A vendor notifies you that they will not deliver contracted goods unless you agree to a price increase not found in the original contract. Another vendor ignores the contract completely, selling to another buyer instead. What is the recommended course of action in these scenarios?
Anticipatory repudiation occurs when a party to a contract communicates an unequivocal intent not to perform. For contracts involving the sale of goods in Missouri, this repudiation must involve a loss that substantially impairs the contract’s value. If this happens, you have legal options to protect your interests.
What actions can you take for anticipatory repudiation?
There are several options available to you as an aggrieved party:
- Await performance: You may await performance by the repudiating party for a commercially reasonable time. However, once you elect to treat the repudiation as a final breach, you must take reasonable steps to mitigate your damages to ensure full recovery under Missouri law.
- Resort to remedies for breach: You may immediately pursue any legal remedy for breach of contract. You could do this even if you have urged the repudiating party to retract the repudiation or informed them that you will wait for their performance.
- Suspend performance: Regardless of whether you choose to wait or pursue a breach remedy, you may suspend your own performance obligations under the contract.
What if you are the seller?
If you are a seller or vendor facing an anticipatory repudiation, you have all the rights of an aggrieved party as indicated above. Additionally, to mitigate losses, you may allocate matching products to the contract provided those items are under your possession or control at the time you learn of the breach.
You may also exercise reasonable commercial judgment to avoid losing money and to reach effective realization of the contract. Depending on what is commercially reasonable, you may complete manufacture to identify the goods to the contract, cease production and resell the components for scrap, or proceed in another reasonable manner.
Protecting your business against anticipatory repudiation
With these options, you have the legal flexibility to take whichever action best minimizes your financial losses. Acting decisively can help ensure you preserve your rights during these situations.
