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Anticipatory Breach of Contract
Anticipatory breach of contract is a disregarded practice of the law of contract all around the world as the conduct of a party defeats the purpose of making a contract, thus requiring strict action from the other party for the imposition of a stringent penalty for suffering an undue loss.
It is also a method of discharge of contract because once a party denies performing its part or obligation, the other party has the liberty to either claim damages or to claim enforcement from the court in order to terminate the contractual relationship between the parties.
What is the Meaning of Anticipatory Breach?
Anticipatory Breach of contract literally means an anticipation that the contract would be discharged without due performance of obligations therein. Thus, when a party to a contract either denies or disables itself from performing the act as specified in the contract before the completion of the contract or the day on which it needs to be done, the other party derives an understanding that the contract would be breached as it would not be completed in its entirety.
Provision of Anticipatory Breach under Indian Contract Act
Section 39 of the Indian Contract Act, 1872, is the sole provision in the entire statute that explains the term and provides for the consequences therein, which are as follows −
“Effect of refusal of party to perform promise wholly: When a party to a contract has refused to perform, or disabled himself from performing, his promise in its entirety, the promisee may put an end to the contract, unless he has signified, by words or conduct, his acquiescence in its continuance.”
It simply provides that if a party has either refused to perform or has disabled itself from performing the promise in its entirety, then the promisee (other party) has the liberty to terminate the contractual relationship by ending the contract.
However, there are two pre-requisites that need to be complied with before exercising the right arising due to refusal −
The refusal or disablement must be with respect to the entire promise and not just part of it.
The promisor must not have shown his intention to continue the contractual relationship, either expressly or impliedly.
Although anticipatory breach of contract does not automatically put an end to the contract, rather the other party has the liberty either to rescind the contract or keep it alive and subsisting until the due date of performance comes, as there might be a possibility that the promisor might change their stand and perform the obligation of promise.
After all, it is the mandate of the law that, despite earlier repudiation, the promisor is always entitled to perform its part of the promise even afterwards as well. Moreover, there might be a change in the circumstances before the due date of performance, and that may absolve or discharge the promisor from performing while also exempting him from any sort of liability.
Hence, anticipatory breach of contract is a well-settled but critically applied principle of contract law for determining the rights and liabilities of parties.
Conclusion
Anticipatory Breach of Contract is a legal principle and statutory provision that provides that if a party to a contract denies performing the promise before the due date of performance, then the other party has the liberty either to rescind the contract or keep it subsisting till the due date; however, the denial by the promisor of performance does not automatically terminate the contract. Moreover, if the contract is subsisting despite refusal, then the promisor can perform the contract irrespective of whether there was an earlier repudiation.
Frequently Asked Questions
What are the remedies available against a breach of contract?
The promisee is entitled to claim compensation in the form of damages, either liquidated or unliquidated, under the statute for damage or loss suffered due to non-performance of the contract.
Whether the promisor can escape the liability of paying damages if, during the duration of the contract, a change in circumstances makes the performance impossible?
Yes, the promisor can escape liability by justifying the non-performance due to the subsequent impossibility, irrespective of the fact that there was a repudiation earlier as the contract was still alive; hence, his liability to perform was also subsisting.
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