How Do You Handle Anticipatory Breach of Contract?

You can cancel an anticipatory breach of contract upon a failed statement to perform by the promisor based on your contractual obligations. When you decide to cancel the contract, you may get a refund from the promisor. 

If the promisor states that they can’t deliver upon the contract terms, you can proceed and file legal action against them. This should happen before the contractual delivery date. In other scenarios, you may do nothing if the promisor states that it is impossible to perform the contractual obligation. This happens in most cases where the promisee has a strong relationship with the promisor. 

What is the Rule of Anticipatory Repudiation?

In the rule of anticipatory repudiation, the breaching party gets more time to repudiate a contract, reducing the number of monetary damages the non-breaching party may receive as compensation. If the non-breaching party fails to mitigate all the losses, they may not receive full compensation. The aggrieved party may decide to do the following.

  • Take time to see if the other party will repudiate the contract or perform their contractual duties.
  • Choose to stop or suspend performance, whether payment or something else. 
  • Go for any remedy for breach even though they’ve informed the repudiating party that they would wait for their performance. 

The promising party can retract the repudiation if there has been no material change in the performer’s position in the interim. The retraction of the repudiation enables the promisor enables them to perform their contractual obligation.

What is the Principle of an Anticipatory Breach?

Principal of anticipatory breach states that when a party to a contract communicates or expresses in a way that shows they are not going to perform the contractual obligation or when it becomes clear that they won’t do it after the contractual agreement, the other party can terminate the contract. 

The principal is comparable to the indispensable non-performance that can be anticipated with the actual non-performance. It must be more than a mere general indefinite statement or observation, impression or idea, or indication of intent. 

What is an example of an Anticipatory Breach?

For instance, a shoe manufacturer company enters into a contract to deliver shoes to a local retailer. The manufacturer fails to deliver the shoes per the contract. This could occur when the manufacturer runs out of materials to produce shoes and deliver them to the retailer at the expected time. 

The impossibility of meeting the deadline constitutes an anticipatory breach. The shoe manufacturers must inform the shoe retailer that they cannot meet the contractual obligation. If the shoe manufacturer and the shoe retailer have a strong relationship, the retailer may decide to do nothing and accept the loss incurred to maintain their relationship. 

The retailer can take legal action against the manufacturer if there is no solid relationship. In other cases where the shoes had already been paid for, the retailer can decide to cancel the contract and get a refund. 

How do I File a Case for Anticipatory Breach of Contract?

Usually, you are expected to prove that a breach occurred, and you should also demonstrate the damage caused when filing a case. It is important to Act quickly to prevent potential losses associated with the breach. 

Filing a claim lets you seek compensatory damages for the breach of contract by the promisor. The compensation is usually in monetary form for an action based on anticipatory repudiation. The amount, however, depends on the circumstances surrounding the breach. For this reason, it is important to speak to an attorney about the possible anticipatory breach because such a claim can be very challenging to prove. 

Sometimes, a non-breaching party may not have solid evidence to prove that an anticipatory breach occurred. A contract attorney can advise and help in determining whether or not you have a case.