Dealing with a customer or another business that has breached one or more terms of their contract takes time and money – even if you recover damages and legal fees. That’s why it’s wise to be able to recognize an “anticipatory breach.”
An anticipatory breach of contract occurs when a party does (or fails to do) something that indicates that it’s likely going to breach the contract. Note that you generally can’t take legal action over an anticipatory breach unless it’s caused you to lose money. You might be able to cancel the contract, however.
How to recognize an anticipatory breach
Determining whether a party is guilty of an anticipatory breach isn’t always clear-cut. For example, you may have a contract with a painter who hasn’t started the job when they said they would because another job ran longer than they anticipated or they’ve had some people on their crew out sick. They assure you they’ll make up the time and get the job finished on schedule. If that’s not an unreasonable promise, you likely can’t claim an anticipatory breach of contract.
If you learn the painter has started on another job rather than yours, that’s more likely to be an anticipatory breach. Another example would be if they are suddenly “ghosting” you and not returning calls or texts. At that point, they might agree to rescind or terminate the contract. However, if you’re going to lose money because you have to find another painter and then pay them overtime to finish the job on time, you could have grounds for a breach of contract suit.
Preventing anticipatory breaches
By doing your due diligence about another business owner or other professional before contracting with them, you can help ensure that they have a solid reputation and track record. Another way to lessen the chance of an anticipatory breach (and a potentially costly actual breach) is to include multiple deadlines in the contract by which various steps must be completed rather than just one final deadline. This can motivate people not to procrastinate and allow you to take action before the project delays get out of hand.
Having sound legal guidance as you write, negotiate and enforce your contracts can also save you valuable time and money and help keep your projects on track.