Anticipatory Breach of Contract

An anticipatory breach of contract is a situation where one party to a contract informs the other party that they will not be able to perform their obligations under the contract before the time fixed for performance has arrived.

Effects of Anticipatory Breach on Contracts

There are several effects of anticipatory breach on contracts, including:

1. Repudiation of the Contract: An anticipatory breach of contract is considered a repudiation of the contract, which means that the breaching party is indicating that they will not fulfill their obligations under the contract.

2. Right to Terminate: The non-breaching party has the right to terminate the contract immediately after the anticipatory breach has occurred.

3. Right to Sue: The non-breaching party also has the right to sue the breaching party for damages resulting from the anticipatory breach.

4. No Obligation to Perform: After an anticipatory breach, the non-breaching party is no longer obligated to perform their own obligations under the contract.

5. Mitigation of Damages: The non-breaching party has a duty to mitigate their damages by taking reasonable steps to minimize their losses resulting from the anticipatory breach.

Conclusion

In conclusion, an anticipatory breach of contract is a serious matter that can have significant consequences for both parties to the contract. The breaching party is indicating that they will not fulfill their obligations under the contract, which gives the non-breaching party the right to terminate the contract, sue for damages, and no longer perform their own obligations under the contract. It is important for parties to a contract to understand their rights and obligations in the event of an anticipatory breach to protect their interests.

SECTION 39 OF INDIAN CONTRACT ACT deals with anticipatory breach of contract and provides as follows: "When a party to a contract has refused to perform or disable himself from performing, his promise in its entirety, the promisee may put an end to the contract, unless he has signified, but words or conduct, his acquiescence in its continuance."

Effect of anticipatory breach: The promisee is excused from performance or from further performance.

Further he gets an option:

(1)To either treat the contract as "rescinded and sue the other party for damages from breach of contract immediately without waiting until the due date of performance; or

(2)He may elect not to rescind but to treat the contract as still operative, and wait for the time of performance and then hold the other party responsible for the consequences of non performance. But in this case, he will keep the contract alive for the benefit of the other party as well as his own, and the guilty party, if he so decides on re-consideration, may still perform his part of the, contract and can also take advantage of any supervening impossibility which may have the effect of discharging the contract.