6.4 Anticipatory Breach

• Library: Contract Law in Virginia (Virginia CLE) (2019 Ed.)

6.4 ANTICIPATORY BREACH

6.401 In General. Where one party to a contract has entirely abandoned it or has absolutely refused to perform, the other party may elect to sue on it without waiting for the time of performance to arrive. ⁶¹ The cause of action for abandonment of a contract obligation is one for anticipatory breach. ⁶² The doctrine of anticipatory breach or repudiation has its roots in English common law. In Hochster v. De La Tour, ⁶³ the parties entered into a contract under which the plaintiff was to commence work on June 1. On May 11, the defendant positively stated that he would not perform. On May 22, the plaintiff brought an action for breach even though the defendant had not yet breached. The court permitted the plaintiff's action.

6.402 What Constitutes Repudiation.

A. In General. Although Virginia case law does not provide a comprehensive framework of the types of repudiation, the Restatement (First) of Contracts⁶⁴ suggests a framework for categorizing most Virginia cases. It lists three actions that constitute anticipatory repudiation:

(a) a positive statement . . . indicating that the promisor will not or cannot substantially perform . . . (b) transferring or contracting to transfer to a third person an interest in specific land, goods or in any other thing essential for the substantial performance of his [or her] contractual duties; (c) any voluntary affirmative act which renders substantial performance impossible. ⁶⁵

B. Positive Statement. Under the Restatement (Second) of Contracts, the repudiatory statement must be sufficiently positive to be reasonably interpreted that a party will not or cannot substantially perform. ⁶⁶ A

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refusal to pay an executory contract before the time for performance becomes due may constitute an anticipatory breach. ⁶⁷

C. Transferring Specific Property. In a contract to sell property, if the seller avowedly and unequivocally repudiates the contract by selling the property to another, the buyer is not obliged to wait until the time fixed for performance but may sue to establish his or her rights as soon as the contract is broken. ⁶⁸

D. Voluntary Affirmative Act. An act may also constitute repudiation. If A agrees to work for B for one year starting on June 1, and on May 25, A sets sail for a year-long voyage, A has repudiated the contract. ⁶⁹ For a voluntary act to constitute anticipatory repudiation, the defendant's conduct must evidence a clear intention to refuse performance in the future by assuming a position in which performance would be impossible. ⁷⁰

6.403 The Right to Demand Assurances. Generally, under Virginia law, a right to demand assurances of due performance exists under the UCC but not otherwise unless the right is created in the contract.

Under the UCC, when a party has reasonable grounds for insecurity about performance by the other party, he or she may demand in writing adequate assurances of due performance. Failure to provide such assurances within a reasonable time (not to exceed 30 days) is a repudiation of the contract. ⁷¹

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Before the adoption of the UCC in Virginia, it was unclear whether Virginia common law embraced the concept of the right to adequate assurances. ⁷²

If the UCC does not apply, there does not appear to be any right to adequate assurances unless provided by contract. ⁷³ Accordingly, the practitioner may consider simply adding the appropriate language to the contract to provide the right to demand assurances...