Anticipatory Breach of Contract

Anticipatory Breach of Contract

An anticipatory breach of contract (or anticipatory repudiation) occurs when one party to a contract or their attorney unambiguously notifies the other party that they will not perform the contract, that they will stop any further performance of the contract, or that they will not accept the other party’s performance of the contract.  An anticipatory breach of contract is a material breach of contract and permits the non-breaching party’s attorney to sue for breach of contract and recover the profits that would have been earned if the other party had not breached the contract.

For example, two businesses sign a contract in which one of them will purchase a machine from the other business.  Before the machine is delivered, the buyer’s attorney sends the seller’s attorney a letter stating that the contract is terminated and they will not accept delivery of the machine.  In this example, the buyer has anticipatorily breached the contract by failing to perform under the parties’ contract so that the seller may sue for breach of contract damages.