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What to do in the event of an anticipatory breach

On Behalf of | Apr 4, 2023 | Business Litigation

Anticipatory breach, also known as anticipatory repudiation, occurs when one party to a contract indicates that they will not fulfill their obligations before the performance is due. In other words, it is a situation where one party communicates their intention to breach the contract before the performance is due. This can be a frustrating experience for Texas business owners, but there are steps you can take to deal with this unfortunate outcome.

Determine anticipatory breach

It is essential to determine whether the communication made by the other party constitutes an anticipatory breach. The communication can be either written or verbal, and it must indicate that the party will not perform their obligations under the contract. For example, if a supplier informs you that they will not deliver goods on the agreed date, that could be considered an anticipatory breach in commercial litigation.

Examine your options

Once you establish that there has been an anticipatory breach, the next step is to determine your options for dealing with the situation. You have two main options: you can either terminate the contract or continue with the contract and seek damages for the breach.

If you decide to terminate the contract, you must inform the other party of your decision. You should do this in writing, making it clear that you are terminating the contract due to the other party’s anticipatory breach.

Contract termination means that neither party will be required to perform their obligations under the contract. However, keep in mind that you may still be entitled to seek damages for any losses you have suffered as a result of the breach, despite moving to terminate the contract.

If you decide to continue with the contract, you must notify the other party that you are doing so. However, you should also make it clear that you consider their communication to be an anticipatory breach and that you reserve the right to seek damages for any losses you may suffer as a result of their breach.

Protect your interests

It can be frustrating and stressful to deal with an anticipatory breach as it may result in unexpected losses. Whether you choose to terminate the contract or continue with it, it is essential to communicate your decision to the other party and pursue appropriate action to safeguard your interests.