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Finance

What is an Anticipatory Breach?

Mary McMahon
By
Updated Feb 28, 2024
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An anticipatory breach is a form of breach of contract in which one party makes it unequivocally clear that he or she will not be fulfilling the contract. By law, the other party is released from the contract, since failure to uphold the contract makes the contract void. In addition, the performing party who is not breaching the contract may be able to sue for damages under breach of contract laws, even though the contract may not have officially been breached yet.

There are a number of ways in which an anticipatory breach can occur. One way is for one party to explicitly state that he or she will not be fulfilling the contract, as for example when a grocery store supplier states that it will no longer make deliveries. Notification can also occur through actions. For example, if a contractor sells off his or her tools, this renders the contractor unable to work, and could be considered a breach of any outstanding building contracts because it is clear that the contractor does not intend to fulfill them. Nonpayment can also constitute an anticipatory breach.

Under the law, the person doing the breaching cannot turn around and sue the other party for failing to meet the contract. In the example with the contractor above, for example, once the anticipatory breach has occurred, the contractor cannot then go to a homeowner and sue for non-payment, because the contractor breached the contract and therefore the homeowner is no longer required to meet his or her end of the deal.

This concept is also known as anticipatory repudiation. People should be careful, as it is possible to run afoul of an anticipatory breach. For example, if someone asks for assurances that a contract will be fulfilled and those assurances are not provided, this could be treated as an anticipatory breach, under the argument that failing to provide proof is akin to indicating that the contract will be broken.

If a contract does need to broken, it is advisable to consult a lawyer. The lawyer can review the terms of the contract and provide information on the best way to break it. Sometimes, the other party may be willing to renegotiate the terms to address a change in situation, especially if the party doing the breaching makes it clear that he or she is involved in a good faith effort to fulfill as many of the terms as possible.

WiseGeek is dedicated to providing accurate and trustworthy information. We carefully select reputable sources and employ a rigorous fact-checking process to maintain the highest standards. To learn more about our commitment to accuracy, read our editorial process.
Mary McMahon
By Mary McMahon

Ever since she began contributing to the site several years ago, Mary has embraced the exciting challenge of being a WiseGeek researcher and writer. Mary has a liberal arts degree from Goddard College and spends her free time reading, cooking, and exploring the great outdoors.

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Discussion Comments

By anon345673 — On Aug 21, 2013

I was wondering could anyone offer me advice please? I signed a contract to take over a franchise from my boss. I signed the contract (after he told me the sooner I signed, the sooner I would own the shop) over three months ago. I have not heard anything from him except delay after delay after delay. His lawyers is on holiday, or the landlord is away, or they need to check the legality of something or other.

He told me when I signed the contract I would be in the premises within two months. I hear negativity back constantly and really need advice.

By ceilingcat — On Oct 13, 2011

Keep in mind that if you're going to sue someone for anticipatory breach of contract, you have to have proof they intend to breach their part of the contract. The example the article gave of the contractor selling their tools is a good one. A letter stating the intent not to perform duties laid out in the contract is another.

Anyway, I guess my point is that just verbally stating you aren't going to perform the contract probably wouldn't be enough for a lawsuit. There would have to be some kind of tangible proof.

By Azuza — On Oct 12, 2011

@sunnySkys - It sounds nice for the other party involved in the contract, doesn't it? If someone gives you verbal notification they're going to breach the contract before they do it they just made the other persons life a lot easier.

Sometimes court cases can take awhile. If you sue someone for anticipatory damages you're getting the ball rolling early, so to speak. I think this would be a good way to minimize the damages for the wronged party.

By sunnySkys — On Oct 11, 2011

In theory, if I were going to breach a contract, I don't think I would let the other party know first! As the article said, you can be sued for an anticipatory breach, too. It would be pretty crappy to be sued for breach of contract when you hadn't even breached the contract yet.

I suppose it might make sense to let someone know you can't or won't fulfill your part of the contract if you think they might negotiate. But I think you would have to choose carefully, because this could totally backfire if they don't want to compromise.

In general, contracts are taken pretty serious by courts. I think I would think twice before breaching one or saying I was going to breach one.

By orangey03 — On Oct 11, 2011

My husband works in construction, and he signs a contract with whoever he does work for so that he doesn’t get ripped off. His workers expect timely payment, and he wants to ensure that they receive their wages after the work is complete.

Once, a guy he had a contract with actually told him that he was not going to pay him. He said times were tough, and he didn’t have the money.

His crew were getting restless, because they hadn’t received a paycheck in a month. After he got his lawyer to contact the guy, he decided to pay up in order to avoid a trial. Sometimes just a threat of legal action is enough to motivate a person to do what’s right.

By StarJo — On Oct 10, 2011

@lighth0se33 - You know, he might not have won even if he had sued you. It sounds like he didn’t fulfill his part of the contract either, and you would have had grounds to counter sue.

I counter sued my cleaning lady once. That sounds frivolous, I know, but she had been doing a terrible job, and she sued me for refusing to pay her. I didn’t see any reason to pay her for work that wasn’t even complete, so I told her to go ahead and sue me and see what happened.

I have learned my lesson, and I refuse to sign a contract with a housekeeper anymore. I just pay the new girl by the week, and she is happy with that.

By lighth0se33 — On Oct 10, 2011

I once informed someone I had a contract with that I would not be carrying it out. I was a singer with a manager, and my career seemed to be going nowhere. I was ready to settle down in one place, and I couldn’t see music as a career anymore.

His part of the contract involved doing all he could to get me gigs and further my career. In a year’s time, he had only gotten me one gig, and nothing had happened to enhance my career. I felt stalled in my life, and I didn’t want to waste years of it.

He threatened to sue, and I knew that he had grounds for it, but I paid him the money I owed him up to that point in the contract, and he backed off. I felt relieved, yet I had to live with the fact that he could have sued me at any time in the following five years.

Mary McMahon

Mary McMahon

Ever since she began contributing to the site several years ago, Mary has embraced the exciting challenge of being a...

Learn more
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