Anticipatory Repudiation

Anticipatory Repudiation

The unjustifiable denial by a party to a contract of any intention to perform contractual duties, which occurs prior to the time performance is due.

This form of breach, also known as anticipatory breach of contract, occurs when one party positively states that he or she will not substantially perform a contract. The mere assertion that the party is encountering difficulties in preparing to perform, is dissatisfied with the bargain, or is otherwise uncertain whether performance will be rendered when due is insufficient to constitute a repudiation. Another type of anticipatory breach consists of any Voluntary Act by a party that destroys, or seriously impairs, that party's ability to perform the contract.

The remedies available to the nonrepudiating party upon an anticipatory repudiation entail certain obligations. If the nonrepudiating party chooses to ignore the repudiation and proceeds with his or her performance, the duty to mitigate damages—which imposes on the injured party an obligation to exercise reasonable effort to minimize losses—mandates that the nonrepudiating party not perform if the consequence of performance would be to increase the damages. In addition, this duty requires, where applicable, the procurement of a substitute performance.

If the nonrepudiating party implores or insists that the other party perform, this demand, in and of itself, does not divest the nonrepudiating party's right to damages. The presence or absence of a breach of contract depends solely upon the repudiating party's actions. The prevailing view is that the nonrepudiating party may pursue any remedy for breach of contract, even though he or she has informed the repudiating party that he would await the latter's performance.

The nonrepudiating party also possesses the option to do nothing and to commence an action for breach after the time for performance. Under the majority view, such an action can be instituted without tendering the nonrepudiating party's performance or even alleging or proving that the party was ready, willing, and able to perform. The nonrepudiating party must demonstrate, however, that he or she would have been ready, willing, and able to perform but for the repudiation.

In regard to the law of sales, the Uniform Commercial Code (UCC), a body of law governing commercial transactions by the states, provides that anticipatory repudiation entails the right of one party to a contract to sue for breach before the performance date when the other party communicates the intention not to perform. The repudiation can, however, be retracted before the performance date if the nonrepudiating party has not acted on the basis of the repudiation. Some jurisdictions direct the injured party to await the performance date before instituting an action.