In Florida, an anticipatory breach happens when one party to a contract does not fulfill their part of the agreement, leading to the other party becoming entitled to a legal solution. One party may have already invested time, money and other resources, which can create significant business challenges if the contract falls through. Parties anticipating a breached contract can respond in a few different ways.
Cancel the existing contract
Communication and reviewing contract provisions regarding breaches can help each side determine the next steps when finding themselves in an anticipatory breach situation. Party A can cancel the contract if the breach occurs due to party B’s operational issues, such as insufficient raw inventory to fulfill a manufactured goods order as agreed.
If the contract requires significant investment, party A may need to cut their losses and cease all activity as soon as they become aware of party B’s intention to breach the agreement. If party B explicitly communicates that they will breach the contract, they have repudiated it. According to the contract provisions, contract repudiation could give party A the right to terminate the contract immediately and seek damages for losses they suffered due to the breach.
Seek legal advice
In contract disputes, party A should investigate all possible options once they think party B has committed an anticipatory breach and seek legal advice to help plan a course of action.
Some likely actions include negotiating with the other party, alternative dispute resolution such as mediation, terminating the contract and, as a last resort, litigation.
Take no action
Both parties sometimes agree to take no action on a breached contract to preserve their business relationship. For example, suppose a dairy farmer could not make his milk delivery to an ice cream manufacturer due to a tornado that interrupted his operations; the ice cream manufacturer may choose to accept the loss if they have a solid relationship with the milk supplier and want to remain on good business terms.
Understanding anticipatory breaches and possible resolution options can help companies minimize the impact of a breach on their business.