Anticipatory repudiation comes into play when two parties enter into a contract for performance and one party says they will not perform their duties under the contract. This is also commonly referred to as an anticipatory breach. If this occurs, the party breaking a promise under the contract may be sued for breach of contract and the other party may be entitled to damages.

What are the Elements of Anticipatory Repudiation?

Here is an example that details a situation involving an anticipatory repudiation that will help you understand the elements of this claim: Say a builder enters into a contract with a business to complete the plumbing installation in some new homes. Under the contract, the business promises that this job will take place on a future date. Then, the business notifies the builder that they will not complete the plumbing job as agreed upon in the contract. This is an example of repudiation prior to contract performance.

Looking at this from the reverse, if the builder promised to pay within seven days of the plumber completing the job and then notified the plumbing business that they would not pay as promised, this is also considered repudiation. The business refusing to accept payment from the builder can also be labeled as repudiation.

These examples help illustrate the elements necessary for anticipatory repudiation, which generally include the following:

  • Two parties enter into a contract for performance;
  • One party indicates that they will not perform under the contract. This can be either through words, actions, or lack of actions. Keep in mind that what is at issue here is the fact that one party said they will not complete their performance obligations;
  • The non-breaching party suffered damages, like not receiving money owed or completion of a job the other party was supposed to perform.

At the heart of an anticipatory repudiation case is performance. For a contract to be anticipatorily breached, there has to be performance involved. Without one party having a legal obligation to perform something for the other party, there can be no breach.

For example, say a party is supposed to provide 1,000 toy dolls to the other contracting party. If the contract says that they must merely provide the dolls and the party indicates that they are outsourcing production to a third-party, there is likely no anticipatory breach because there was no obligation to perform the production aspect. However, if the contract states that the party is also supposed to be the one producing the toy dolls, a court could find an anticipatory breach. This is where drafting clear contract language becomes crucial.

What Actions Can a Non-Breaching Party Take for Anticipatory Repudiation?

After anticipatory repudiation occurs, the non-breaching party has the right to file a lawsuit for breach of contract. Generally, laws covering this topic will require a certain time period to pass before filing suit is authorized. This is usually after the date for performance has passed or after a reasonable time to cure has lapsed.

For example, say the non-breaching party gave the party indicating they would not pay under the contract 30 days to take this assertion back and make payment. Most courts would probably find this to be a reasonable time period. If the breaching party does not pay or make any indication they would remedy the anticipatory breach, (like working out a new payment schedule in writing) then the other party could successfully file suit without facing dismissal.

Under the Uniform Commercial Code (“UCC”), which governs the sale of goods, anticipatory breach is discussed. The UCC says that if you suspect someone will fail to perform under a contract, then you can request an adequate assurance of performance and suspend your own performance until they offer such assurance to you. After 30 days where no assurance is provided, the contract is considered to be officially repudiated.

Keep in mind that the non-breaching party has the discretion to either continue with the contract or sue the other party for performance and damages. The first step should definitely be to try and settle out of court and keep performance flowing so the contract is not interrupted. Performance is generally the preferred remedy if the other party agrees to take back their anticipatory breach.

Anticipatory repudiation and initiating court proceedings will take time and be costly. However, this is sometimes the only option when the other party is uncooperative and not responsive to any requests for assurances, amending the contract, or working out another solution without court intervention.

What Does Retraction of Contract Repudiation Mean?

The party that anticipatorily repudiates a contract can retract this action. This simply means that they can take back their repudiation before the other party accepts it or relies on said promise not to perform. The reliance needs to be to the other person’s detriment, which means harm needs to occur (like a delay in construction or failure to meet other financial obligations).

As such, the repudiating party may withdraw their claim to anticipatorily breach the contract when one of the following things happens:

  • The other party has not yet acted on the promise not to perform or relied on the anticipatory breach to their detriment;
  • The repudiating party provides the other party sufficient assurances that they will perform under the contract as detailed. For example, sending an email could be considered a sufficient assurance; or
  • The repudiating party reimburses the other party for any delay resulting from the repudiation and reinstates their contractual rights.

Based on this, if the aggrieved party found another vendor to fulfill the obligation that the repudiating party said they were not going to perform, then retraction would likely not be authorized.

What Damages Are Allowed in an Anticipatory Repudiation Lawsuit?

As noted above, the main goal a court will have is for the parties to fulfill the contract and complete performance as promised. Even if coupled with monetary damages reflecting losses suffered from the anticipatory breach, this is considered to be a better outcome than termination. However, this is not always a realistic option and the party who suffered may be able to receive damages and be released from all future contract obligations.

Potential damages for anticipatory repudiation include the following things:

  • Monetary damages associated from the breach;
  • Termination of the contract;
  • Specific performance of the contract by the breaching party; or
  • Suspension of the aggrieved party’s own performance until new or amended contract terms are agreed upon in writing.

However, as noted above the aggrieved party must wait a reasonable amount of time for performance after an anticipatory breach occurs before seeking remedies. This time period is usually provided by the court or is outlined by the UCC when dealing with the sale of goods. Again, this was discussed in detail in the section above.

Do I Need to Hire a Lawyer for Anticipatory Repudiation Issues?

Contract law in general is complicated and anticipatory repudiation is no exception. If you are dealing with a contract issue where the other party anticipatorily repudiated your agreement, then consulting with a local contract lawyer would be a good move.

A lawyer can review your situation, advise you on what course of action would be best, attempt settlement of the issue where the other party retracts their anticipatory breach, and represent you in any court proceedings if necessary.