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Dealing with anticipatory breaches of contracts

On Behalf of | May 20, 2021 | Business Law |

As a business owner, you know that creating contracts with clients and suppliers is a necessity to ensure your legal rights in the event that something goes wrong. In most cases, you won’t even have to worry about another party not fulfilling their contractual obligations. However, there are some rare cases in which another party may not be able to do so, and it’s important that you understand what you can do in that scenario.

Anticipatory breaches of contract

When one party to a contract that you’re involved in states that they’re going to be unable to fulfill their contractual obligations and the contract has not yet expired, it’s considered an anticipatory breach of contract. This type of contractual breach is unique in the fact that the breach actually happens prior to the contract expiration date. Once you understand how to identify this type of contractual breach, it’s time to learn how you can respond to it when it happens to you.

How to remedy the situation?

If you’re experiencing an anticipatory breach of one of your contracts, you have a couple of different ways that you can deal with it. One of the most common ways to handle this type of contractual breach is to simply cancel the contract. If any consideration was given to the breaching party of the contract, they are to refund the consideration upon the cancellation of the contract. If you believe that your business is going to suffer great financial loss due to the other party’s unfulfillment of their contractual duties, you may want to take legal action against them. It’s important to note that you can partake in business litigation prior to the contractual delivery date.

While most contracts are pretty easy to establish, dealing with an anticipatory breach of one of those contracts can be a bit confusing at first. You may want to consult an attorney to determine what your remedies are.