What is Anticipatory Breach of Contract?
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 repudiation is another name for an anticipatory breach. The counterparty’s obligation to carry out its responsibilities may be terminated by an anticipatory breach.
The opposing party has the right to bring legal action once it can show proof of an anticipatory breach. Verbal or written confirmation is not necessary.
Verbal or written confirmation is not necessary. Rather than waiting until a contract’s terms are really broken, the counterparty may file a lawsuit right away by claiming an anticipatory breach.
Any party asserting an anticipatory breach who intends to pursue a claim for damages in court must use all reasonable efforts to limit their own losses. That can entail stopping payments to the violating party and right once searching for ways to lessen the impact of the breach. It might also entail looking for a third party to carry out the tasks listed in the original contract.
Section 2-609 of the Uniform Commercial Code (UCC) also lays out a number of obligations if the anticipatory breach includes the sale of goods. The party anticipating 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 stopped while waiting for confirmation. The contract is deemed to have been broken if the other party fails to provide the required assurance within 30 days.