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What is an anticipatory breach of contract?

| Apr 30, 2021 | Business Litigation |

A failure to perform the duties that are required under the terms set forth in a contract represents one of the most challenging types of legal problems faced by Texas companies. A business law dilemma that can arise related to binding agreements is what is known as an anticipatory breach of contract.

Anticipatory breach of contract defined

Under business law, an anticipatory breach of contract is defined as a situation in which a party to a legally binding agreement intimates, or it otherwise becomes clear, that a breach of contract of going to occur. In other words, conduct or statements begin to make it apparent that a party to a contract is not likely to perform obligations in that agreement by the due date.

Course of action for the non-breaching party

When this occurs, the party that intends to comply with the agreement has two available primary courses of action. First, it can wait until the point in time that the other party actually is in breach of the contract. Second, it can initiate legal action based on the anticipatory breach of contract.

By taking legal action based on the concept of an anticipatory breach of contract, the non-breaching party may be able to mitigate or lessen damages that would be sustained if an actual breach occurs There are also instances in which initiating an anticipatory breach of contract legal action can spur the other party to satisfy its obligations in a timely manner.

Anticipatory breach of contract cases are complicated and oftentimes emotionally charged legal matters. A company that is faced with this type of dilemma should seek the assistance of a qualified business law attorney.