Anticipatory Breach

In one minute

An anticipatory breach happens when a party refuses to perform, or makes himself unable to perform, before the time for performance arrives. The other party need not wait for the due date. He has two choices. He may accept the refusal, end the contract and sue at once. Or he may keep the contract alive and wait.

The choice has risks. In exams, the meaning, the two choices and the cases earn the marks. In real life, it decides whether you can act the day a supplier says he will not deliver.

Legal provision

• Section 39: when a party has refused to perform, or has disabled himself from performing, his promise in its entirety, the promisee may put an end to the contract. He cannot do so if he has signified, by words or conduct, his acquiescence in its continuance.
• Section 39, illustration (a): A, a singer, contracts to sing at B's theatre two nights a week for two months. On the sixth night A wilfully absents herself. B is at liberty to put an end to the contract.
• Section 39, illustration (b): the facts are the same, but with B's assent A sings on the seventh night. B has signified his acquiescence in the continuance of the contract. He cannot put an end to it, but he is entitled to compensation for the sixth night.
• Section 73, illustration (c): A contracts to buy 50 maunds of rice from B. A afterwards informs B that he will not accept the rice. B is entitled to the amount, if any, by which the contract price exceeds the price B can obtain for the rice at the time when A informs him.

Meaning and definition

Anticipatory breach is a breach committed before the time fixed for performance. It takes two forms. In an express repudiation, the party says he will not perform. In an implied repudiation, his conduct makes performance impossible, for example by selling to another buyer the very goods he promised.

The Act does not use the words "anticipatory breach". Section 39 covers it in the words "refused to perform, or has disabled himself from performing". The English case Hochster v. De La Tour gave the doctrine its name and shape.

The law lets the innocent party act early because waiting helps no one. He can look for another supplier at once and so reduce his loss. The timeline shows the moments in order.

1. Contract madePerformance is due at a later date.
2. Before the due dateOne party refuses, or makes himself unable to perform the whole promise (section 39).
3. The promisee choosesHe may accept the refusal, end the contract and sue now. Or he may affirm it and wait.
4. The due date arrivesIf he waited, performance is due. He must be ready and willing, and events may change his position.

Detailed explanation

Step 1: what makes a repudiation

• The contract is a valid one that is still to be performed.
• The time for performance has not yet come.
• One party shows a clear and unequivocal intention not to perform. A statement of difficulty or doubt is not enough.
• The refusal covers the whole promise (section 39: "in its entirety").

Step 2: the first choice, accept and sue now

The promisee may accept the repudiation. He treats the contract as ended and sues for damages at once. He need not wait for the due date. He is freed from his own duty to perform. Damages follow section 73, and he must take reasonable steps to reduce his loss.

Step 3: the second choice, affirm and wait

The promisee may refuse to accept the repudiation. He keeps the contract alive and waits for the due date. The contract then stays binding on both sides. Until he accepts the repudiation, the other party may retract it and perform. The promisee must remain ready and willing to perform his own part.

If he waits, he takes a risk. Something may happen before the due date that excuses the defaulter. In Avery v. Bowden, the outbreak of war made the contract illegal before the time for performance. The shipowner had not accepted the repudiation, so he lost his claim.

Step 4: what the choice does to the remedy

The promisee's election (his legal choice) affects what remedy is open. In Jawahar Lal Wadhwa v. Haripada Chakroberty, the Supreme Court held that a party who treats an anticipatory breach as ending the contract may sue for damages but cannot ask for specific performance. A party who keeps the contract alive may claim specific performance, but only if he proves that he was ready and willing to perform.

Step 5: how damages are measured

The promisee recovers compensation for the loss that arose naturally from the breach, within section 73. Illustration (c) to section 73 measures the loss at the time when the defaulter informs the promisee of his refusal. The promisee must also take reasonable steps to reduce the loss. The exact kinds of damages are a separate topic.

The promisee's two courses at a glance

Course	What the promisee does	Effect	Risk or limit
Accept the repudiation	Treats the contract as ended and sues now	Freed from his own promise. Damages under section 73	Cannot later ask for specific performance
Affirm the contract	Refuses to accept it and waits for the due date	The contract stays binding on both sides	Must stay ready and willing. An intervening event may defeat his claim

Don't confuse: anticipatory breach and mere doubt or delay

Only a clear refusal of the whole promise, or a disabling act, is an anticipatory breach. Doubt or an admitted difficulty is not.

Point	Anticipatory breach	Actual breach
When	Before the due date	On or after the due date, or during performance
Suit	May be filed at once if the promisee accepts it	Filed after the failure
Evidence	A clear refusal or a disabling act	The failure itself

Common mistakes

• Saying a breach can happen only on or after the due date. A clear advance refusal is itself a breach.
• Treating any hint of delay as repudiation. It must be clear and cover the whole promise.
• Forgetting that a promisee who waits keeps the contract alive for both sides and takes the risk of events in between.
• Claiming specific performance after accepting the repudiation. The two courses exclude each other.

Apply it

Leading case laws

• Hochster v. De La Tour (1853)

  Facts. De La Tour engaged Hochster as a courier from 1 June 1852 for three months. On 11 May 1852 he told Hochster his services would not be needed. Hochster sued on 22 May, before 1 June.

  Principle. A clear refusal before the due date entitles the innocent party to treat the contract as broken and sue at once. He need not wait for the due date or stay ready to perform.

  Why it matters. It is the origin of the doctrine.

• Frost v. Knight (1872)

  Facts. Knight promised to marry Miss Frost on his father's death. While the father was alive he told her he would not marry her. She sued for breach of promise. Citation: LR 7 Ex 111.

  Principle. She was entitled to sue as soon as he made clear that he would not perform. She need not wait for the father's death.

  Why it matters. It confirms the rule in Hochster and applies it to a promise whose time of performance was uncertain.

• Avery v. Bowden (1855)

  Facts. A charterer's agent told the ship's master at Odessa that no cargo would be supplied. The master stayed and did not accept the refusal. War broke out and made performance illegal before the loading time ended. Citation: (1855) 5 E & B 714.

  Principle. A promisee who does not accept the repudiation keeps the contract alive and takes the risk. The shipowner lost his claim because the war ended the contract before any breach was accepted.

  Why it matters. It shows the risk of waiting.

• Jawahar Lal Wadhwa v. Haripada Chakroberty (1989)

  Facts. The Supreme Court, (1989) 1 SCC 76, dealt with an anticipatory breach of an agreement and the remedy available to the other party.

  Principle. A party who treats the breach as ending the contract may sue for damages but cannot ask for specific performance. A party who keeps the contract alive may claim specific performance only if he proves that he was ready and willing to perform.

  Why it matters. It states the two courses in Indian law.

How to write this answer in the exam

Key points to remember

• Anticipatory breach is a refusal or disabling act before the due date (section 39).
• The refusal must be clear and cover the whole promise.
• The promisee may accept it, end the contract and sue at once (Hochster).
• Or he may affirm the contract and wait, staying ready and willing.
• If he waits, an intervening event may defeat his claim (Avery v. Bowden).
• After accepting the repudiation he can claim damages but not specific performance.

Quick self-test

Related topics

• Discharge by Breach
• Actual breach
• Discharge by impossibility of performance (Doctrine of Frustration)