You have a contract, and the other party makes it clear that they cannot or will not perform their end of the bargain. You probably wonder what your rights are in this situation and whether you have to perform your obligations under the contract. The blog will help you in understanding an anticipatory breach of contract and what your remedies are when this happens.
Anticipatory breaches of contracts are tricky events. You will want to work with a South Carolina contracts attorney to make sure that your legal rights get protected and that you do not inadvertently make an expensive mistake.
The Definition of an Anticipatory Breach of Contract
Cornell Law School defines anticipatory breach as:
“In contract law, anticipatory breach occurs when a party repudiates prior to the
date that the performance is due. Anticipatory breach is an excuse for non-performance
by the non-breaching party. A party can retract its anticipatory breach provided that the
non-breaching party has not relied on it.”
In plain language, if the other side denies that a contract exists or refuses to perform their duties under the contract, they have repudiated the contract, which is a breach of contract. The other side does not have to perform its obligations under the contract unless the breaching party retracts its anticipatory breach before the non-breaching party relies on the repudiation.
Let’s say that you have a contract to buy $50,000 of computers from an office supply company. They notify you that, due to supply chain issues, they will not be able to deliver the computers you ordered from them. You do not have to pay them $50,000.
You do, however, have to take reasonable measures to minimize, also called mitigate, your damages. Suppose that the contract was for catering services for a large, important event. The caterer you hired notified you three months before the event that they would not be able to provide the catering for the event because they were going out of business. You should make every reasonable effort to find a replacement catering company to minimize your damages.
Remedies for Anticipatory Breach of Contract
There are four possible types of damages available for a breach of contract, depending on the circumstances.
- Compensatory damages. The purpose of compensatory damages is to pay the non-breaching party money for what they lost because of the breach. These losses are things like the increased amount they had to pay for replacement goods or services. Compensatory damages can get reduced if the judge feels that the non-breaching party did not try hard enough to mitigate their losses.
- Nominal damages. These damages are for “the principle of the matter.” In other words, you might not have suffered great expense because of the breach, but you want a judge to say that what the breaching party did was wrong.
- Liquidated damages. Your contract might state a specific amount that either party will have to pay the other for breach of contract or delays. Often, liquidated damages get stated at a “per diem” rate, like $1,000 per day of delayed performance, up to a maximum total amount.
- Punitive damages are rare in breach of contract cases because they usually require a showing of actual malice that greatly exceeds the conduct found in ordinary business transactions.
Whether you find yourself needing to back out of a contract or you are on the other side of an anticipatory breach of contract, you will want to talk to a South Carolina business attorney to navigate these complex situations. For help with your case contact our office today, we offer a free consultation.