What is an Anticipatory Breach of Contract?
A breach of contract occurs when at least one party fails to fulfill obligations that were stipulated by a legally binding agreement. In most cases, a breach of contract happens the moment when one part of the contract is scheduled to be executed. If the contract is not actually performed at that time, a breach has taken place. For example, if a shipment of goods is scheduled to arrive on January 1st but when the day comes, no goods arrive, a breach has occurred. That being said, a breach of contract can also happen ahead of time. Indeed, the very moment that one party to the contract indicates that it can not, or will not, perform the contracted duties, a breach has taken place. This type of advanced contract breach is known as an anticipatory breach or a contract repudiation.
Three Common Examples of Contract Repudiation
- An Unconditional Refusal is Made
If one party to a deal makes a clear and unambiguous statement that indicates that he or she will not be living up to the terms of the agreement, then an anticipatory breach has occurred. To reiterate, the statement of refusal to perform must be completely unconditional and it must be explicit. Statements that imply possible unwillingness or inability to perform do not qualify as a breach.
- An Action Makes Performance Impossible
If performance becomes unquestionably impossible based on the actions of the other party, then the contract has been breached. Once again, the other party’s actions must truly make future contract performance impossible. Actions that simply make contract performance unlikely or more difficult do not qualify as a breach.
- Property Subject to the Agreement is Delivered to Another Party
For contracts involving real property, a breach happens that moment that the property is transferred to another party. For example, imagine that your company has an agreement to lease a parcel of land from another firm in three months. However, you recently learned that the land was already sold to a third party. In this scenario, the contract has been immediately breached, even though performance is not scheduled for several months.
Non-Breaching Parties Must Mitigate Damages
The duty to mitigate damages requires non-breaching parties to take reasonable action to ensure that they do not suffer avoidable additional losses. If your company has been the victim of a contract breach, please take immediate action to do what you can to limit your losses. This is extremely important because in Florida if you fail to mitigate your losses, you may not be able to seek recovery for those losses.
Do You Need Legal Advice?
The experienced contract litigation attorneys at Pike & Lustig, LLP are standing by, ready to help. If you are involved in any type of contract dispute, please get in touch with our team today by calling (561) 291-8298. We will review your case free of charge and help to assess all of your available legal options. Our firm serves businesses throughout South Florida, including in Miami, Fort Lauderdale, and Oakland Park.