Contract Performance, Breach, Remedies, Assignment and Novation

Assignment, delegation and novation answer a different question: what happens when a right, a duty or an entire contractual position moves to someone else? Assignment generally transfers a contractual right. Delegation entrusts performance of a duty to another person. Novation replaces an old obligation with a valid new one and requires the agreement of everyone whose rights or duties change.

These distinctions determine whether a closing failure is a default, whether a deposit may be retained, whether specific performance is available and whether an original party remains liable after a transfer.

The exam answer in one table

Official source map

The New York Department of State 77-hour salesperson curriculum places performance, breach, assignment, novation, rescission, reformation, specific performance, liquidated damages, contingencies and time-is-of-the-essence clauses within the contracts subject.

The principal authorities used here are:

• General Obligations Law section 13-101: New York's statutory starting point for transferring claims, subject to listed exceptions, statutory restrictions and public policy.
• CPLR 213(2): the general six-year limitations period for an action on an express or implied contractual obligation, subject to statutory exceptions.
• Oppenheimer & Co. v Oppenheim, Appel, Dixon & Co.: the distinction between an express condition and a contractual promise.
• Hadden v Consolidated Edison Co. of New York: factors used to assess substantial performance and material failure.
• Princes Point LLC v Muss Development L.L.C.: the definition and consequences of anticipatory repudiation.
• JMD Holding Corp. v Congress Financial Corp.: the test separating liquidated damages from a penalty.
• Grace v Nappa and ADC Orange, Inc. v Coyote Acres, Inc.: time-of-the-essence rules for real estate closings.
• Lambert v Schiller: the four elements of novation and the real estate specific-performance rule.
• Chimart Associates v Paul: the demanding proof required for reformation.
• Rudman v Cowles Communications, Inc.: the substantial breach required for rescission.

Start with the contract, not the remedy

Before deciding that someone breached, read the agreement in this order:

1. What duty was promised? Identify the exact act, payment, delivery or document.
2. Who owed it? Do not transfer one party's duty to another without contractual support.
3. What had to happen first? Look for financing, inspection, title, board approval and other conditions.
4. When and how was performance due? Check dates, notice methods, cure periods and tender requirements.
5. Was the duty changed or waived? Review amendments and conduct, but avoid assuming a conversation changed a writing that requires written modification.
6. What does the default clause provide? Deposits, termination, notice, cure and remedy limits often depend on the text.

A remedy analysis that skips these questions is premature.

Promise, condition and contingency are not interchangeable

A promise is a commitment to act or refrain from acting. Failure to keep it can be a breach.

A condition is an event that must occur before a contractual duty becomes due, or that may end an existing duty. Failure of a condition is not necessarily a breach because no one may have promised that the event would occur.

A contingency commonly makes an obligation dependent on an event such as mortgage approval, a satisfactory inspection or the ability to deliver required title. Its wording controls the required steps and consequence of failure.

Condition precedent

A condition precedent must occur before a duty becomes due.

Example: Buyer must obtain a written mortgage commitment meeting specified terms by a stated date. If buyer follows the application and notice requirements but the qualifying commitment does not issue, the contract may permit cancellation and return of the deposit. The exact clause decides the result.

Concurrent conditions

Some performances are due at the same time. At a typical closing, seller tenders the deed and required documents while buyer tenders the balance of the price. Each side's readiness can matter when accusing the other of default.

Express conditions receive careful enforcement

Oppenheimer explains that an express condition is created by unmistakable conditional language such as “if,” “unless” or “until.” Substantial compliance may not satisfy a clearly stated express condition. Courts seek to avoid forfeiture where interpretation permits, but they do not rewrite unmistakable language.

Exam cue: First ask whether a clause is a condition or a promise. Then ask whether strict occurrence, substantial performance or a cure right applies.

Complete performance and substantial performance

Complete performance occurs when a party performs all duties as agreed. It ordinarily discharges those duties.

Substantial performance means the essential purpose of the bargain has been performed despite a comparatively minor defect. The other party may still claim the cost or value of correction, but may not be entitled to end the entire contract.

Hadden identifies practical considerations for substantial performance:

• the proportion of promised performance already delivered
• the quantitative importance of what remains undone
• how far the contract's purpose has been frustrated
• whether the default was willful
• whether the other party received the substantial benefit promised

No universal percentage decides the question.

Worked example: minor defect or material breach?

A seller agrees to deliver a property with several repairs completed. One inexpensive cabinet latch is missing, but the material systems and all other repairs are complete.

That defect may support a credit or damages without excusing buyer from the entire transaction. Change the facts so seller failed to remediate a major condition expressly made essential to closing. The failure is more likely to affect the contract's central purpose.

The label “unfinished” does not answer the question. Materiality depends on the agreement and facts.

What is a breach of contract in New York?

A basic New York breach claim requires:

• a contract
• the claimant's performance, or a legally sufficient excuse for nonperformance
• the other party's breach
• resulting damages

A broken promise can be a breach even when damages are small. A claimant seeking more than nominal relief generally must prove loss caused by the breach.

Minor breach

A minor or partial breach does not defeat the contract's central purpose. The nonbreaching party generally must continue performing while preserving a claim for the limited loss.

Material breach

A material breach goes to the root of the agreement. It can excuse the nonbreaching party's remaining performance and support termination or other relief, subject to the contract and law.

Avoid assuming every missed date is material. Ask whether time was essential, whether notice and cure were required, what prejudice resulted and how much of the bargain was delivered.

Notice and opportunity to cure

Many agreements require written notice of default and a cure period before termination or specified remedies become available. Ignoring the required notice method may defeat the attempted remedy.

Check:

• who must receive notice
• the permitted delivery method
• when notice is effective
• the length of the cure period
• whether the default is curable
• what happens after cure or failure to cure

Apply the clause instead of inventing a general grace period.

Anticipatory repudiation happens before performance is due

Anticipatory repudiation occurs when, before the performance date, a party positively and unequivocally communicates that it will not perform, or voluntarily acts in a way that makes performance impossible or apparently impossible.

Princes Point gives two central forms:

1. a clear statement that the obligor will commit a total breach
2. a voluntary affirmative act that renders the obligor unable or apparently unable to perform

A request to renegotiate, an expression of concern or an ambiguous statement is not automatically repudiation. The refusal must clearly show that promised performance will not occur.

The nonrepudiating party may generally treat an unequivocal repudiation as a breach without waiting for the performance date. Contract rights, readiness to perform and possible retraction still depend on the facts and law.

Scenario: One week before closing, buyer writes, “I will not close under this contract and will not deliver the purchase price.” That is far stronger evidence of repudiation than, “Financing is taking longer than expected. Can we discuss an extension?”

Time is not automatically of the essence at every New York closing

In a New York real estate contract, a stated closing date is not ordinarily treated as time of the essence unless:

• the contract clearly makes time of the essence, or
• a party later gives clear, distinct and unequivocal notice fixing a reasonable time for performance

Without that treatment, the parties generally have a reasonable time to close after the stated date. “On or about” reinforces flexibility, but even an apparently definite date is not always enough by itself.

ADC Orange held that “in no event later than” did not, on its own, make the closing date time of the essence. A later notice also cannot fairly declare an immediate default while giving no reasonable opportunity to perform.

When time is properly made essential, each party must tender performance on the law day unless the date is extended by agreement. Failure without lawful excuse can constitute default.

The main remedies for breach

A remedy should respond to the proven wrong. It should not put the injured party in a better position than full performance would have done.

Compensatory damages

Contract damages generally seek to place the nonbreaching party in as good a position as if the contract had been performed. This is often called the benefit-of-the-bargain or expectation measure.

General damages naturally and probably flow from the breach. Consequential losses face additional limits. Under the Kenford rule, claimed loss must be caused by the breach, proven with reasonable certainty and within the parties' contemplation when they contracted.

Speculative loss is not made recoverable by placing a large number in a complaint.

Mitigation

An injured party generally must take reasonable steps to avoid increasing damages. The law does not require unreasonable expense or risk, but avoidable loss may not be recoverable. Mitigation limits loss after breach. It does not erase the breach.

Nominal and punitive damages

When breach is established but actual loss is not proven, nominal damages may recognize the violated right. Ordinary breach of contract is compensated, not punished. Punitive damages require much more than failure to perform a private bargain and are not the standard answer.

Liquidated damages versus an unenforceable penalty

A liquidated-damages clause sets an agreed amount or measure for loss if a specified breach occurs.

Under JMD Holding, the clause is generally enforceable when, at the time of contracting:

• actual loss was difficult or incapable of precise estimation, and
• the stated amount was not plainly or grossly disproportionate to probable loss

If the amount is designed to punish breach rather than reasonably estimate loss, it is an unenforceable penalty. The label does not control. Courts examine circumstances when the agreement was made, not simply whether actual loss later proved lower.

Real estate deposit example

A sale contract may specify that seller's agreed remedy for buyer default is retention of the down payment as liquidated damages. Avoid assuming seller always keeps the deposit whenever a transaction fails.

Ask:

• Did buyer default?
• Was a contingency properly exercised?
• Did seller satisfy required obligations?
• Does the clause make retention the exclusive remedy?
• Is the provision enforceable rather than a penalty?
• What does the escrow clause require before release?

An escrow agent should not decide a disputed entitlement based on one party's demand alone.

Specific performance

Specific performance is an equitable order compelling promised performance, such as conveyance of property. Real property's unique character makes the remedy relevant, but not automatic.

Lambert states that a party seeking specific performance of a real estate contract must show that the party:

• substantially performed its obligations
• was ready, willing and able to perform the rest
• faced a seller able but unwilling to convey
• lacked an adequate remedy at law

Equitable defenses and contract validity also matter. A court will not create a bargain that the parties never made.

Worked example: Buyer has a valid signed contract for an identified parcel, satisfies the financing condition, appears with funds and documents on the proper closing date, and seller refuses to convey because a later buyer offered more. Those facts can support specific performance. If buyer cannot fund the purchase and lacks a contractual excuse, buyer may fail the ready, willing and able requirement.

Rescission, restitution and reformation

These remedies are often confused because each changes the ordinary result of enforcing the writing.

Rescission

Rescission seeks to unwind the contract and restore the parties, as nearly as equity permits, to their precontract positions. Rudman explains that a slight, casual or technical breach is not enough. The breach must be material and willful or so substantial and fundamental that it strongly defeats the agreement's object.

Availability of adequate money damages and ability to restore the status quo can matter.

Restitution

Restitution returns a benefit unjustly retained after a contract is rescinded or otherwise fails. It focuses on restoration, not the expectation profit the claimant hoped to earn.

Reformation

Reformation corrects a writing so it expresses the agreement the parties actually reached. It does not rescue poor negotiation or insert a wished-for provision.

Under Chimart, reformation ordinarily requires clear and convincing proof of:

• mutual mistake, where both sides reached an agreement but the writing failed to express it, or
• unilateral mistake induced by the other party's fraud

The claimant also must prove what the actual agreement was.

Assignment transfers rights

An assignment transfers a contractual right from the assignor to the assignee. Examples include a right to receive payment or, when the contract permits, a buyer's contractual interest.

General Obligations Law section 13-101 says that a claim or demand can be transferred except for identified categories, statutory prohibitions and transfers contrary to public policy. The agreement itself may restrict assignment.

The assignee generally steps into the assignor's position for the assigned right. The assignee does not normally gain greater rights than the assignor possessed and may take subject to defenses that apply to the right.

Contract restrictions matter

A clause may permit assignment, require prior written consent, prohibit assignment to specified persons or prohibit assignment altogether. Read the consequence as well as the restriction. A prohibited assignment may be a breach, ineffective or both, depending on the wording and governing law.

Notice helps the obligor know who is entitled to receive performance. Without notice, payment or performance to the original party can create avoidable disputes.

Delegation transfers performance of duties

A delegation occurs when a party owing performance, the delegator, appoints another person, the delegatee, to perform.

Delegation is different from release. Unless the obligee agrees to a novation, the original obligor usually remains responsible if the delegatee does not perform.

Delegation may be barred when:

• the contract prohibits it
• the duty depends on special trust, skill, judgment or reputation
• substituted performance would materially change what the obligee expected
• a statute or public policy prevents it

A salesperson cannot delegate licensed activity to an unlicensed person merely because a private agreement says that person will help.

A transaction described as an “assignment of the contract” may transfer benefits and delegate duties. Analyze each part separately.

Novation replaces and extinguishes the old obligation

Novation is more than assignment or delegation. Lambert lists four required elements:

1. a previously valid obligation
2. agreement of all parties to the new obligation
3. extinguishment of the old obligation
4. a valid new contract

The release is the key distinction. Everyone whose contractual position is affected must agree that the new obligation replaces the old one.

Assignment versus novation example

Seller contracts with Buyer A. Buyer A transfers the purchase right to Buyer B, and Buyer B agrees to perform. Seller accepts Buyer B's performance but never releases Buyer A.

That may be assignment plus delegation. It is not necessarily novation because the old obligation and Buyer A's liability were not extinguished.

Now add a signed agreement among Seller, Buyer A and Buyer B stating that Buyer B replaces Buyer A and Seller releases Buyer A from all future purchase obligations. If the new agreement is valid, those facts support novation.

Consent to assignment or acceptance of a delegatee's performance is not necessarily release. Look for agreement to extinguish the old duty.

One comparison that resolves most exam questions

Six exam-style scenarios

Scenario 1: inspection contingency

Buyer may cancel only after obtaining an inspection and giving written notice by 5:00 p.m. Friday. Buyer sends notice Monday without obtaining the inspection.

Best analysis: Identify an express condition and apply its procedure. General dissatisfaction does not create a cancellation right.

Scenario 2: small repair defect

Seller completes nearly all promised work, but an inexpensive nonessential item remains.

Best analysis: Consider substantial performance and an adjustment for the defect before declaring total breach.

Scenario 3: clear refusal before closing

Seller writes that seller will not convey under any circumstances.

Best analysis: This can be anticipatory repudiation because it is positive and unequivocal. A request to discuss an extension is different.

Scenario 4: missed nonessential date

The contract states an anticipated closing date but does not make time of the essence. One side can close within a reasonable time.

Best analysis: Do not declare automatic default solely from the missed date. Apply the contract and New York timing rules.

Scenario 5: buyer transfers the deal

The contract permits assignment. Buyer transfers the right and delegates performance. Seller never releases original buyer.

Best analysis: Original buyer may remain liable. Permission to assign is not a novation.

Scenario 6: written substitution

All three parties sign a valid agreement substituting the new buyer and expressly discharging the original buyer.

Best analysis: These facts fit novation because the old obligation is extinguished and a new one replaces it.

Misconceptions to remove before the exam

“Any breach lets the other party cancel”

No. Materiality, conditions, cure rights and remedy language matter.

“A deadline is always time of the essence”

No. New York real estate closing dates are not ordinarily time of the essence without clear language or proper later notice providing a reasonable time.

“Liquidated damages means the amount is enforceable”

No. A grossly disproportionate punishment is an unenforceable penalty regardless of its label.

“Specific performance is automatic because land is unique”

No. A claimant must satisfy contract and equitable requirements, including readiness and ability to perform.

“Assignment releases the original party”

No. Rights, duties and release are separate questions.

“Consent to assignment creates a novation”

Not necessarily. Novation requires agreement to extinguish the old obligation and replace it with a valid new one.

“Reformation cancels a bad bargain”

No. Reformation corrects a writing that fails to express the actual agreement because of qualifying mistake or fraud.

The salesperson's role and boundary

A New York salesperson should:

• present offers and communications promptly through the supervising broker
• use approved forms and follow brokerage procedures
• identify deadlines, notices and contingencies without inventing legal conclusions
• document instructions and communications accurately
• direct contract drafting, disputed default, remedy selection and escrow entitlement questions to the parties' attorneys and supervising broker
• avoid telling a party that a contract is void, breached, assignable or terminated as a personal legal opinion

A salesperson can explain process and relay information. Deciding whether conduct is legal repudiation, whether a penalty is enforceable or whether a party should sue for specific performance is legal work.

A five-step method for contract questions

1. Identify the duty or condition. Quote the operative idea from the facts.
2. Check timing and procedure. Was performance due? Were notice and cure satisfied?
3. Classify the failure. Condition failure, minor breach, material breach or anticipatory repudiation?
4. Read the remedy clause. Deposit, damages, termination and exclusivity language matter.
5. Track each party. Ask who owns the right, who must perform and who has been released.

This prevents the common error of jumping from “something went wrong” directly to a remedy.

Frequently asked questions

What is substantial performance in a New York contract?

It is performance of the contract's essential purpose despite a comparatively minor defect. Courts consider completed performance, importance and willfulness of the defect, frustration of purpose and benefit received. The defect can still support damages.

What makes a breach material?

A material breach substantially defeats the contract's purpose or deprives the other party of the essential benefit promised. The contract, seriousness, cure rights, timing and facts matter.

Can a party breach before the closing date?

Yes. A positive and unequivocal refusal to perform, or a voluntary act making performance impossible or apparently impossible, can constitute anticipatory repudiation.

Does missing a New York real estate closing date automatically end the contract?

Usually not when time was not made of the essence. The parties generally have a reasonable time to perform. Clear contract language or proper later notice can make a date essential.

What is the difference between rescission and reformation?

Rescission unwinds the agreement and seeks restoration. Reformation keeps the agreement but corrects the writing based on qualifying mistake or fraud and demanding proof.

What is the difference between assignment and delegation?

Assignment transfers a right or benefit. Delegation entrusts performance of a duty. A transaction can include both, but neither automatically releases the original obligor.

What is the difference between assignment and novation?

Assignment transfers a right. Novation replaces an old obligation with a valid new one by agreement of all affected parties and extinguishes the old obligation.

Is a contract claim always subject to six years in New York?

CPLR 213(2) supplies a general six-year period for an action on an express or implied contractual obligation, but exceptions and different accrual rules can apply. The specific claim, breach date, agreement and statutes control.

Can an original buyer remain liable after assigning a purchase contract?

Yes. Unless seller agrees to a novation or another valid release, assignment and delegation do not automatically discharge the original buyer.

Can a broker release disputed escrow funds after one party alleges breach?

Not simply because one side demands payment. The escrow agreement, consent, brokerage procedure and legal process control. Escalate a dispute to the supervising broker and attorneys.

Continue your study

Build the contract first with offer, acceptance, consideration, capacity and lawful purpose. Then review valid, void, voidable, executed and executory contracts and New York's Statute of Frauds, part performance and electronic signatures.

For the full sequence, use the contracts, sales and leases study guide. For landlord-tenant transfers, compare assignment, sublease, roommates and leasehold improvements.

Sources and verification notes

This article was checked against primary New York materials available through August 27, 2026. It teaches curriculum rules and an exam method. It does not predict unpublished exam wording or replace advice from a New York attorney.

• New York Department of State, Real Estate Salesperson 77-Hour Curriculum
• New York General Obligations Law section 13-101, transfer of claims
• New York CPLR 213, general six-year contract limitations period
• Princes Point LLC v Muss Development L.L.C., 30 NY3d 127 (2017)
• JMD Holding Corp. v Congress Financial Corp., 4 NY3d 373 (2005)
• ADC Orange, Inc. v Coyote Acres, Inc., 7 NY3d 484 (2006)
• Lambert v Schiller, 156 AD3d 1285 (3d Dept 2017)
• Gunther v Vilceus, applying Chimart's reformation rule
• Nelson v Rosenkranz, applying Rudman's rescission rule
• Norwegian Builder & Excavator, applying Brushton-Moira and Kenford