An anticipatory breach is when one party makes a declaration that it intends to break a contract before it actually happens. It may be a breach of contract or an anticipatory repudiation. In either case, the breaching party may withdraw its repudiation by saying something that is not in accordance with its promise. However, the breaching party must still be held liable for its breach of contract if it did not perform its obligations.
Retracting a breaching party’s repudiation
A party can retract a repudiation in anticipation of a breach if the other party did not perform as promised. In this situation, the breaching party must have relied on the repudiation to delay performance, and the other party must have suffered damage as a result. Once the breach has occurred, the repudiating party must reimburse the non-breaching party for the cost of delay. This may be as simple as finding another vendor to perform the obligation.
Under the Uniform Commercial Code, the breaching party may request adequate assurance before commencing its performance. Until such assurances are provided, the first party may suspend its own performance and demand damages. If the other party fails to provide adequate assurances, the contract is void. Under UCC, a qualified repudiation may be sufficient to suspend the breaching party’s own performance.
There are several grounds for retracting a breaching party’s retraction in anticipation of a breach. The party must have the intent to perform as previously agreed. The retraction must also reinstate any conditions that were included in the repudiation. For example, a party may be unable to fulfill its obligations due to economic difficulties. If this is the case, the repudiating party may simply be too busy with the rest of their business to complete the contract.
Alternatives to declaring an anticipatory breach
A legal doctrine known as anticipatory breach of contract, also called an anticipatory repudiation, protects the party who has observed a sign of nonperformance before the event. However, it can also be applied in some cases. While it provides the other party with the opportunity to take legal action, anticipatory breach rules are complex. Learn the rules and your options for protecting your interests. Below, we’ll discuss some of the most common scenarios.
The first alternative to declaring an anticipatory breach is to re-examine the contract. Does the contract contain any force majeure clauses? If so, the clause must specifically mention the facts and language of the force majeure provision in the contract. The party must prove that the other party has not performed its duties. If the other party knowingly performed its obligations but did not notify the other party in advance, this constitutes a breach.
A third alternative to declaring an anticipatory breach is to make a false declaration or use incomplete or inaccurate information. This method is often used when the concerned party has bad information that makes it impossible to determine the other party’s compliance with its obligations. Using an incomplete or inaccurate document as proof would likely constitute a breach of contract. You should document all the relevant information and request a written confirmation from the other party.
Mitigating damages
When a party to a contract anticipates an upcoming breach, it is wise to take steps to avoid causing any additional costs, expenses, or loss. The compliant party needs to mitigate the damages in this case in order to avoid having to pay the entire amount of damages. Otherwise, the innocent party will have little opportunity to collect full restitution. Listed below are a few tips to help you mitigate your damages.
Contracts often contain provisions limiting the amount of indirect damages a party can claim for anticipatory breach. If a party must pay money and cannot wait until the payment date to do so, he or she cannot use an anticipatory breach to avoid paying the full amount due. If the damages are more than ten percent of the value of the contract, the breach must have occurred before the breach can be characterized as anticipatory.
When assessing the damages in an anticipatory breach, the courts look to common law to determine what constitutes a reasonable amount of damages. In the case of a landlord, the state courts traditionally hold that the landlord has no duty to mitigate damages, unless the breach occurs while he or she is reentering or regaining control of the premises. However, the Indiana Supreme Court has overturned Fisher v. Heyman, addressing the amount of damages a landlord may owe a tenant.
