Anticipatory Breach
An anticipatory breach of contract is an action that shows one party's intention to fail to fulfill its contractual obligations to another party. An anticipatory breach can end the counterparty's responsibility to perform its duties.Demonstrating the other party's intention to breach the contract gives the counterparty grounds for beginning legal action.
Definition: Anticipatory breach refers to a situation where one party clearly indicates or demonstrates through their actions that they will not fulfill their contractual obligations. This breach allows the other party to terminate the contract early and seek legal action for compensation.
Origin: The concept of anticipatory breach originated in 19th-century English contract law. One of the earliest cases was Hochster v De La Tour in 1853, which established that when one party clearly indicates they will not fulfill their contractual obligations, the other party can take immediate legal action.
Categories and Characteristics: Anticipatory breach is mainly divided into two categories: express anticipatory breach and implied anticipatory breach.
- Express Anticipatory Breach: One party explicitly states, either verbally or in writing, that they will not fulfill their contractual obligations.
- Implied Anticipatory Breach: One party's actions or attitude indicate that they will not fulfill their contractual obligations, such as stopping supply or payments.
- Allows the aggrieved party to terminate the contract early.
- The aggrieved party can take immediate legal action.
- Helps reduce the losses of the aggrieved party.
Specific Cases:
- Case 1: In a supply contract, the supplier explicitly states that due to rising costs, they will not be able to supply at the original contract price. In this case, the buyer can consider it an anticipatory breach, terminate the contract early, and seek compensation.
- Case 2: In a construction contract, the contractor stops all construction activities and removes all equipment and personnel. The owner can consider it an implied anticipatory breach, terminate the contract early, and seek compensation.
Common Questions:
- Q: What is the difference between anticipatory breach and actual breach?
A: Anticipatory breach occurs when one party clearly indicates or demonstrates through their actions that they will not fulfill their contractual obligations before the performance date; actual breach occurs when one party fails to fulfill their contractual obligations after the performance date. - Q: How can anticipatory breach be proven?
A: It can be proven through the other party's explicit statements, written notices, or actions.
