Anticipatory Breach Lawyers

Anticipatory breach of contract cases refers to breaching a contract before the performance is due. This type of breach occurs when one party to a contract indicates to the other party that they cannot or do not wish to fulfill the contract. When faced with an anticipatory breach of contract, the non-breaching party does not have to wait until the contract’s requirements are not met; instead, they can terminate the contract and seek compensation by filing a lawsuit against the breaching party.

Types of Repudiation

Express repudiation: This involves a definite and unconditional refusal to perform the terms of the contract, such as, “ABC Inc. will not be able to deliver the product as originally agreed.” Ambiguous and qualified statements, such as, “Unless the price of our raw materials come down, ABC Inc. will not be able to deliver the product as originally agreed,” do not count.

However, an expression of doubt about the party’s willingness or ability to perform might indicate a prospective failure to fulfill the contract, in which case the non-breaching party might suspend their performance and request an assurance of performance from the offending party.

Repudiation through actions: Anticipatory repudiation doesn’t need to be verbal. An action that makes it impossible for a party to perform its obligations is enough to constitute a breach of contract. For example, imagine you took out a business loan and planned to repay it from profits from your business. Things do not go as planned for your company, and you must take on even more debt to continue operating. This makes it impossible to repay your original loan and can be considered an anticipatory breach even though you did not expressly state you would not perform.

Repudiation of property: If the agreement is for property, repudiation occurs when one party sells the property to someone else. For example, if you sign a contract to buy a house but later find out that the owner has sold it to another person, this will repudiate the contract.

Repudiation under the UCC for the sale of goods: The Uniform Commercial Code (UCC) lays down several requirements. The party anticipating a breach has the right to ask the other party to provide reassurance that the contract will be fulfilled. While awaiting assurance, payments and other duties can and should be stopped. The contract is officially breached if the other party does not offer the proper assurance within 30 days.

Example of an Anticipatory Breach

Let’s say a company contracts a software developer to create plans for a new computer database by a specific deadline. If the company requests regular updates on the project and is not satisfied with the results, this is not grounds to claim an anticipatory breach of contract. The software developer may be behind schedule, but they continue working on the project. There is still a possibility that they might meet their deadline if steps are taken to speed up the promised work.

However, if the software developers took actions that made it impossible to meet the deadline, it would constitute an anticipatory breach. For example, the software developers might stop working on the first project and commit all their resources to a new project with a different client. If they could not meet their deadline, that would constitute anticipatory repudiation because it prohibited them from fulfilling the initial contract.

Elements of Anticipatory Breach

Not every failure to perform under a contract amounts to an anticipatory breach. In order to file a lawsuit for an anticipatory breach, the following elements must all be present:

• There must be a contract
• One of the parties must indicate – through words, actions, or omissions – that it will not perform its obligations under the agreement.
• The non-breaching party must show that it would have been willing and able to fulfill its own obligations under the contract if the other party had not breached it
• Repudiation must happen before performance is due. If it occurs after the performance was required, this is a standard breach of contract, not an anticipatory breach.
• The non-breaching party must suffer some kind of loss as a direct result of the breach

Anticipatory Breach of Contract Remedies

In an anticipatory breach situation, the non-breaching party will be allowed to sue the breaching party for damages, even though the non-breaching party is technically the one putting an end to the parties’ contract. The non-breaching party to the contract has a right to seek remedies in court. The most obvious remedy is money.

Monetary damages include:

• Compensatory damages: This is the actual financial damage caused by the anticipatory breach.
• Punitive damages: These are monetary damages granted to the non-breaching party above and beyond their actual damages. The court might award these damages in cases where the offending party has committed acts that are so reckless and malicious they give a reasonable person pause. Also called exemplary damages, punitive damages are granted to punish the guilty party for outrageous misconduct.

Non-monetary remedies include:

• Rescission: One option is to rescind or cancel the contract. Rescission terminates all obligations under the agreement and enables the non-breaching party to claim a refund of any payments already made.
• Specific performance: This compels the party to perform its obligations and not breach the contract. This is a good alternative where monetary damages may not be adequate compensation, such as in cases involving unique or rare items or when the value is hard to determine.

Mitigation of Damage

Most courts require the non-breaching party to act promptly to prevent avoidable costs or expenses. You cannot sit around and let the situation deteriorate. For example, if you can obtain the product you need through another source, you must do so. If the new source is more expensive, you are entitled to receive the difference between what it was supposed to cost you and what it actually did.

Do I Have to Wait Before I Can Sue for Breach of Contract?

Although the law does not require it, courts generally prefer that the non-breaching party wait a reasonable amount of time before suing for breach of contract due to an anticipatory repudiation scenario. The length of time that a court considers to be “reasonable” varies from state to state because it is based on the separate statutes enacted by each state.

Also, an anticipatory breach action may be withdrawn in certain circumstances if the non-breaching party changes their mind about suing. This could be for various reasons, such as if the breaching party decided to perform finally and the non-breaching party found the performance sufficient not to sue.

Should I Talk to an Attorney about a Possible Anticipatory Breach?

A breach of contract action based on a claim for anticipatory repudiation can be difficult to prove. Sometimes there is not even definitive evidence for a non-breaching party to use to prove that an anticipatory breach occurred.

Therefore, if you are a party to a contract where anticipatory repudiation might occur, you should contact a local contract attorney for further assistance. An attorney in your area will be able to determine whether or not you have a case and, if so, what you can do about it to either prevent it from happening or how to recover your losses.