Essentials of Contract

Anticipatory breach – Everything you need to know.

 

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Ayush Singh

What is ‘ Anticipatory Breach ‘ ?

It occurs when prior to the due date of performance, the promisor absolutely refuses or disables himself from the performance of his obligations. In other words, it is a declaration by one party of his intention not to perform his obligations under the contract. Thus, the anticipatory breach is the premature destruction of the contract, i.e., the repudiation of the contract before due date of performance.

Example:

X contracted to supply to Y 100 pieces of spark plugs on 15th December 2005. But before the due date of performance (i.e., 15th December), X informed Y that he is not going to supply the spark plugs at all. On Xs refusal to supply the goods, the anticipatory breach of the contract occurs. And Y put an end to the contract.

This doctrine of anticipatory breach is contained in Section 39 of the Indian Contract Act, which reads as under:

“Where 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 by conduct, his acquiescence in its continuance.”

Consequences:

In case of an anticipatory breach of the contract, the aggrieved party may exercise either of the following two options:-

  • He may treat the contract as discharged and bring an immediate action for damages.
  • He may treat the contract as operative and wait till the time of performance arrives.

Thus, the option of bringing the action lies with the aggrieved party. He may bring an immediate action or wait till the time for performance arrives. If he treats the contract operative and waits till the time of performance, the consequences will be as under:-

(1) The party who has committed the anticipatory breach of contract may perform his promise when the time for performance arrives, and the other party will be bound to accept the performance.

(2) The party who has committed the anticipatory breach of contract may also take the advantage of any subsequent event which discharges the contract. Sometimes, while the contract is operative, the contract is discharged due to subsequent impossibility or frustration. In such cases, the party guilty of breach may take the advantage of such discharge of the contract. And the other party loses his right to sue for damages.

Example:

‘X ‘agreed to sell his horse to Y on 1 st December, 2005. But before this date. X informed Y that he would not sell his horse at all. However, Y did not accept the refusal and kept the contract alive till 1st December, 2005.

The horse died before this date. In this case, the contract is discharged by the death of the horse on the ground of impossibility of performance. X can take advantage of this event, and Y cannot recover any damages form X for the breach of the contract.

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