Anticipatory Breach of Contract

A breach of contract refers to the failure of one party to perform the obligations specified in a binding agreement with another party. When a contract is breached, the person at fault may face legal consequences. But not all breaches are the same.

An anticipatory breach occurs when a party signals they won't be able to fulfill their obligation before the agreed-upon date or to the agreed-upon standard. In this case, the non-breaching party may have the option to terminate the contract or seek remedies before the breach occurs. Anticipatory breaches can be classified several different ways depending on the circumstances.

• Express Repudiation occurs when one party explicitly communicates that they do not intend to fulfill their obligations under the contract. For example, a supplier informs a buyer well before the delivery date that they will not be able to deliver the goods as agreed.
• Implied Repudiation occurs when the actions of a party clearly indicate an intention not to perform their contractual obligations. While not explicitly stated, the circumstances make it evident that the party will not fulfill their obligations when the time comes. For example: a contractor stops responding to communication and fails to show up for work days before the project start date
• Inability to Perform is similar to implied repudiation, but in this instance, a party indicates through their actions that they are UNABLE to perform their obligations under the contract. This may stem from financial difficulties, physical incapacity, or changes in circumstances that render prevent performance. In some jurisdictions, a party stating that they are unable to perform their obligations as agreed can also be considered an anticipatory breach.

In all types of anticipatory breaches, the non-breaching party can treat the contract as breached immediately upon learning of the anticipatory breach. This allows them to pursue remedies without waiting for the actual performance date to arrive. Remedies typically include suing for damages, seeking specific performance if feasible, or terminating the contract and seeking restitution.