Anticipatory breaches of contracts happen when one party to a contract clearly communicates, either through words or actions, that they do not intend to fulfill their obligations under the contract, either because they cannot or due to some other concern. This occurs before the actual performance is due, potentially inspiring uncertainty and potential harm to the other party.
When an anticipatory breach of contract happens, the non-breaching party typically has several remedies available to them. These are approaches that aim to address the harm caused by the breach and mitigate losses.
Specific performance
Despite the anticipatory breach, the non-breaching party may choose to demand performance from the breaching party. This compels the breaching party to fulfill their contractual obligations as originally agreed upon. By demanding specific performance, the non-breaching party seeks to enforce the terms of the contract and ensure that they receive what they were promised. This remedy is often pursued when the subject matter of the contract is unique or rare, making monetary compensation inadequate to remedy the breach.
Rescission or cancellation
The non-breaching party may opt to rescind or cancel the contract due to the anticipatory breach. Rescission involves terminating the contract and releasing both parties from their obligations under it. This remedy essentially restores the parties to the position they were in before the contract was made. It can be pursued when the breach is significant enough to undermine the purpose of the contract or when the non-breaching party no longer wishes to be bound by its terms.
Anticipatory damages
In the event of an anticipatory breach, the non-breaching party may also seek anticipatory damages. Anticipatory damages aim to compensate the non-breaching party for the harm caused by the breach. These damages are calculated based on the anticipated losses that the non-breaching party is likely to suffer as a result of the breach. The purpose is to put the non-breaching party in the position they would have been in if the contract had been fully performed.
The appropriate remedy for a specific situation depends on the unique circumstances of the breach and the preferences of the parties involved. Thus, it’s important for the non-breaching party to carefully consider their options and seek legal guidance to determine the best course of action before committing to an approach.
