If you own a business, a contract with a customer, vendor, partner, or other party may be essential to your company’s operations. When that party signals they will not fulfill their obligations under the agreement, your business may face financial losses, operational setbacks, and reputational harm. Significantly, under New York law, certain statements or conduct may constitute an anticipatory breach, potentially giving you grounds to pursue a breach of contract claim before the time for performance actually arrives. A knowledgeable business litigation attorney can best advise you regarding your options and help ensure your business is protected when a contracting party indicates they will not perform.
What is an Anticipatory Breach?
Under New York law, an anticipatory breach (also referred to as an “anticipatory repudiation”) occurs when a party to a contract repudiates their contractual obligations before the time set for performance has arrived. An anticipatory breach may arise when a party expressly states that they will not perform or takes affirmative action that makes them unable, or apparently unable, to perform without breaching the agreement.
Importantly, not every statement expressing uncertainty or concern about future performance constitutes an anticipatory breach. New York courts generally require an express and absolute refusal to perform that is “positive and unequivocal.” Whether a party’s words or conduct meet this standard depends upon the specific language of the communication and circumstances surrounding the case.
What Should You Do if the Other Party Indicates They Won’t Perform?
If a party to a contract indicates they won’t fulfill their obligations, taking the right steps can help protect your rights and preserve your potential claims. The appropriate response depends on the contract language, the nature of the repudiation, and the circumstances surrounding the dispute. If the other party has indicated they will not perform in accordance with the contract, you should:
- Review the contract: Start by carefully reviewing the agreement to understand each party’s obligations and the procedures that may apply if a party signals they won’t perform. The contract may provide for certain rights and remedies following an anticipatory breach. Look for provisions that address performance deadlines, default, termination notice requirements, and dispute resolution.
- Preserve evidence: Keep copies of emails, text messages, contracts, invoices, meeting notes, and other communications related to the dispute. Pay particular attention to communications in which the other party discussed their willingness or ability to perform, as the exact language can be used to determine whether an anticipatory breach occurred. Preserving this evidence early can help support your claims if litigation becomes necessary.
- Determine whether an anticipatory breach occurred: Not every statement made by another party doubting their future performance constitutes an anticipatory breach. A business litigation attorney can review the party’s statements or conduct, along with the terms of the contract and surrounding circumstances, to determine whether the conduct amounts to an anticipatory breach and may support a breach of contract claim.
- Consider your legal options: Once you have evaluated the potential breach and preserved relevant evidence, consider how you want to proceed with the dispute. Depending on the circumstances, this may include demanding assurance, pursuing negotiations, or preparing to file a breach-of-contract lawsuit. A business litigation attorney can help you evaluate your options and determine the appropriate course of action.
- Consult with a business litigation attorney: Consulting with a business litigation attorney early can help you understand your rights and protect your position. An attorney can evaluate the contract and available evidence, determine whether the other party’s conduct may constitute an anticipatory breach, and advise you regarding the next steps in your case.
Understanding how to respond to anticipated nonperformance can help you avoid unnecessary complications and ensure you are in the best position to address the dispute.
What are the Remedies for an Anticipatory Breach?
A non-breaching party generally has two options after an anticipatory repudiation. They may treat the repudiation as a breach and immediately seek damages in court. A wrongful repudiation before the time for performance generally allows the non-repudiating party to seek damages for a total breach. Once a non-breaching party treats the repudiation as a breach, they are generally relieved of their own future performance obligations under the terms of the contract.
The other option for a non-breaching party is to ignore the repudiation and continue treating the contract as valid, waiting to see whether the other party fulfills their obligations when performance is due. The choice between these two options can have important consequences for a potential contract dispute and should be made carefully.
Depending on the circumstances and the agreement’s terms, a non-breaching party may also be entitled to remedies provided by the contract. These may include liquidated damages or other damages expressly provided for in the agreement. In some cases, a court may order specific performance, but whether this remedy is available largely depends on the nature of the contract and whether monetary damages would be inadequate.
Contact an Experienced Long Island Business Litigation Attorney
If you are facing a conflict with a party who has signaled they will not perform their contractual obligations, it’s important to understand your rights and options. At Barnes & Barnes, P.C., we offer experienced counsel for a wide range of business disputes across Long Island, including those involving breach of contract matters. Contact us at (516) 673-0674 to schedule a consultation and learn how we can assist you.
