An anticipatory breach occurs when someone refuses to honor a contract to which they agreed. The other person in the situation can take legal action in the California courts for breach of contract. The breach is anticipatory because failure to fulfill the contract becomes known before the contract’s end date.
Based on information from the California State Bar, there were more than 1 million civil lawsuits in California in 2021. Of those lawsuits, 100,000 were business-related. Business disputes often occur after someone commits an anticipatory breach. The person who paid for the service or product generally seeks to recover their costs. If you’re dealing with an anticipatory breach, there are multiple ways to respond.
Cancel
You can cancel the contract if you already know that the other person isn’t going to fulfill the contract. They should return any money that you paid for the service or product. The dispute can stop here. However, you can also take legal action against the other person for breach of contract.
Legal action
Perhaps you’re unable to get a refund for the money you paid for the service or product, or maybe the breach of contract caused you some other type of setback or hardship. You might take legal action to seek compensation for non-monetary losses caused by the anticipatory breach. This can help you minimize the damages caused by the other person failing to fulfill the contract.
Do nothing
You can decide to take no action against the anticipatory breach. Perhaps you feel the other person has a logical and valid reason for breaching the contract. For example, maybe there’s a problem getting materials to complete the job. You might also decide to do nothing if you want to maintain a personal or business relationship with the other person.
A breach of contract is only anticipatory when one person clearly states or shows they won’t fulfill the contract. Whether or not you want to take legal action depends on how you’re affected by the breach.