Not all business contracts in Massachusetts reach their intended conclusion. Sometimes, one party indicates that it will not fulfill the contract terms. This situation is called an anticipatory breach. When it occurs, the party known as the promisee, which was to receive the goods or services, may take several courses of action.
Resolving an anticipatory breach
When an anticipatory breath occurs, one option open to the promisee is to cancel the contract. Businesses often take this option if no explicit harm occurs, such as when the promisor indicates that it cannot fulfill a contract due to the unavailability of materials.
Another common remedy involves business litigation against the promisor. When this occurs, both the promisor and the promisee must do everything in their power to mitigate the damages that occurred from the breach. In many cases, the failure to honor a contract provides the promisee with an immediate right to compensation.
Businesses that have good relationships with each other may elect to do nothing and simply let the contract slide and take a loss to maintain their connections. Anticipatory breaches rarely occur in unilateral contracts because of their complexity.
Which course of action is appropriate for me?
Every anticipatory breach situation is different. Therefore, it may not be in your best interests to immediately pursue compensation for the breach. Business owners should evaluate all factors when considering taking action in an anticipatory breach.
Temporarily suspending the contract may be another route with the possibility that the promisor may pay you for damages, if applicable. In these situations, you may ask the promisor for assurance that the contract will be fulfilled once materials are available or individuals are hired to carry out the work. When possible, try to maintain goodwill in your business relationships.