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Anticipatory Breach of Contracts

Understanding Anticipatory Breach of Contract

Anticipatory breach is a special remedy in which the promisee foresees the breach, due to the conduct or expressions of the Promisor before the performance of a contract occurs. This provision allows the promisee to take recourse to alternative steps in order to mitigate his losses beforehand without waiting for the actual date of performance on which such breach is to actually c. As per the most significant case relating to anticipatory breach, Hochestor v. De La Tour[1], Lord Campbell CJ made a very important observation that forms the genesis of the concept of anticipatory breach. He stated that a ‘contract is contract from the date it is made and not from the date its performance is due’. Hence, even though the performance becomes due on a future date, the obligations are still initiated on the date of creation of the contract.

An illustration of anticipatory breach is given below –

X promises to sell certain goods to Y at the end of every month. X and Y are both situated in the same country. At the start of one month, X makes a public proclamation that it is ceasing its domestic operations and shall only be exporting all its products. If Y is aware of this proclamation, it does not have to wait till the date when the actual delivery becomes due. It can anticipate, in advance that there shall be a breach of the contract on the date of delivery or before the actual performance becomes due.

Provisions of the Laws

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

  1. 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.

  1. Section 60 of Sales of Goods Act, 1930

Repudiation of contract before 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other may either treat the contract as subsisting and wait till the date of delivery, or he may treat the contract as rescinded and sue for damages for the breach.

Options available to the aggrieved Parties/ Promisee

Both the above sections provide that the aggrieved promisee has two options, namely, at his own accord he may either rescind the contract or wait for its actual breach. In a landmark English the case of Avery v Bowden[2] where the promisee 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 obligations 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.

Acceptance by the Promisee: In the case of State of Kerala v Cochin Chemical Refineries Ltd.,[3] it was held that by refusing to advance the loan which the state had undertaken to advance, its obligation to purchase groundnut cake from the company did not come to an end. Also, the Court observed that repudiation just by one party alone does not bring an end to the contract. There has to be repudiation, on one side and acceptance of repudiation on the other. This law was emphasized by Lords in White and Carter (councils) ltd v Mc Gregor 1962 AC 413: (1962) 2 WLR 17: (1961) 3 All ER 1178(HL). 

Damages for Anticipatory Breach:

Further, in the case of Jawahar Lal Wadhwa and Anr. Vs. Haripada Chakroberty[4] it was observed by the Court that “It is settled in law that where a party to a contract commits an anticipatory breach of the contract, the other party to the contract may treat the breach as putting an end to the contract and sue for damages, but in that event he cannot ask for specific performance.”

Also, in the case of Manindra Chandra Nandy and Ors. Vs. Aswini Kumar Acharyya,[5] it was observed that upon anticipation of breach the injured party can immediately sue for damages. The Court held that:

Calculation of damages: The damages for breach of a contract by renunciation thereof before performance is due, are measured by what the injured party would have suffered by the continued breach of the other party down to the time of complete performance, less any abatement by reason of circumstances of which he ought reasonably to have availed himself. The substance of the matter then is, that the damages are assessed as on the date of the breach; nevertheless, they are to be a compensation for the loss caused by depriving the plaintiff of the benefit of the contract as it was originally made.

When anticipatory breach becomes effective: The doctrine of anticipatory breach is not a doctrine which fictitiously moves the performance ahead to the time on the repudiation and regards the repudiation as a failure to perform the contract. The anticipatory breach takes effect as a premature destruction of the contract rather than as a failure to perform it in its terms.

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To know more about Commercial Contracts & Agreements in India, read below:

Commercial Contracts in India

Commercial Contracts & Agreements in India

Merger & Acquisitions in India

Joint Ventures in India

[1] 1853 2E & B678

[2] 1855 5E & B 714,

[3] AIR 1968 SC 1316 

[4] Civil Appeal No. 2678 of 1985

[5] AIR1921Cal185, 25CW N297, (1921)ILR 48Cal427, 60Ind. Cas.337

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