What Does Anticipatory Breach Of Contract Mean For You & Your Business?
Protecting Your Business Interests With An Anticipatory Brech
If you’ve entered into a contract with an employee, vendor, client, subcontractor, or other business partner, it’s important to be aware of anticipatory breach of contract. Anticipatory breach of contract happens when one party to a contract exhibits an intention to break the terms. The other party can then initiate legal action and seek solutions immediately instead of waiting for a breach to take place. This legal doctrine can give your business a way to protect its interests and minimize loss. However, the requirements related to anticipatory breach can be complicated, so it’s important to discuss the situation with your Scottsdale business attorney and understand your rights and responsibilities in order to be successful.
What Are the Benefits Of Anticipatory Breach Of Contract?
Anticipatory breach of contract can actually benefit both parties to the contract. If you are on the receiving end of the anticipated breach, you don’t need to wait for the other party to actually stop fulfilling their obligations; you can save time, mitigate your losses, and seek payment or other remedies right away.
On the other hand, if you declare an anticipatory breach of contract to the other party, you give them the opportunity to cut their losses. This could minimize the damages that the breaching party would have to pay.
When Does Anticipatory Breach Of Contract Take Place?
Anticipatory breach of contract takes place whenever one party indicates a clear refusal to perform their contractual obligations. The non-breaching party then has the legal right to claim a breach of contract and seek compensation.
The anticipatory breach of contract does not need to be in writing; it can be oral or demonstrated through action or omission. If you’re unsure whether your contract falls under anticipatory breach, contact your Avondale business attorney.
Some of the most common types of anticipatory breach include:
Express repudiation: A clear and directed statement of refusal, such as “Company A will no longer be able to deliver materials as agreed.” Less direct statements, such as “Until our supplier sends more materials, we cannot deliver all 50 units,” are unlikely to meet the standard.
Repudiation through actions: Anticipatory breaches do not need to be verbal. Actions or lack of actions also count. For example, if you take out a business loan and your business does poorly, forcing you to take out another loan, you will be unlikely to pay back the first loan, which might be considered an anticipatory breach even though you have not directly violated or refused your contract.
Repudiation through property transfer: If your contract involves the sale of property, an anticipatory breach can occur if one party agrees to transfer the property to another party. This will nullify your contract even if the other party does not communicate with you.
Repudiation of contracts for the sale of goods: If you believe another party cannot fulfill its obligations, you can demand assurance of their performance and suspend your obligations until the performance is provided. If the other party does not provide assurance within 30 days, the contract is legally repudiated.
Repudiation when only payment remains: The typical rules of anticipatory breach of contract don’t apply when the only remaining obligation is payment. In that situation, the payment due date must pass before the other party can claim anticipatory breach.
What Are The Necessary Elements Of Anticipatory Breach Of Contract?
Not every failure to perform as agreed upon in a contract amounts to anticipatory breach. Discuss with your Glendale business attorney whether these necessary elements were involved in your situation:
- A legally binding contract must exist.
- One of the parties must indicate via a direct statement, actions, or lack of action that they will not be performing their contractual obligations.
- The anticipatory breach must occur before performance is due. If it takes place after, it would be considered a breach of contract.
- The non-breaching party must suffer a loss as a direct result of the anticipated breach, such as financial loss or lack of services.
- The non-breaching party must show that they would have been willing and able to perform their obligations had it not been for the other party’s breach.
What Are The Solutions To Anticipatory Breach Of Contract?
Once one party has proven they intend to breach the contract, the other party has a legal right to seek remedies. These include monetary and non-monetary solutions:
Recission: Rescinding or canceling the contract, terminating all obligations. The non-breaching party may claim a refund of any payments that were made and is free to seek another party to provide services or products as needed.
Specific performance: This compels the party to perform their contractual obligations, most commonly used in situations where financial damages can be difficult to value or are inadequate, such as situations involving real estate or other unique items or services.
Compensatory damages: A sum of money awarded to compensate the non-breaching party for financial, property, or other types of loss. The amount will depend on what losses were suffered.
Punitive damages: Financial compensation above actual damages, typically rendered when the repudiating party committed deliberately malicious acts.
Do I Need Legal Counsel For Anticipatory Breach Of Contract?
If you believe you are the victim of anticipatory breach of contract, contact your Phoenix business attorney immediately. One factor in your case may be that you need to act quickly to demonstrate that the anticipatory breach is significant.
Anticipatory breach of contract law can be complex. You need an experienced legal team on your side to ensure you receive maximum compensation and minimal loss. Contact the trusted attorneys at Denton Peterson Dunn to consult on your situation, protect your business, and learn how we can help you navigate the complicated situation of anticipatory breach of contract. Consultations are confidential.