NATIONAL UNIVERSITY OF STUDY AND

RESEARCH IN LAW, RANCHI

CONTRACTS

RESEARCH PAPER

ANTICIPATORY BREACH OF CONTRACT

SUBMITTED BY:- SUBMITTTED TO:-

MAHENDRA DHAKA MS.PRAGYA AISHWARYA
SEMESTER:- ASST. PROFESSOR
1 ‘ A’

ROLL NO.:-
1000
 ANTICIPATORY BREACH OF CONTRACT

The objective of this paper is to give a brief of anticipatory breach of contract, provisions of
laws, differences between anticipatory breach of contract and actual breach of contract, effect of
anticipatory breach of contract, remedies to anticipatory breach of contract and citing of cases
related to anticipatory breach of contract.

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 TABLE OF CONTENT

INTRODUCTION...................................................................................................... 3
PROVISIONS OF THE LAWS ..................................................................................... 4
ANTICIPATORY BREACH OF CONTRACT vs ACTUAL BREACH OF CONTRACT ........... 5
Anticipatory Breach of Contract........................................................................... 6
Actual Breach of Contract.................................................................................... 6
EFFECT OF ANTICIPATORY BREACH OF CONTRACT ................................................ 7
REMEDIES TO ANTICIPATORY BREACH OF CONTRACT ........................................... 8
CASES RELATED TO ANTICIPATORY BREACH OF CONTRACT ................................. 10
CONCLUSION ....................................................................................................... 12
REFERENCES......................................................................................................... 13

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 ANTICIPATORY BREACH OF CONTRACT

INTRODUCTION

An anticipatory breach (also referred to as an anticipatory repudiation) is an action that shows a

party's intention to fail to perform or fulfill its contractual obligations to another party.

Anticipatory breach of contract is when a party to a contract fails to perform the part of the
contract1 before the performance of contract becomes due.2

The anticipatory breach of contract by one party gives right to the other party of the contract to
claim the damages and compensations under the anticipatory breach of contract Section 39 of
The Indian Contract Act, which reads as:

“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.”

Anticipatory breach of contract is also referred as anticipatory repudiation of contract. Its

meaning has been explained in the provisions of the contract law. Anticipatory breach of contract
can be explained as the contract which has been repudiated even before the performance of the
contract has actually commenced.

In simple terms anticipatory breach of contract can be explained as that a party in a contract does
not intend to live up to his or her obligations under the terms and condition of the contract.

There are two types anticipatory breach of contract :

1
Associates Cinemas of America, Inc v World Amusement Co, (1937) 201 Minn 94 (Minnesota SC).

2
Dhanraj Mills Ltd Liability Co v Narsingh Prasad Boobna, AIR 1949 Pat 270: (1949) 27 Pat 723.

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  Express repudiation : In this type of anticipatory breach of contract the party breaches the
contract expressly. It means that the party to the contract has clearly refused to perform
his part of the contract even before the actual due date of the contact.
 Implied repudiation : In this type of anticipatory breach of contact the party does not
clearly refuses to perform his or her obligation rather imply from his/her words or actions
that he/she is not going to perform his/her part of the contract before the due date of the
contract.

PROVISIONS OF THE LAWS

Anticipatory breach, though not per se defined under the contracts laws in India, is incidentally
covered under the following provisions of the Indian Contract Act, 1872 and the Sales of Goods
Act, 1930.

 Section 39 of the Indian Contract Act, 1872 :

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.

 Section 60 of the Sales of Goods Act, 1930 :

Repudiation of contract before the due date. – Where either party to a contract of sale
repudiates the contract before the date of delivery, the other may either treat the contract
as subsisting and wait till the date of delivery, or he may treat the contract as reclined
and sue for the damages for the breach.

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Both the above mentioned sections provide that the aggrieved promise has two options, either to
recline the contract or wait for its actual breach, according to his own will. In the case of Avery
v. Bowden, the promise by his conduct portrayed that he shall allow the contract to subsist until
actual breach, and where before occurrence of the actual breach the contract was frustrated due
to impossibility. The court held that the promisor’s obligation were discharged due to
impossibility and since the promisee opted not to act for anticipatory breach he could not claim
damages, as the contract was frustrated before the date of performance.

ANTICIPATORY BREACH OF CONTRACT

vs.

ACTUAL BREACH OF CONTRACT

These are the following differences between anticipatory breach of contract and actual breach of
contract :

Basis Anticipatory Breach Actual Breach

Occurrence Anticipatory breach of Actual breach of contract

contract takes place when a takes place when the party on
party to a contract expresses the date of the performance of
his incapability to perform his the contract fails to perform
part of the contract in advance, his part of the contract.
i.e, before the due date of the
contract.
Nature of Breach The entire contract is The breach can be of
repudiated. warranty, condition or an in-
nominate term.

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 Effect of Breach The injured party in case of In actual breach of contract
anticipatory breach can either the injured party can go only
accept the breach or can for the remedy available for
continue with the contract. breach of contract.

Anticipatory Breach of Contract

As the name suggests, an anticipatory breach is a breach of contract before the time of performance.
So, if a promisor denies to perform his promise and signifies his unwillingness before the time for
performance, then it is an anticipatory breach of contract.

The promisor can convey his unwillingness either by:

 Expressing it in words (spoken or written)

 Implying it by his conduct

Let us look at an example. Peter enters into a contract with John on May 30, 2018. In the contract,
Peter agrees to sell his house to John provided he receives a token amount of Rs 5,00,000 from John
on or before June 30, 2018. However, on June 15, 2018, John informs Peter that he will not be able
to provide the token amount on the said date, thereby expressing rejection of the contract.

Here is another example. Peter enters into a contract with John on June 01, 2018. As per the
contract, Peter agrees to sell his guitar to John on June 10, 2018, for an amount of Rs 5,000.
However, he sells this guitar to Oliver on June 07, 2018. Hence, it is an anticipatory breach of
contract due to Peter’s conduct.

Actual Breach of Contract

While an anticipatory breach is before the time of performance, an actual breach of contract is on
the scheduled time of performance of the contract. An actual breach of contract can be committed
either:

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1] At the time when the Performance of the Contract is Due

Peter enters into a contract with John promising to deliver 50 bags of cotton to him on June 30,
2018. However, on the scheduled day, he fails to deliver the same. This is an actual breach of
contract. Also, this breach is at the time the performance of the contract is due.

2] During the Performance of the Contract

An actual breach of contract can also occur when one party fails to perform his obligation, during
the performance of the contract. This refusal can be expressed in words or by action.

EFFECT OF ANTICIPATORY BREACH OF CONTRACT

When an anticipatory breach of contract takes place, the injured or the aggrieved party generally
has two options at his/her disposal.

 The injured party can recline or repudiate the contract and can bring an action for
damages for anticipatory breach of contract without further waiting for the due date for
performance of the contract. The amount of damages shall be equal to the difference
between the price prevailing as on the date of refusal of the contract.

 The injured or the aggrieved party waits till the due date fixed for the performance of
contract and then bring up a case against the latter.

As a general rule in most states, the proper measure of

damages for anticipatory repudiation is the amount of money that will place the
injured party in as satisfactory a position as it would have been in had the contract
been performed; the purpose of such damages is neither to provide the nonbreaching
party with a windfall recovery nor to put him in a better position. This basic
measure of compensatory damages aims to provide the injured party its “benefit

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of the bargain.” A party injured by a breach of contract is allowed to recover
compensatory damages generally equal to the net amount of losses caused by the
breach plus the gains prevented because of the breach minus the savings made due
to the breach. A plaintiff can recover lost profits if the plaintiff proves the
loss with a reasonable degree of certainty, if defendant’s wrongful act resulted
in a loss and if profits were reasonably within the contemplation of defendant
at the time of entry into the contract.
A party injured by a breach of contract
is required to use all reasonable means to mitigate its damages. Where the nonbreaching
party allows its damages to be unnecessarily increased, the resulting loss that
such party could have avoided by performance of such party’s duty to mitigate
will fall upon such party.

There are four points that are essential to prove whether anticipatory breach of contracts takes
place or not. They are :

 When a party to a contract has clearly communicated that he would be unable to perform
his part the obligations and such performance leads to the root of the contract.
 The renunciation or repudiation to perform a contract cannot be conditional on certain
circumstances taking place. The refusal, therefore, should be absolute.
 When deciding whether there has been sufficient refusal to perform the obligations of the
contract, it must be judged according to whether a person in the position of the innocent
party would regard the refusal as being clear and absolute.

REMEDIES TO ANTICIPATORY BREACH OF CONTRACT

The remedies for the anticipatory breach of contract have been provided in the Indian Contract
Act. They are :

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 Monetary Damages – It includes a sum of money given as a compensation for the
financial losses suffered by the aggrieved party by the anticipatory breach of contract.
The party can ask for compensation for the net gain they would have got if the
anticipatory breach of contract would not have taken place or can claim the bargain
which he/she was entitled for under the terms of contract. The party in anticipatory
breach can recover the damages only to the extent of amount of actually spent by a party
in execution of his part of the performance.

 Restitution – It provides that the injured party of the contract in the same position as
he/she was in before the contract was made. If restitution is chosen as a remedy, then the
injured party cannot ask for compensation for the loss he/she has suffered due to the
anticipatory breach of contract.

 Rescission – It completely puts an end on the obligations of both the parties to a

contract. The parties that are indulged in the contract due to mistake, undue influence,
fraud, can request to set aside the agreement and the commitments framed thereunder by
method for cure of rescission accessible in such cases.

 Reformation – In this sort of remedy the court changes those substance of the
agreement as a result of which disparities was endured by the injured or the wronged
party to the contract. The courts for the most part oppose in giving the remedy of the
reorganization as an error in a contract can be effortlessly changed by completing a pre-
contract signing investigation.

 Specific Performance of contract – Specific performance of the contract is an

impartial remedy accessible in both types of contract, i.e., anticipatory breach of
contract and actual breach of contract. This remedy urges the breaching party to play out
his part of the contract i.e., his or her obligations as determined under the terms of the
contract. At the point when the money related damages are insufficient to remunerate the
injured or aggrieved parties against the anticipatory breach of contract only then the
court orders for remedy of specific performance of the contract. The remedy of specific

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 performance of the contract is for the most part given when the topic of the contract is
the fundamental reason of the dispute.

CASES RELATED TO ANTICIPATORY BREACH OF CONTRACT

Some of the landmark anticipatory breach of contract cases which explains and deals with
anticipatory breach of contract at length are discussed below :

In the case of Food Corporation v J.P. Kesharwani, 19943, the Supreme Court held that where
one party making unilateral alterations without any intimation to the other party and then
cancelling the contract, this amounted to breach (repudiation). Therefore, it can be stated that,
any kind of contract may be examined as broken once a party refuses to perform under the
contract as promised, regardless of when performance is supposed to occur. This unconditional
refusal is known as a repudiation of contract.

In the case of Universal Cargo Carriers Corp v Citati4, in the year 1957 it was held by the
Supreme Court that the “Anticipatory breach means that a party is in breach from the moment
that his actual breach becomes inevitable. Since the reason for the rule is that a party is allowed
to anticipate an inevitable event and is not obliged to wait till it happens, it must follow that the
breach which he anticipates is of just the same character as the breach which would actually have
occurred if he had waited.”

In the case of Aslhing v L.S. John5, (1984) 1 SCC 205, whereby the respondent who was a party
to a subsisting contract with the government for widening of a road, had written a letter to the
concerned Executive Engineer stating that he was closing the said contract. The appellant

3
1994 Supp (1) SCC 531
4
[1957] 2 QB 401
5
(1984) 1 SCC 205

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contended that the contents of the letter did not have the effect of putting an end to the contract.
In this case the judgement of the court was delivered by Fazal Ali J. It was argued that the
contents of the said letter made no effect in closing the contract. However after going through the
contents of the letter it was absolutely made clear, that the contractor unilaterally dismissed the
contract and informed the concerned department, also he resigned from the contractors list’s of
PWD Manipur. Thus after this letter the contract got repudiated and acceptance of the letter by
the authorities was unnecessary for putting an end to the contract although breach may give rise
to an action for damages.

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 CONCLUSION

 Anticipatory breach of contract is when a party to a contract fails to perform the part of
the contract before the performance of contract becomes due. It occurs when prior to the
due date of performance, the promisor absolutely refuses or disables himself from the
performance of his obligations. Anticipatory breach of contract stand different from
actual breach of contract as anticipatory breach of contract takes place when a party to a
contract expresses his incapability to perform his part of the contract in advance, i.e,
before the due date of the contract. Whereas actual breach of contract take place when
the party on the date of the performance of the contract fails to perform his part of the
contract. The remedies that can be taken in anticipatory breach of contract are –
Monetary damages, Restitution, Rescission, Reformation, Specific performance of
contract. The injured party can recline or repudiate the contract and can bring an action
for damages for anticipatory breach of contract without further waiting for the due date
for performance of the contract or the injured or the aggrieved party waits till the due
date fixed for the performance of contract and then bring up a case against the latter.

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 REFERENCES

BOOKS

 CONTRACT AND SPECIFIC RELIEF – AVTAR SINGH.

 BARE ACT-THE INDIAN CONTRACT ACT, 1872.

SITES

 https://www.manupatrafast.com/
 https://ssc.nic.in/
 http://www.google.com/

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