As a business owner, contracts are a critical part of managing operations and establishing clear expectations with partners, suppliers, or clients. However, situations may arise when the other party signals their inability to meet their obligations before the actual breach occurs. This is called an anticipatory breach of contract, and it can still cause significant financial losses if not handled properly.
When an anticipatory breach occurs, there are several remedies available to the non-breaching party to remedy the situation and potentially recover losses.
1. Canceling the contract
One of the first options available is to cancel the contract entirely. This remedy releases you from your responsibilities under the agreement, giving you the opportunity to pursue other business relationships without being bound by the breached terms.
2. Filing for damages
Another remedy is seeking damages through legal action. This allows the non-breaching party to recover any financial losses caused by the anticipatory breach. Damages can include both direct financial losses, such as missed income as well as additional costs incurred as a result of the breach.
3. Pursuing specific performance
In some cases, specific performance may be requested. This involves asking the court to compel the breaching party to carry out their duties as originally agreed upon. Specific performance is often used when the contract involves unique goods or services that cannot be easily replaced.
4. Rescinding the contract
Rescission nullifies the contract, aiming to return both parties to their original state before the agreement was made. This remedy can be helpful when continuing the contract is no longer practical or beneficial due to the breach.