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Anticipatory breach is a concept you need to understand. Here’s what it means.
What is anticipatory breach?
Anticipatory breach, also commonly known as an anticipatory repudiation, is a notification that one party plans to renege on a contract, releasing the other party from having to fulfill its end of the agreement.
Anticipatory repudiation applies when it becomes clear that one party is either unwilling or unable to fulfill the terms of a contract by the agreed-upon deadline. The other party is released from contractual obligations and is entitled to file a lawsuit for breach of contract, seeking payment or other damages. Indication that one party is reneging on a contract can come through words or actions.
Courts generally recognize three types of anticipatory repudiation:
- Express repudiation: When the other party gives a positive and unconditional refusal, either verbally or in writing, to live up to promises made under the deal.
- Action: When one party’s actions make it impossible for said party to perform as promised.
- Transfer of assets: When assets or other objects needed for fulfilling a contract have been sold to a third party or disposed of in some other way.
Anticipatory breach example
Franny deals in antique brass musical instruments. Early in June, she agreed to sell an antique flugelhorn to Zooey for $3,000 on June 15. On June 14, Zooey told Franny that he is no longer willing to purchase the flugelhorn because he has settled on a different wedding gift for his daughter. Zooey has breached the contract through express repudiation.
Alternatively, if Franny had admitted to Zooey that she could not sell the flugelhorn because she had mangled it by accident, Franny would have breached the contract through her actions. Finally, if Franny had sold the antique instrument to another party for $4,000, she would have breached the contract through the transfer of assets.
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