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What is an anticipatory repudiation in contract law?

On Behalf of | Apr 4, 2023 | Business & Commercial Law

When parties enter into contracts, they usually intend to meet their obligations. An anticipatory breach or repudiation occurs when a party bound by the terms of a contract either states or makes clear by their actions that they do not intend to do so. This commonly happens when a person who has agreed to buy or sell an item changes their mind. When a Georgia contract is breached in this way, the non-breaching party is no longer legally bound to fulfill their obligations under the agreement, and they may take legal action to recover damages.

Anticipatory breach

This kind of breach of contract is called anticipatory in business and commercial law because the breaching party has either stated or made clear by their actions that they do not intend to fulfil their obligations before actually failing to fulfil their obligations. The breach is anticipated, but it has not yet occurred. These breaches are also called anticipatory repudiations because the breaching party is repudiating the contract by refusing to fulfil their obligations. If the breaching party changes their mind again and states that they will fulfill their obligations, both parties will once again be bound by the terms of the agreement as long as a breach has not already occurred.

Damages for anticipatory breach or repudiation

When an anticipatory repudiation occurs, the non-breaching party can file a lawsuit to recover damages if the breaching party’s actions caused them injury, loss or damage. However, they have a legal duty to mitigate their damages. For example, if the breaching party was obligated to deliver goods, the non-breaching party should mitigate their damages by trying to find another supplier.

Avoiding anticipatory repudiations

The best way to avoid anticipatory repudiations is to think carefully before signing contracts. This is especially true if time is of the essence and the consequences of a breach could be severe.