Anticipatory Breach of Contract: When to Action for your Business

When a party to your business contract fails to live up to their end of the agreement, they’re in breach. The contract is broken, and as the business owner who honored his half, you have rights to pursue the party who breached the agreement for damages incurred as a result. When the breach of contract occurs is often irrelevant to when your company can bring a claim to hold the other signees accountable. An unconditional refusal or repudiation is an anticipatory breach of contract, which your company can use to its advantage long before any actions under the agreement are supposed to take place.

Express Repudiation under the Law

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This type of refusal to perform the agreed-upon actions to satisfy a contract is straightforward. An express repudiation is an outright refusal to perform. The language used must be clear, with no qualifiers or room for ambiguity. For example, saying “I can’t bring in the harvest unless the rain stops” isn’t an unconditional refusal. Stating, “There’s no way I’ll fulfill this contractual agreement” is the kind of language that’ll satisfy this type of repudiation.

Actions Making it Impossible to Satisfy Contract

The other party to the agreement can conduct themselves in a way that makes it impossible for them to uphold the agreement. For example, if the contract loans the other party a sum of money to be repaid from proceeds from their business, and the party chooses to spend their profits on other things, they can be in breach of the agreement. Profits or proceeds from their business was supposed to be earmarked to satisfy the agreement, and the actions of the party you entered into the contract with have made that impossible.

Transferring the Contract to a Third Party

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This form of repudiation occurs most often during the sale of real property, including equipment to run a business or real estate. Repudiation occurs when you contract to buy a piece of real property and the seller transfers ownership to a third party. The contract is in breach because you agreed to the sale from one named party in the agreement, not an unknown third. Your contract is broken regardless of your knowledge of the transfer.

Exceptions to the Rule

If the only provision remaining in the contract is for your business (or another) to receive payment, you can’t claim an anticipatory breach until the due date for payment has passed. No matter how much reason your company has to believe the other party will default on payment, you must give them every day as identified in the agreement until you can seek compensation.

As the non-breaching party, you may also have a duty to mitigate the damages of those who breached the agreement. That means you must move swiftly to seek remedy for the agreement; not wait around for things to get worse. Our attorneys can assist you in seeking swift justice for any form of commercial breach of contract. Contact us today for more information and to schedule a consultation.