Law Advocate Group, LLP 
What is Anticipatory Breach of Contract
An anticipatory breach of contract occurs when one party indicates that they intend to default on their contractual obligations. This action allows the non-breaching party to terminate their obligations under the contract.
The non-breaching party has the right to take legal action upon demonstrating proof of an anticipatory breach. They do not need verbal or written confirmation from the breaching party. Instead of waiting for an actual breach of the contract terms, they can immediately file a lawsuit for anticipatory breach.
To pursue a claim for damages, the non-breaching party must take reasonable steps to mitigate their losses. This might include halting payments to the breaching party and seeking alternative solutions to minimize the impact of the breach. It could also involve finding a third party to fulfill the original contract’s obligations.
If the anticipatory breach involves the sale of goods, Section 2-609 of the Uniform Commercial Code (UCC) outlines specific requirements. The non-breaching party can demand assurance from the breaching party that the contract terms will be honored. During this period, payments and other obligations can be suspended. If the breaching party fails to provide the necessary assurance within 30 days, the contract is considered breached.
Anticipatory Breach vs. Anticipatory Repudiation
Though they are often used interchangeably, anticipatory breach and anticipatory repudiation are distinct concepts in contract law. Understanding these differences can aid businesses in crafting more precise legal strategies and responses.
An anticipatory breach refers to a party’s explicit refusal or inability to fulfill future performance. In contrast, repudiation involves actions or statements signaling an intention not to perform. The key distinction lies in the manner and certainty of non-performance.
In a breach, the non-performance is direct and certain. However, repudiation involves indirect indicators, leaving room for possible performance under different circumstances. Recognizing these differences is vital for businesses responding to potential contract issues.
Keep reading: Understanding Breach of Contract in California Law
