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Terms in this set (14)
Anticipatory Repudiation (generally)
Anticipatory repudiation occurs when, before performance is due, there is executive duties on both sides and one party makes an unequivocal and definite statement that they will not perform. Typically, the non-repudiating party may elect to treat the repudiation as a total breach and terminate the agreement immediately.
Rule - Anticipatory Repudiation
A party has anticipatorily repudiated a contract when, before performance is due, a party
(1) makes an unequivocal and definite statement that he will commit a total breach, OR
(2) engages in any conduct that renders that party unable to perform its duties
Analytical Framework for Anticipatory Repudiation
1) Has a party repudiated the contract?
2) What are the rights of the non-repudiating party?
3) Has the repudiating party retracted its repudiation?
Has a Party Repudiated the Contract? - Before Performance is Due
The repudiation analysis applies only if the statement by the repudiating party occurs before performance is due
Has a Party Repudiated the Contract? - Unequivocal and Definite Statement
The statement for repudiation must be unequivocal and definite that the party will not perform their duties under the contract. A repudiation must show the party's intent to commit a total breach.
Mere expression of doubt as to the party's willingness or ability to perform is not enough to constitute repudiation. To show requisite level of intent for repudiation, the courts use the tools of interpretation.
The repudiation must be made directly to the person who is a party to the contract.
Has a Party Repudiated the Contract? - Conduct as Repudiation
A party may also engage in conduct with the result of making his performance impossible. This conduct may be treated as an anticipatory repudiation.
Has a Party Repudiated the Contract? - Insolvency
If a party is insolvent, or unable to pay its debts, then insolvency alone is not necessarily a repudiation. A bankrupt party can still operate and fulfill some of its contractual obligations to pay off its debts.
Rights of the Non-Repudiating Party - Sub-Rule
After repudiation, the non-repudiating party may:
(1) suspend performance
(2) terminate the contract and sue for breach, or
(3) continue to treat the contract as valid and wait for the time of performance before bringing suit.
Retraction - Sub-Rule
The repudiating party has the right to retract its repudiation.
After repudiation, the ability to retract a repudiation terminates when the non-repudiating party:
(1) gives notice that it chooses to treat the contract as rescinded or terminated,
(2) treats the anticipatory repudiation as a breach by bringing suit, or
(3) with or without notice materially changes its position in reliance on the repudiation
Request for Adequate Assurance of Performance (generally)
Sometimes, a statement or conduct is not so unequivocal and definite as to rise to the level of repudiation. This still may leave a party uncertain as to whether the party will perform. Thereby, a party may request adequate assurance of performance. If the assurance is not given, then the party can treat the contract as repudiated.
Analytic Framework for Adequate Assurance
1) Reasonable grounds for insecurity
2) Demand for adequate assurance of performance
3) Failure to provide adequate assurance is a repudiation
Reasonable Grounds for Insecurity - Adequate Assurance
Typical examples are where an obligor has financial troubles, a labor strike, or is experiencing shortages of essential supplies needed for their business.
"Reasonable grounds" arise for an obligee's belief that there will be a breach must be determined in light of all the circumstances of the particular case. These beliefs must have occurred after contract formation.
Minor breaches may give rise to more serious breaches.
Grounds for insecurity can also arise from indirect communication.
Demand for Adequate Assurance of Performance
The demand for assurance must be reasonable and made in good faith. If the demand is unjustified, then there may be a violation of the duty of good faith and fair dealing.
Failure to Provide Adequate Assurance is a Repudiation
Whether the assurance is adequate depends on the context.
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