Anticipatory Breach: Contract Law Definition and Example

An action that indicates a party’s intention to default on its contractual commitments to another party constitutes an anticipatory breach of contract. An anticipatory breach may terminate the counterparty’s obligation to carry out its responsibilities.

The counterparty can file a lawsuit once it can prove the other party intends to break the agreement. An anticipatory repudiation is another name for an anticipatory breach.

Recognition of Anticipatory Breaches

When a party makes it clear that they intend to break a contract, this is known as an anticipatory breach. However, verbal or written confirmation is unnecessary, and a breach might occur if an obligation is not fulfilled on time.

Rather than waiting until a contract’s terms are breached, the counterparty may file a lawsuit immediately by claiming an anticipatory breach.

Considerations for Compensation

Any party asserting an anticipatory breach who intends to pursue a claim for damages in court must make all reasonable efforts to limit their losses. That can entail stopping payments to the violating party and searching for methods to lessen the impact of the violation. It could also entail looking for a third party to perform the original contract’s tasks.

Conditions for a Predicted Breach

An unequivocal unwillingness to uphold the conditions of the contract must be the intention to violate it for it to count as an anticipatory breach. The presumption that the other party won’t fulfill its commitments cannot be the basis for the anticipated violation.

Section 2-609 of the Uniform Commercial Code (UCC) also lays forth several obligations if the anticipatory breach includes the sale of goods. The party expecting a breach has the right to request assurance from the other party that the terms of the agreement will be upheld. Payments and other obligations can and should be halted while waiting for confirmation. The contract is deemed broken if the other party fails to provide the required assurance within 30 days.

An example of a Predictable Breach

Suppose a real estate developer engages an architecture company to generate blueprints for a new building by a particular date. It is not sufficient to assert an anticipatory breach if the developer demands regular updates on the project and is dissatisfied with the most recent outcomes. Even while they continue to work on the project, the architects could be running behind schedule. If appropriate action is taken, this situation still leaves the chance that the architects will make their deadline.

An anticipatory breach would occur if the architects took steps that made meeting the deadline impossible. The architects may, for instance, stop all work on the first project and devote all of their resources to a new project with a different developer. They would be unable to complete the original deal as a result.

Conclusion

• A party’s failure to uphold its contractual duties to another party is prevented by an anticipatory breach, also known as repudiation.
• Any party asserting an anticipatory breach who intends to pursue a claim for damages in court must make all reasonable efforts to limit their losses.
• An unequivocal unwillingness to uphold the conditions of the contract must be the intention to violate it for it to count as an anticipatory breach.