In this article, our contract disputes solicitors will discuss anticipatory breach of contract – what this term actually means, when it could happen and what potential remedies are available to you if you find yourself facing this scenario.
Jump to:
- What is considered an anticipatory breach of contract?
- When might an anticipatory breach of contract occur?
- What should I do if I suspect there will be a breach of contract?
- Do I have to wait until a breach of contract occurs to take legal action?
- How to take legal action for anticipatory breach of contract
- Anticipatory breach and repudiation
- What remedies are available for an anticipatory breach of contract?
- Summary
What is considered an anticipatory breach of contract?
If the other party to your commercial contract does or says something to indicate that they might not be willing or able to do something they promised to do when entering into the contract with you, and they do so before the point at which they agreed to carry out that obligation, then this is considered to be an anticipatory breach of contract. The key factor is that the other party somehow demonstrates their intention not to do the thing or things they promised to do, or indicates that they’re not going to go about it in the way that you agreed between yourselves when drawing up the contract.
When might an anticipatory breach of contract occur?
There are two main questions to think about when looking at whether there has been an anticipatory breach of contract. These questions are:
- Has the other party done or said something that gives you the strong impression that they no longer intend to be bound by their obligations under the contract? (In technical legal language, this is known as renunciation.)
- Has it somehow become impossible for the other party to perform their obligations under the contract because of something they’ve done or said?
Bringing a successful claim for anticipatory breach of contract hinges upon whether you have a subjective belief that the other party is going to breach the contract.
Example scenarios of an anticipatory breach of contract
Some of the most common kinds of examples of anticipatory breach of contract that our commercial contract disputes solicitors have seen are:
- The other party to a contract having a change of circumstances and telling the client ahead of time that they wouldn’t be able to carry out their contractual obligations after all, because it became impossible for them to do so.
- A supplier who contracted with the client to deliver goods to them on an agreed date was told by the supplier before the delivery date that they could no longer carry out the delivery on the day originally agreed.
- A client with a catering company who had a contract with a venue to provide catering services for a corporate event was informed the day before that they would no longer be permitted to access their land to provide the catering, because they’d found another company willing to cater at a cheaper rate.
What should I do if I suspect there will be a breach of contract?
If you suspect that there will be a breach of contract, it’s important to start gathering evidence to support your suspicion. The first thing will always be to revisit the contract itself to be clear on exactly what was agreed so that you can compare this with how the circumstances are shaping up to be when it comes to the other party’s obligations. Keeping records of communications between you and them to document the suspected breach is also advisable, as well as ensuring that you try and clarify their intentions in case there’s been a misunderstanding that’s led to your suspicion.
It's also worth speaking to a solicitor if you find yourself in this situation, because they’ll be able to advise you on whether an anticipatory breach of contract has or is likely to have occurred.
Do I have to wait until a breach of contract occurs to take legal action?
You don’t have to wait until a breach of contract actually occurs to take legal action. Once you become aware of the other party’s intention to breach a term or terms of your contract, you’re entitled to accept the breach, treat the contract as an end and pursue a claim for damages. Otherwise, you might decide to wait and see if the other party does in fact perform its obligations – or even affirm the contract if it makes commercial sense for you to do so. Legal advice about the best course of action should be obtained as soon as possible to help you decide what to do so that you’re in the strongest position you can be when it comes to your damages claim.
How to take legal action for anticipatory breach of contract
The importance of taking advice from an experienced commercial contract disputes solicitor as soon as you become aware of an anticipatory breach of contract cannot be underestimated. They will carefully review your contract, any evidence you’ve gathered about the breach and assess whether it’s possible to resolve the dispute via an alternative means instead of commencing court proceedings.
If you do decide to take legal action for an anticipatory breach of contract, the first thing you should do is let the other party know that you’re terminating your contract with them – a step which should be taken in writing. From there, there will be procedures to follow, such as those set out in the relevant Pre-action Protocol to your dispute, before court proceedings are formally begun.
Anticipatory breach and repudiation
The term ‘repudiatory breach’ when discussing contract disputes means that an innocent party has been deprived of the substantial benefit of a contract due to the fact that the other party has acted in such a way that’s breached a fundamental term of it.
Quite often, an anticipatory breach of contract is referred to as an ‘anticipatory repudiatory breach’ because the other party has shown an intention to commit a repudiatory breach of the contract. This means that in some cases, it’s possible for the contract to be considered as repudiated off the back of the anticipatory breach.
It’s important to highlight here that a repudiatory breach of contract doesn’t automatically end a contract. You’ll still have to choose whether you want to terminate the contract or affirm it when faced with an anticipatory breach.
What remedies are available for an anticipatory breach of contract?
The main remedy for an anticipatory breach of contract is damages, which you can pursue if you’ve decided to terminate the contract. The key factor to be aware of when claiming damages is that you’ll need to prove to the court that if the other party hadn’t breached their contractual obligation(s), you would have been able to carry out your own obligations. If the court considers otherwise based on the evidence, the level of damages payable to you might well be reduced.
You should also be aware of the need to mitigate the losses caused to you when you become aware of an anticipatory breach – in other words, take reasonable steps to minimise the financial impact of it on you. This will also be taken into account by the court when assessing what damages are payable to you from the other party.
Summary
Proving an anticipatory breach of contract isn’t always clear cut and because it involves close scrutiny of the contract between you and the other party, in tandem with the evidence around their words and conduct, it’s best to speak to a solicitor as soon as you become aware that there’s potentially going to be a problem. Our team of business dispute specialists can help identify whether an anticipatory breach of contract has occurred and provide you with tailored advice to secure the most commercially sensible outcome for your business.
