escrowed funds.
14. A. Impossibility and impracticability are narrow doctrines, not excuses for ordinary difficulty.
15. C. A claimant may need to show readiness and ability to perform concurrent duties.
16. C. The escrow holder must remain neutral and follow controlling authority.
17. B. An injunction directs or prohibits conduct.
18. D. Restitution focuses on restoring benefits rather than expectation damages.
19. A. Avoidable loss may be excluded when the claimant unreasonably fails to mitigate.
20. B. Termination and remedies are legal consequences requiring exact contract and current-law analysis.

Mastery Checklist

• I can distinguish full and substantial performance.
• I can identify tender and anticipatory breach.
• I can distinguish material and minor breach.
• I can identify nonbreach termination methods.
• I can compare rescission, damages, specific performance, restitution, and injunction.
• I can explain liquidated damages without assuming forfeiture.
• I can apply mitigation.
• I can handle earnest-money disputes through authorized procedure.
• I can identify Indiana remedy statements requiring current verification.
• I can score at least 80% and explain every answer.