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What is an anticipatory breach of contract?

On Behalf of | May 28, 2024 | Business And Commercial Law

No one wants to end up in court arguing a breach of contract suit. You just want the parties with whom you contract to do their work satisfactorily – on time and on budget.

If you can spot what’s called an “anticipatory breach,” (also known as “anticipatory repudiation”), you may be able to avoid having things escalate to the point where you have no choice but to take legal action. By that time, you will probably have lost money and time. Even a successful outcome to a breach of contract suit may not make you whole.

Recognizing an anticipatory breach

An anticipatory breach of contract occurs when a party indicates by their actions (or inaction) or words that it’s likely going to breach one or more terms of a contract. You can take legal action for an anticipatory breach, but you need to know when that’s possible (and when it’s advisable).

Determining whether there’s been an anticipatory breach can be tricky. Generally, you can’t do it early in a project. For example, a contractor may get off to a slow or unpromising start, but that doesn’t mean they won’t be able to fulfill their obligations under the contract.

For example, say that you’re having a new roof put on a property you purchased. Maybe the contractor doesn’t start work when promised because they’re finishing up another job. If they indicate they’ll still be able to get your roof finished before your new site is ready to open, you likely have no grounds to claim anticipatory breach.

If the contractor admits that there’s no way they can finish your roof on time, that’s an anticipatory breach. The same may be true if they stop returning your calls and texts and you see them working on another roof in the area.

Well-crafted contracts can help prevent anticipatory breaches

Thankfully, it’s possible to minimize the chances of an anticipatory breach in your contracts. One way may be to set individual deadlines for various milestones in a project. This can often motivate people not to get behind – especially if there are monetary penalties attached. There are other strategies as well. Having sound legal guidance in writing, negotiating and enforcing your contracts can potentially save you time, money and harm to your business.