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Understanding actual and anticipatory contract breaches

On Behalf of | Feb 28, 2023 | Business Litigation

Most businesses are founded on the grounds of a contract. A contract is a legally binding agreement between parties, which ensures everyone meets their obligations for the benefit of everyone. However, contracts can be breached and this can greatly affect business relationships and reputations.

As you may know, a contract can have a minor or material breach. A minor breach happens when a product or service didn’t meet a deadline, for example. While a material breach happens when the wrong product or service is provided. 

There are two other kinds of contract breaches: actual and anticipatory. These types of breaches can be harder to understand. Here’s what you should know:

What is an actual breach?

An actual breach is fairly straightforward; it involves one party blatantly refusing to fulfill their duties altogether or by the due date. This kind of breach may come as a total surprise when the contract isn’t fulfilled. As a result, the affected party may suffer damages.

What is an anticipatory breach? 

Much like an actual breach, an anticipatory breach occurs when a party is unable to perform a service or deliver a good. However, an anticipatory breach can occur when the affected party notices that a service or product won’t be delivered on time. In other words, the breach hasn’t occurred yet, but it will in the future. Because of the warning, you may be able to mitigate your losses and should do so, when possible. 

What can you do about a contract breach?

Contracts are made to ensure a product or service is done without issues, as stated above. In most cases, once a contract breach occurs or is anticipated, the damaged party may seek legal remedies. If you believe that a contract breach has affected you, then you may need to know your legal options.