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Understanding anticipatory breaches of contract

On Behalf of | Jul 6, 2023 | Business Litigation |

A breach of contract is typically described as one party not fulfilling one or more terms of the contract. This is an actual breach of contract.

An anticipatory breach of contract is when a party demonstrates by doing or saying something (or failing to do something) that it will breach the contract. It’s also sometimes known as an anticipatory repudiation.

How can you be sure it’s an anticipatory breach?

There are different requirements for what constitutes an anticipatory breach based on what the party’s responsibilities are under the contract. However, one party to the contract can’t just make the assumption that the other party will breach it.

For example, say you’ve hired an architect to remodel a commercial building you’ve purchased. If that architect keeps postponing meetings with the contractors and others instrumental in the project, you can’t just claim anticipatory breach and initiate legal action.

However, what if the architect informs you that they’ve had no time to devote to the project because another project has run into problems or they’ve taken on a new project and can’t make time to work on yours for weeks or maybe months? That’s likely an anticipatory breach because it means they won’t be able to finish the remodel on time, which will be an actual breach of contract.

What are your responsibilities when you have an anticipatory breach?

If you determine that you’re dealing with an anticipatory breach, you can start legal action. However, you also have a responsibility to take steps to lessen your damages. For example, if you’re paying the architect on a regular basis, you’d immediately stop paying them. You’d also seek another architect to step in and take over the project so you don’t lose any more time.

Of course, to have a solid legal case, the original contract must be sound and not open to interpretation. Otherwise, the other party can claim that they aren’t breaching it or it was not a valid contract in the first place.

If you believe you’re dealing with an anticipatory breach of contract, it’s wise to get legal guidance as soon as possible. This can help you determine whether you can indeed initiate legal action and what else you need to do to lessen the damage to your project and your business.