Anticipatory Breach

Anticipatory Breach: Definition and Key Points

Key takeaways
* An anticipatory breach (anticipatory repudiation) occurs when one party clearly indicates they will not perform their contractual obligations before performance is due.
* The non-breaching party may treat the contract as breached immediately, stop their own performance, and seek remedies, but must make reasonable efforts to mitigate damages.
* For sales of goods, the Uniform Commercial Code (UCC) provides a right to request adequate assurance of performance (UCC §2‑609).

What it means

An anticipatory breach happens when a party, by words or actions, demonstrates an unequivocal intent not to fulfill its future contractual duties. The manifestation of intent need not be a formal statement; conduct that makes performance impossible or shows an absolute refusal to perform can qualify.

If established, the non-breaching party can generally:
* Treat the contract as terminated,
* Stop performing their own obligations, and
* Seek damages or other legal remedies immediately rather than waiting until the performance date.

Legal requirements

To qualify as an anticipatory breach, the showing of intent must be clear and absolute—not merely speculative or based on rumors. Key elements include:
* An objective indication (words or conduct) that the obligor will not perform;
* The indication must amount to an unequivocal refusal or make performance impossible.

Special rule for goods (UCC §2‑609)
* Under the UCC, a party anticipating breach may demand adequate assurance of performance.
* While awaiting adequate assurance, the demanding party may suspend their own performance.
* If proper assurance is not provided within a reasonable time (commonly 30 days in practice), the demanding party may treat the contract as breached.

Mitigation and remedies

The non-breaching party has a duty to mitigate damages, which means taking reasonable steps to reduce loss (for example, seeking substitute performance or halting payments). Remedies commonly include:
* Compensatory damages for losses caused by the breach,
* Specific performance or injunctive relief in limited cases,
* Contract termination and recovery of reliance costs.

Failure to mitigate can reduce recoverable damages.

Example

A developer hires an architecture firm to deliver final plans by a fixed deadline. If the firm falls behind but continues work, that alone may not be an anticipatory breach. If instead the firm abandons the project and reallocates all staff and resources to another client so that timely completion becomes impossible, that conduct constitutes an anticipatory breach—entitling the developer to stop performance and seek remedies.

Practical considerations

• Assess whether the other party’s words or actions constitute an unequivocal refusal or merely a temporary difficulty.
• Preserve evidence of communications and conduct that demonstrate intent not to perform.
• Consider requesting adequate assurance under the UCC for transactions involving goods.
• Consult an attorney before treating a contract as breached or stopping performance, since facts and applicable law can affect rights and remedies.

Reference

• UCC §2‑609 — Right to Adequate Assurance of Performance (sale of goods).