Understanding anticipatory contract breaches

| Apr 7, 2021 | Business Disputes |

Contracts are foundational in the business world. They outline the rights and responsibilities of each party to the agreement. When one party shows that they have a clear intent to breach the agreement, that’s known as an anticipatory breach. Businesspeople in Pennsylvania need to know about this issue. There are important considerations related to payments that are involved.

The nuts and bolts of anticipatory breaches

In an anticipatory breach, an intent to break the contract has not necessarily been explicitly made clear. Instead, it can be something that’s inferred by the party that paid for the work. For example, if a business has contracted with a company to deliver a service, but they aren’t receiving progress reports, that could be a sign that they no longer intend to fulfill the contract.

An anticipatory breach can also occur with contracts focused on material goods. If a company is expecting delivery of clothing, but the supplier has run out of materials, it makes it impossible for the contract to be fulfilled. In that situation, the company can either cancel the contract or initiate litigation.

The party that made the promise, or promisor, can be held liable for damages to the party they made the promise to, or promisee. The court will, however, want to see evidence that the promisee has taken steps to limit the damages to their operation. Of course, the promisee also has another option: doing nothing. If the parties have had a solid relationship for a long time, this may be the course of action they decide to pursue.

Business disputes are often complex. It’s a good idea to contact an attorney in a situation where a contract is about to be breached.