Anticipatory repudiation, also known as anticipatory breach, occurs when two parties have a contract for performance in the future and one party says they will not perform or pay before that time, in which they have repudiated the contract before any party has performed.
The breaching party may give the impression of not holding up their end to the non-breaching party through specific actions or lack of action. A common example is the breaching party stating that they are stopping production of an ordered item or refusing to accept payment.
- What is Performance?
- What is the Non-Breaching Party Entitled to?
- What is Retraction of Repudiation of a Contract?
- What Should a Party Do If It Suspects Anticipatory Repudiation?
- What Damages Are Allowed Under Anticipatory Repudiation?
- Do I Need a Lawyer for My Anticipatory Repudiation Contract Issue?
In order for a contract to be breached or anticipatorily breached the element of performance must be present. A person’s performance to a contract is the obligation they have to the other party. If that obligation is not fulfilled in accordance to the terms agreed to by both parties, then a breach has occurred.
For example, the potentially breaching party is obligated to provide 1000 dolls to the other party. The contract only says that they must provide it. But if the contract says that the party is supposed to create/produce 1000 dolls and instead they outsource the production to another company, then they are likely to be in reach of the contract.
A party may bring suit for breach of the contract after performance is required or in the case of anticipatory repudiation when the breaching party repudiates the contract after they were given reasonable time to cure. The non-breaching or “aggrieved” party have several options once a breach has been established. Some options include:
- Suspending their own performance, or any preparation, until the situation is clarified;
- Requiring adequate assurance that other party’s performance is duly forthcoming;
- May treat the contract as fully breached if they have reasonable grounds for insecurity that are not cleared up within a reasonable time.
Ultimately, the non-breaching party has the discretion to continue the contract or sue for performance and damages.
Retraction of repudiation of a contract occurs when a party may take back their repudiation any time before the other party either accepts it or has relied on it to their detriment. The breaching or “repudiating” party may withdraw its anticipatory breach only if:
- The aggrieved party has not acted or relied on the anticipatory breach; or
- The repudiating party provides, by any means, sufficient assurances to the aggrieved party that the performance will be completed; or
- If the retraction reimburses the aggrieved party for any delay caused by the repudiation and reinstates the repudiating party’s rights under the contract.
Read More About:
- What are the Remedies for a Breach of Contract?
- What is the Statute of Limitations for a Breach of Contract Claim?
There are a number of things a party can do after receiving actual notice or other evidence of an anticipatory breach. The aggrieved party has the right to:
- Demand a guarantee of performance with additional assurances;
- Accept or reject terms under the contract, in whole or in part; and/or
- Reject any installment that is defective – if the defect significantly impairs the value of the whole contract, and cannot be fixed, the buyer can treat it as a breach of the entire contract, but the buyer must notify the seller of the defect.
Generally, the courts like to encourage contract fulfillments and performance tends to be the most common remedy for breaches.
Upon breach of contract, the wronged party is entitled to damages and may also be released from any obligations that they still face under the contract. Generally, the courts like to encourage contract fulfillments and performance tends to be the most common remedy for breaches. However, under anticipatory repudiation, they may seek the following damages:
- They may specifically seek monetary damages associated with the breach; or
- Request specific performance of the contract by the breaching party with or without fulfilling their performance; or
- Suspend their own performance until additional new terms are reached.
The aggrieved party does have to wait for a reasonable amount of time (usually provided by the court) for the other party to perform the contract if completion of the contract is the remedy granted by the court.
Contract law and anticipatory repudiation is quite complicated. A business attorney can advise you on what to do if you are unsure about a potential breach. Additionally, every state has different filing procedures and deadlines for breach of contract claims.
An attorney can help a party conform to the applicable procedural rules and collect all the proper documents to prove a breach. Lastly, attorneys are often capable of helping parties reach a remedy outside of court which can save both parties time and money from court procedures and fees.