Repudiation of contract occurs when one party refuses to perform the contractual duties as promised. Once a party has shown either through words or deeds that it is not going to perform its contractual obligations — also known as “anticipatory breach” — the other party may claim a breach of contract and seek legal remedies.
Courts typically recognize three types of repudiation:
Express repudiation. Express repudiation occurs when one party to a contract makes a positive and unconditional refusal to the other party to deliver as promised. The repudiation must be clear, unambiguous, and stated to the other party.
Actions making it impossible to perform. Actions speak as loudly as words when it comes to repudiation. Voluntary actions that make it impossible for one party to fulfill its obligations under the contract can count as repudiation.
Property transfer to third party. When a contract is for the sale of property and the seller transfers the property to a third party before the original sale can go through, this counts as repudiation.
If the contract is for the sale of goods, the Uniform Commercial Code (UCC) specifies the procedure for anticipatory breach. If one party has a reason to believe that the other party to a contract is not going to fulfill its obligations, that party may demand an “adequate assurance of performance” of the contract and can withhold its own performance until that assurance is provided. If the other party does not comply with this request for assurance after 30 days, the contract is repudiated.
However, none of the above rules for repudiation apply if the sole contractual obligation remaining is payment by one party to the other. In these situations, the party seeking payment must wait until the due date for payment has passed before being allowed to sue for a breach of contract.
It is also important to note that the non-breaching party has a duty to mitigate any losses anticipated because of a breach. This is known as “mitigating damages,” and generally means that the non-breaching party cannot wait and let the situation worsen before taking action.
When you are facing any type of business dispute, you need an experienced Arizona trial attorney to obtain the best possible result. Contact Williams Mestaz, L.L.P., at (602) 256-9400 to speak with us about your case.