What is an Anticipatory Breach of Contract?
Contracts are a necessary part of doing business and form the basis of most modern commercial relationships in North Carolina. A breach of contract could give rise to a legal claim. In some cases, a contract breach could occur before the actual date of performance. An anticipatory breach (anticipatory repudiation) is a notable example. In this article, our experienced North Carolina business law attorney at Green Mistretta Law, PLLC, provides a comprehensive overview of the key things that businesses and entrepreneurs should know about an anticipatory contract breach.
Anticipatory Breach of Contract: Defined
An anticipatory breach of contract, also known as a repudiatory breach or anticipatory repudiation, occurs when one party to a contract indicates, either through words or actions, communicates their intention to not fulfill their contractual obligations before the performance is due. Many different reasons can explain why a party may opt to repudiate a business agreement. It is a type of breach that allows the non-breaching party to take legal action and seek remedies even before the actual breach occurs. The non-breaching party may choose to either terminate the contract or affirm it— depending on the case’s specific circumstances.
What Constitutes a Reputation of a Commercial Contract in North Carolina?
In North Carolina, the courts consider several factors to determine whether a party’s conduct amounts to an anticipatory breach of a commercial contract. A contract could be deemed repudiated (anticipatory breach) in any of the following situations:
- A Clear and Unequivocal Refusal to Perform: The party must express an unambiguous intention not to perform the contractual obligations when they are due.
- Inability to Perform: If a party becomes unable to perform their obligations under the contract, either due to financial reasons or other circumstances beyond their control, this may constitute an anticipatory breach.
- Voluntary Acts Rendering Performance Impossible: If a party engages in acts that make it impossible for them to fulfill their contractual obligations, this may be considered a repudiation of the contract.
The Rights of the Non-Breaching Party in North Carolina
Our state has a specific statute in place for anticipatory contract reputation. In handling these matters, the non-breaching party must understand the relevant North Carolina law (NC Gen Stat § 25-2A-402). Here are some of the critical things to know about the rights of the non-breaching party in North Carolina:
- Waiting Period: The non-breaching party has the right to wait to see if the other party will retract its anticipatory reputation for a commercially reasonable period of time. What constitutes a commercially reasonable period of time is very much fact and case-specific.
- Make a Demand: The non-breaching party may make a demand for performance or future performance in accordance with North Carolina law.
- Resort to Remedies: An anticipatory reputation does not eliminate a contractual obligation. The non-breaching party can pursue all remedies available under the terms of the bargain-for agreement.
North Carolina Law: A Duty to Mitigate Damages
Once a counterparty repudiates a contract, the non-breaching party has a duty to mitigate damages. The Cornell Legal Information Institute defines mitigation of damages as a legal doctrine “prevents an injured party from recovering damages that could have been avoided through reasonable efforts.” Failure to mitigate damages could limit recovery. It is crucial that businesses in North Carolina are proactive. For specific information related to the mitigation of damages in a breach of contract case, contact an experienced North Carolina business litigation attorney for help.
Alternative Dispute Resolution (ADR) May Be an Option for an Anticipatory Contract Breach
Alternative Dispute Resolution (ADR) refers to a range of methods used to resolve disputes outside of the traditional court system. These methods include mediation, arbitration, and negotiation ADR can be particularly useful in cases involving anticipatory breaches of contract. Advantages include the potential for cost savings, flexibility, confidentiality, and the preservation of business relationships. If you have questions about mediation or arbitration as an option for resolving a dispute over an anticipatory breach of contract, our North Carolina business lawyers can help.
Get Help From a Breach of Contract Attorney in North Carolina
At Green Mistretta Law, PLLC, our seasoned North Carolina business litigation lawyers handle the full range of breach of contract cases. If you have any questions about an anticipatory breach of contract, we are here to help. Contact us now to set up your completely confidential initial consultation.