Anticipatory Breach Of Contract: Everything You Need to Know
Anticipatory breach of contract is the act of breaking a contract before the deadline for meeting contractual obligations. 3 min read
Anticipatory breach of contract is the act of breaking a contract before the deadline for meeting contractual obligations. It occurs when one party in a contract expresses his or her inability or unwillingness to perform the tasks specified in the contract. In such a situation, the nondefaulting party can take legal action against the breaching party. An anticipatory breach of contract does not necessarily have to be confirmed in writing or vocally; it can also occur through actions or direct or implied communication.
Overview of Anticipatory Breach of Contract
A breach of contract can happen ahead of time. The moment one contracting party shows that he or she cannot or will not perform his or her contractual duties, a breach has occurred. This is called an anticipatory breach of contract or contract repudiation. When an anticipatory contract breach takes place, the nondefaulting party is no longer required to perform his or her obligations under the contract.
Usually, the breaching party will indicate to the other party that he or she is unable or unwilling to fulfill the contract before the deadline for performance. The innocent party can start taking legal action by proving the offending party's intention to breach the contract. He or she is not required to have written or vocal confirmation. Inability to perform a certain obligation on time is also a breach. The nondefaulting party does not have to wait until the contract terms are broken to declare an anticipatory breach of contract.
What Constitutes an Anticipatory Contract Breach?
For an anticipatory breach of contract to be valid, it must meet several conditions:
- The breach must be expressed in a clear and straightforward manner to the nondefaulting party.
- The breach must be a positive and unconditional refusal.
- The breach occurs through actions or direct or implied communication.
The court usually recognizes three forms of repudiation under contract law:
- The breaching party makes a positive and unconditional refusal to the other party, which is also known as express repudiation.
- It is impossible for the nondefaulting party to perform because of the offending party's actions.
- One party has transferred the property or the subject of the deal to a third party.
How to Mitigate Losses in an Anticipatory Contract Breach
The aggrieved party in an anticipatory contract breach is required by law to act quickly to prevent potential losses and costs that might occur due to the breach. These are called mitigating losses. Basically, you can't just do nothing and allow the situation to get worse.
For instance, in Florida, you might not be able to claim compensation for your losses if you do not make an effort to mitigate your damages. This is why some people decide to repudiate a contract. Contract repudiation gives the nonbreaching party more time to cut his or her losses, which reduces the amount of monetary damages that might be awarded in a contract breach lawsuit. If the nondefaulting party fails to mitigate losses to the fullest, he or she will not be able to gain full compensation.
While the innocent party should try to mitigate his or her losses as soon as possible, he or she might choose to wait. By doing so, he or she can see if the other party will continue to repudiate the contract or decide to perform his or her contractual duties. The nondefaulting party can also choose to stop performance, be it payment or something else. There are basically two things you can do to remedy an anticipatory breach of contract:
- Request an assurance of delivery. If you ask the defaulting party to provide reasonable assurance he or she will be able to fulfill the contract, he or she has 30 days to do so. Failure to give you such assurance by the end of 30 days will make the contract void.
- File a lawsuit. If an anticipatory contract breach is too messy, you can opt to sue for damages. Usually, you will be required to prove that the breach occurred and demonstrate the damages that resulted from it. The defaulting party then pays you damages, usually in monetary form.
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