Anticipatory Repudiation: Breaching A Contract Before Its Breached

You probably know that if you don’t live up to the terms of a contract, or you fail to do what a contract requires that you can be sued for breach of contract. But what if you just say that you don’t intend to comply with or that you can’t comply with a contract? Is just stating your intent not to comply with a contract enough to get you sued for actually breaching an agreement—or does the non-breaching party have to wait until you are actually in breach of the contract in order to sue?

It may surprise you to know that someone can be sued for breach of contract just for indicating that they can’t comply, won’t comply or that they don’t intend to comply with the terms of a contract. It’s called anticipatory repudiation.

How Anticipatory Repudiation Happens

Anticipatory repudiation can happen one of two ways: Verbal, and by actions.

Verbally, someone must state, in no uncertain terms, clearly and unequivocally, that they do not intend to comply with the terms of an agreement.

This usually means that there cannot be conditions on non-performance. For example, saying “if I am in the mood, I will comply with the terms of the contract,” or “assuming there is no traffic, I will comply with my duties under our agreement” may be discouraging—but they are not clear statements that the person will not comply with the terms of the contract.

Repudiation by Actions

When it comes to an action, anticipatory repudiation happens when someone takes an action that is contrary to their obligation to comply with the agreement.

Take, for example, someone who is contracted to paint a house. A week beforehand, they move out of state. Clearly, by their actions, they can no longer perform and have no intention of performing (unless, of course, they have stated otherwise, or made verbal indications that they can or will still comply).

This often happens when someone is supposed to sell an item to someone, but then disposes of the item, or sells it to someone else. Even though the time to perform (to sell the item) isn’t here yet, it’s clear that the seller is unable to perform, having sold the item to someone else.

Taking Back Repudiation

If someone verbally says that they won’t perform under an agreement, they can take what they said back and perform under the agreement—so long as the other side hasn’t done something in reliance on the anticipated breach.

So, for example, if Party 1 says they won’t perform derives under a construction contract, and Party 2 gets someone else to do the job, Party 1 can’t then change his mind, and perform under the agreement.

Sale of Goods

In some cases, such as when it comes to the sale of goods under the Uniform Commercial Code, when a party suspects the other party has repudiated an agreement, the other side can ask or demand assurances that the contract will be performed. If the other side doesn’t provide adequate assurances, the contract can be canceled and the repudiating party can be held in breach of contract.

Call the West Palm Beach commercial litigation attorneys at Pike & Lustig today for help with your business law questions, or with any business related legal issues you may have.

Source:

law.cornell.edu/ucc/2/2-610