Dealing with an anticipatory breach of contract

On Behalf of | May 18, 2021 | Business Law |

If you have a contract with another party in Texas and you have reason to believe that party will breach the contract, it is not always necessary to wait until the breach occurs to take action. You can file a lawsuit for an anticipatory breach of contract in some circumstances.

When an anticipatory breach occurs

In business law, to take successful action, it is not necessary for the party causing the breach to give written or oral confirmation of their intentions. However, the other party should take steps to reduce their own damages, such as stopping payments and looking elsewhere for a different party that can fulfill their needs. An advantage of being able to file an anticipatory breach of contract is that action can be taken before serious damages occur. This might be the case when the party responsible for the breach is part of a manufacturing supply chain. In some cases, if a party is aware that supplying promised goods is going to be very costly, it might be cheaper to pay damages than to fulfill the order.

Identifying an anticipatory breach

An anticipatory breach can also happen in the context of services. If a party is falling behind on deadlines, this is not necessarily sufficient to allege that an anticipatory breach has occurred. However, if the party makes it clear that all of its resources are going toward another customer, this might be grounds for legal action. If goods are involved and a party requests delivery confirmation, 30 days without a response may be an anticipatory breach.

Waiting until an actual breach of contract occurs can mean waiting too long for many companies. A company that believes that a breach of contract may be imminent might want to contact an attorney to discuss what constitutes an anticipatory breach and how to proceed.