Wednesday, February 15, 2012

Anticipatory Repudiation

Question:

I was looking at some practice MBE contract questions, and was really confused around the area of anticipatory repudiation - ie when it's triggered. For example, if two parties have contracted with each other for a service, and one party expresses some doubt as to their performance in the contract, can the other party cancel the contract due to anticipatory repudiation? I cant get around the topic for some reason! Any advice would be greatly appreciated!

The practice question I was looking at is the following:

On March 1, an excavator entered into a contract with a contractor to perform excavation work on a large project. The
contract expressly required that the excavator begin work on June 1 to enable other subcontractors to install utilities. On
May 15, the excavator requested a 30-day delay in the start date for the excavation work because he was seriously behind
schedule on another project. When the contractor refused to grant the delay, the excavator stated that he would try to begin
the work for the contractor on June 1.
Does the contractor have valid legal grounds to cancel the contract with the excavator and hire a replacement?

Response:

It's important to remember that anticipatory repudiation must be unequivocal, and not simply an expression of doubt. The options available to the nonrepudiating party are to sue immediately, suspend his own performance and wait for the repudiating party to perform, treat the repudiation as an offer to rescind the contract, or ignore the repudiation entirely.

Let's assume, however, that X has reason to believe that Y will not perform his end of the bargain when performance is due (because Y has expressed some doubt as to his ability to perform,) but Y has not unequivocally stated as such. All of the options as stated above are not available, as there has not been an anticipatory repudiation. X, however, can suspend his performance until he receives adequate assurances that Y will perform. And, if those assurances are not provided, then X can treat the contract as repudiated, and all options for anticipatory repudiation are once again fair game.

Addressing the facts in the question above, and applying the rules as stated in this post, it follows that when the excavator expressed some doubt as to whether he would be able to perform his obligations under the contract by the agreed upon date (ie, he would try to begin the work by June 1st), that expression of doubt did not rise to the level of unequivocal repudiation, and therefore the contract was not repudiated by the excavator. An option may be available for the contractor to suspend his own performance due to the excavator's prospective inability to perform, but if the excavator provides assurances that he will, in fact, perform by the agreed upon date, then the options for the contractor end there.



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