When people think of breaches of contract, they typically think of what’s known as an actual breach. That’s when one party doesn’t fulfill at least one term of the contract. These can be minor breaches, which often involve a term of the contract not being fulfilled by the designated due date. More serious breaches are material breaches. They’re more difficult and costly to recover from.
It’s also important to understand what an anticipatory breach is, how to recognize one and what your options are for handling it. You may see these referred to as “anticipatory repudiation” as well.
What does an anticipatory breach look like?
An anticipatory breach is when a party to the contract indicates either by an action (or failure to take an action) or by indicating verbally or in writing that they’re going to breach the contract.
For example, say that you’ve hired a contractor for a construction project. The contractor then becomes impossible to reach or set up meetings with. They tell you they have another project that is taking longer than they anticipated. So far, they haven’t actually breached the contract, but it soon becomes apparent that they won’t be able to finish the project on schedule. That likely can be considered an anticipatory breach based on what they’ve said and their failure to be available to you.
It’s important to note that you can’t just assume that someone is going to breach a contract. Say the same contractor is difficult to get ahold of and not good at returning calls and messages. However, they haven’t given you a reason for this, and as far as you know, they have time to devote to your project. You may be looking at an anticipatory breach down the road, however.
Taking legal action for an anticipatory breach
You can initiate legal action if you have a true anticipatory breach. That can get the other party’s attention and spur them to devote more time to your project if they don’t want to face a costly lawsuit.
You do have a responsibility to lessen any potential damages. For example, if the other party isn’t completing any of the initial deliverables, you may need to stop paying them. Before you take any steps like that, you’ll want to have sound legal guidance to help ensure that you’re not breaching the contract yourself. This guidance can help you protect your rights under the contract and your project.