Withdrawal of Anticipatory Breach Lawyers

Anticipatory repudiation of a contract occurs when either party makes it known that they are not going to fulfill their obligation pursuant to a contract before the obligation becomes due. This is also called “anticipatory breach.” Ultimately, the purpose of the anticipatory repudiation is to repudiate the contract and the performance it requires of the party who repudiates it.

How Is an Anticipatory Repudiation Made?

An anticipatory repudiation can be either a statement by the repudiating party to the other party to the contract which indicates that the person intends not to perform their contractual obligation. Or, the repudiation may take the form of an affirmative act which renders the person unable or apparently unable to perform their contractual obligation.

There are three ways in which a party can effect the anticipatory repudiation of a contract:

• Express Repudiation: This means that one party explicitly informs the other party that it will not fulfill the contract. This is a straightforward and frank rejection of the performance that is called for by the terms of the contract;
• Implied Repudiation: The party does not express the repudiation explicitly but their actions make it impossible for them to complete the contract;
• Property Transfer: The party transfers any property that is central to the contract to a third party making fulfillment of the contract impossible.

Whatever act is made in repudiation of a contract, in order for it to be deemed effective as repudiation, the act must be positive and unequivocal. If the repudiating party’s actions are equivocal, ambiguous or unclear, then the nonbreaching party has a difficult choice to make and must consider their options and the consequences.

If the non-repudiating party takes the apparent repudiation as an anticipatory repudiation, and then terminates their own performance and sues for breach of contract, there is a risk. The risk is that a court may find that the apparent repudication was not clear and unequivocal enough to constitute an anticipatory repudiation. The court may then find that the insufficient repudiation did not justify the failure of the non-repudiating party to perform its own obligation. In this case, the party who did not repudiate the contract could be liable for damages for breach of contract.

On the other hand, if the non-repudiating party continues to perform even after perceiving an apparent repudiation, and it is then determined that an anticipatory repudiation did in fact take place, the non-repudiating party may be denied recovery for costs they incurred after the repudiation, because they failed to mitigate their damages. They failed to avoid expenses after the repudiation that they could have avoided.

For example, courts have held that if a party merely expresses that performing as required by the contract is difficult for them, this is not a clear repudiation of the contract. So, if before a lease is set to begin, the tenant informs the landlord that the tenant is experiencing financial difficulties and offers certain options for modifying the terms of the lease, this is not a clear repudiation of the lease agreement.

If the landlord were to stop the construction being done at the property that was the subject of the lease as agreed in the lease, and then terminate the lease, the landlord may not prevail in a subsequent lawsuit. The reason would be that there was no anticipatory repudiation

If the tenant were to sue the landlord for breach of the lease agreement, the tenant would likely win, even if the landlord filed a counterclaim for damages resulting from the tenants’ alleged anticipatory repudiation of the lease. A court is likely to decide that there was no clear and unambiguous repudiation of the contract. Therefore, the landlord’s termination of the lease was unjustified.

Where a party who has not repudiated gives the repudiating party an opportunity to retract their repudiation, but the repudiating party does not seize the opportunity, the non-repudiating party’s subsequent failure to perform their own contractual obligation does not constitute a breach of the contract. The injured party does not change the effect of the repudiation by urging the repudiating party to perform their contractual obligation or retract their repudiation.

Can a Party Retract the Anticipatory Repudiation?

The repudiating party may retract the anticipatory repudiation. But that is going to obviate a suit for breach of contract only if the other party has not made a material change to their position between the time that the first party made their repudiation and the time that the party then retracted it.

So, for example, in a reported case, a seller had wrongfully repudiated a contract for sale of a house based upon the buyer’s failure to obtain a mortgage loan. However, when the seller learned that the buyer had been able to obtain a mortgage commitment, the seller retracted its repudiation of the contract.

The court that heard this case ruled that the seller had effectively retracted its repudiation. The repudiation had been wrongful, but it had relieved the buyer of their future obligation to perform, and entitled the buyer to a remedy if the buyer’s position had changed materially before the retraction had been made. But the buyer’s position had not changed materially, and so the seller was not liable for paying damages to the seller.

Generally, in order to be effective, the retraction of the repudiation must be both timely and made in good faith. To be timely, it would have to be offered before the non-repudiating party has changed their position in a material way in reliance on the repudiation.

What Is a Material Change in a Party’s Position?

A material change is any major change that the other party makes in their position with respect to the contract in reliance on the repudiation. For example, the other party may make a new contract with a different party in order to get the benefit of the original agreement. This change in the other party’s position would prevent the party from fulfilling the contract.

How Can a Party Withdraw Its Repudiation?

In order to successfully retract its anticipatory repudiation, a party may do either of the following:

• It may complete the performance called for by the terms of the contract; or
• Reimburse the other party for any losses they may have suffered from the delay caused by the anticipatory repudiation.

When confronted with an attempted repudiation, the non-repudiating party has to choose between two options. It could either:

• Deal with the termination as an anticipatory breach, consider the agreement as having ended, and sue for damages; or
• Ignore the anticipatory breach, continue to perform their contractual obligation and wait to see if the repudiating party performs when required by the terms of the agreement. If the repudiating party does not perform as required by the contract, then the non-repudiating party may sue for breach of contract.

In determining which option the non-breaching party has made, the main consideration would be whether the non-repudiating party has taken some action, or failed to take some action, that indicated to the breaching party that it had made a choice.

Some courts have held that there is no particular time within which the non-repudiating party must make their choice. They may refuse, for a time, to accept the repudiation, and urge the repudiating party to perform without waiving any of their rights.

The repudiating party may retract the repudiation until the other party has elected to terminate the contract or has materially changed his position in reliance on the repudiation

It would seem that communication between the parties would be required and might prevent amplification of problems. The non-repudiating party might ask the repudiating party for clarification of any act or communication that is ambiguous and unclear. And the repudiating party could make sure to express its intentions regarding its performance in terms that are certain to be understood.

Do I Need a Lawyer to Help Me Withdraw My Repudiation?

Anticipatory repudiation is a difficult thing to do correctly. Responding to an anticipatory repudiation can be challenging as well. Withdrawing that repudiation presents still more challenges.

If you are embroiled in a situation involving an anticipatory repudiation of a contract, it is in your best interest to consult an experienced contract lawyer to understand if and how you can withdraw your repudiation. Or, if you have perceived an anticipatory repudiation from the other party to a contract, you should consult a contract lawyer for guidance on how to proceed.