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Understanding an anticipatory breach of contract

On Behalf of | Nov 4, 2021 | Business Law |

Business owners in Oregon sign all different types of contracts with other companies that they work with. Contracts are meant to establish the responsibilities of multiple parties and provide legal remedies if things go wrong. If one party in a contract decides that they are not going to fulfill their responsibilities under the contract, they might be sued for an anticipatory breach.

Anticipatory breach

An anticipatory breach of contract is when an actual breach has not yet occurred. However, one party has made its intention of breaching the contract unmistakably clear. This might have been done through a conversation, a written statement or a recorded declaration.

One example of an anticipatory breach of contract is a business partner who declares that they are walking away from the business and not doing any more work. If the business partner signed a contract with the other partners, this statement about quitting would make it clear that they intend to breach the contract.

Anticipatory breach with no declaration

There are many cases where an anticipatory breach can occur with no declaration from the breaching party. In fact, a person who has signed a contract may be reluctant to admit that they plan to breach the contract because they know that there will be legal repercussions. However, a failure to perform contractual obligations in a timely manner can indicate an anticipatory breach.

Legal remedies for an anticipatory breach

When one party is demonstrating that they are going to breach the contract, the other party may file a lawsuit against them to seek damages. The court generally expects the claimant to do everything they can to mitigate damages before seeking financial compensation from the breaching party. This could mean suspending payments to the breaching party and looking for a replacement.