What is Anticipatory Breach of Contract? This is a case where two parties are in contract to be fulfilled in a given period. But, one party realizes it cannot fulfill the contract in time and communicate in advance about his inability to deliver as per the contract. This makes it possible for the other party who has been wronged due to a breach of contract to proceed and file a lawsuit asking for compensation due to the breach of contract. For the anticipatory breach of contract lawsuit to be filed successfully, there are some factors which should be taken into consideration. For example, the repudiating party should be proved to have acted without sincere action in breaching the contract. The breach should cause some loss to the other party which will require compensation.
The Anticipatory Breach of Contract occurs under different conditions. Some of the situations which can lead to this type of breach of contract include the following:
Unconditional refusal to fulfill a contract
There are some conditions which can come up hence make it hard for a party to fulfill a contract. In such a case, the other party can decide to communicate early so that the one offended can file for the lawsuit instead of waiting till the time of fulfilling the contract elapses. For instance, a party may be in a contract to supply farm produce, but they are unable due to drought or other reasons which can lead to reduced crop production.
Action makes it hard for a party to fulfill contract
You may have taken a loan to start a business from where you will earn the profit and repay the loan. But, due to unavoidable circumstances you end up failing to repay the loan due to the failure of the business. If you will close the business before you finish repaying the loan and you have no other source of income, then the action will show you are unable to repay the loan.
Transfer of the property which is the subject of the deal
Some contracts such as buying a house can expose you to the case of repudiation of the contract. For example, someone may agree to sell a house to you but in the process of buying, he decides to give the home to his brother. Your sales contract will be repudiated in such a case. If you face the challenges of anticipatory breach of contract, then you need a competent lawyer who will represent you well so that you can recover the losses.
Disclaimer: This article is intended to provide a general summary of laws in the State of California and should not be construed as a legal opinion nor a complete legal analysis of the subject matter. Noelle Minto is an attorney at NM Law, APC in Tustin, California, a law firm specializing in Trusts & Estates and Business Transactions.