Do you believe that a contract between your business and another party will be breached by the other side? If so, actions taken now can help preserve your finances or even your ability to do business. Some of those actions can be taken even before the contract terms are up and the breach is clear. This category of contract law involves 'anticipatory breaches'. Here's what you need to know about them.
What Is an Anticipatory Breach?
An anticipatory breach of contract occurs when it becomes clear that one party will not be able to—or will choose not to—fulfill the terms of the contract. Unlike most breaches, you don't have to wait for the end of the contract to take action.
For example, if you contracted with a business to build a new wing of your office by December 31 but they haven't started construction by December 30, it's clear that they won't have that building done on time. You can anticipate that the contract will be breached even though it technically hasn't yet occurred.
How Can You Claim Anticipatory Breach?
Anticipatory breaches are sometimes easy to spot. A supplier who chose not to purchase the individual parts necessary to produce your contracted widgets cannot provide those widgets. And if you ask directly about it, the supplier may acknowledge that they won't be able to fulfill the contract. The breach is considered to be 'express'—stated by the other party—and you may be able to pursue compensation.
Many anticipatory breaches, though, are harder to navigate. If the supplier says they are simply behind schedule, they may still be able to get the widgets done on time. While the situation looks bad, it's not yet actionable. Eventually, it may become clear that fulfillment has become impossible. But without that express statement, you must be able to prove that you're relying on more than just suspicions.
Why Should You Take Action Now?
Anticipatory breaches are a time-sensitive issue. The longer you wait to start legal action, the more money you may lose. If the supplier won't be able to produce your widgets, you lose out on sales to your customers. You may even have to put in an expensive rush order with another supplier. But if you get compensation for the lost contract now, that money can minimize your losses.
Where Should You Start?
Protect your company by recognizing what makes an anticipatory breach and what doesn't. Then, you can decide when is the best time to pursue other solutions. Start by meeting with a contract dispute lawyer. They will help you build the right case that gets the results you need. Contact a contract dispute lawyer for more information.