When we think of a breach of contract, we often think that it is actions or the lack thereof, that make up a breach of contract. But in fact, our words can also constitute a breach of contract, even if the contract is not actually breached.
Anticipatory Repudiation
That’s called anticipatory repudiation. With the right expression of future intention to not perform under an agreement it can allow a party to cancel a contract, or even sue for breach of that contract.
Imagine that you agree to supply IT support for a large company, and there is a contract that details the terms of the support that you will provide. You later learn that the premises or business where your employees will provide the IT services is farther than you thought it was, and thus, you want extra compensation for gas or gas mileage.
You tell the other side that you cannot provide the services unless extra funds are provided for the gas mileage—a term that was not in the original agreement.
Even though you haven’t actually breached the agreement (yet), you have expressed an intention to breach the contract. As such, you could, under a theory of anticipatory repudiation, be held to be in breach of the agreement.
A Clear Statement
To be found to have breached a contract under this legal theory, there must be a clear and unambiguous expressed intention of a refusal to perform under an agreement. So, in our example above, saying, “It will be pretty tough for me to provide those IT services, knowing how far your offices are,” may not be a specific enough intent to not perform the contract to warrant anticipatory repudiation.
Assurances
The Uniform Commercial Code does, in some instances, allow the non-breaching party to ask for assurances that the party that may be repudiating still intends to perform under the agreement. The repudiating party may be required to show some proof of the intention to perform. If that proof is not shown, both parties may be released from their obligations under the contract, and the non-breaching party may be permitted to file a lawsuit.
Repudiating by Actions
You can also repudiate a contract by saying nothing but rather by your actions. So, in our example above, imagine that the IT company packed its bags, closed its office, and disconnected its phones before the IT services were scheduled to start. The business that needed and contracted for the services could safely assume, by the IT company’s actions, that there was no intention to perform on the contract and, thus, could act accordingly.
Note that when it comes to payment conditions, anticipatory repudiation normally will not apply. So, for example, someone can say, “I’m not paying you, ever,” 100 times—but until the actual deadline for payment has come and gone, the payee could not sue for nonpayment.
Speak with a Chicago commercial litigation attorney at Ellis Legal at (312) 967-7629 today for help with your business law and commercial litigation legal issues.