Anticipatory breach occurs when one of the parties to a bilateral contract repudiates the contract. The repudiation may be express or implied. An express repudiation is a clear, positive, unequivocal refusal to perform. Conversely, an implied repudiation results from conduct where the promisor puts it out of his or her power to perform so as to make substantial performance of his or her promise impossible. (Mammoth Lakes Land Acquisition, LLC v. Town of Mammoth Lakes (2010) 191 Cal.App.4th 435.)
Under civil code section 1440, “if a party to an obligation gives notice to another, before the latter is in default, that he will not perform the same upon his part, and does not retract such notice before the time at which performance upon his part is due, such other party is entitled to enforce the obligation without previously performing or offering to perform any conditions upon his part in favor of the former party.” Civ. Code § 1440.
A party can breach, or break, a contract before performance is required by clearly and positively indicating, by words or conduct, that he or she will not or can not meet the requirements of the contract. (CACI 324).
If Plaintiff proves that he or she would have been able to fulfill the terms of the contract and that Defendant clearly and positively indicated, by words or conduct, that he or she would not or could not meet the contract requirements, then Defendant breached the contract. (CACI 324).
Element 1: A Bilateral Contract
The general rule is that there can be no anticipatory breach of a unilateral contract, or a contract that has become unilateral because one party has completed its performance, because the party who has performed is not prejudiced by having to wait for the arrival of the other party’s time for performance before suing for breach. (Johnson v. Miller (2008) Cal.App.Unpub. LEXIS 708 (citing (Cobb v. Pacific Mut. Life Ins. Co. (1935) 4 Cal.2d 565).)
Exception to General Rule
Where the contract is for the performance of related acts, rather than merely the payment of installment amounts, or if, after the repudiation, it appears that performance of the agreement is unlikely and that the non-repudiating party may be protected only by recovery of damages for the value of the promise, then the courts have made an exception to the general rule requiring a bilateral contract and have allowed recovery for total breach of a unilateral contract. (Coughlin v. Blair (1953) 41 Cal.2d 587.) (repudiation of unilateral contract for performance of improvements to real estate supported claim for breach of entire contract)
Element 2: Repudiation
The repudiating party positively repudiates the contract when, by acts or statements, he indicates that he will not or cannot substantially perform his contractual duties. (Mission Beverage Co. v. Pabst Brewing Co., LLC (2017) 15 Cal.App.5th 686.)
An express repudiation is a clear, positive, unequivocal refusal to perform. (Mammoth Lakes Land Acquisition, LLC v. Town of Mammoth Lakes (2010) 191 Cal.App.4th 435.)
The refusal to perform must be of the whole contract or of a covenant going to the whole consideration, and must be distinct, unequivocal and absolute. (In re Marriage of Burkle (2006) 139 Cal.App.4th 712.)
Mere Threats are not Repudiations
Generally, a mere threat not to perform will not constitute a repudiation. (Reynaud v. Rollins (2006) Cal.App.Unpub. LEXIS 8312 (citing (Thornton v. Victor Meat Co.) (1968) 260 Cal.App.2d 452).)
Repudiation can be implied when a party to a contract voluntarily renders his performance impossible. (Central Valley General Hospital v. Smith (2008) 162 Cal.App.4th 501.)
Failure to Provide Adequate Assurance can be Implied Repudiation
Repudiation can be implied when the promisee demands adequate assurance of due performance from the promisor and the promisor fails to provide such assurance within a reasonable time which is not more than thirty days. Com. Code § 2609(1).
Retraction of Repudiation
A cause of action for anticipatory breach requires that the repudiation not be retracted prior to the time for performance or prior to a detrimental change in position by the non-repudiating party in reliance thereon. (Mammoth Lakes Land Acquisition, LLC v. Town of Mammoth Lakes (2010) 191 Cal.App.4th 435.) “If the repudiation is retracted prior to the time of performance, then the repudiation is nullified and the injured party is left with his remedies, if any, invocable at the time of performance.” (Ibid.)
Retraction of Repudiation Must be Clear and Unequivocal
The retraction of the repudiation must be clear and unequivocal, and the one who repudiates and then retracts the repudiation may not impose new conditions not in accord with the original contract. (Pichignau v. Paris (1968) 264 Cal.App.2d 138.)
When is it too Late to Retract the Repudiation?
If a party sues for breach after the other party anticipatorily repudiates the contract, the repudiation thereafter cannot be retracted, as the suing party has materially changed his position by treating the repudiation as a breach. (Central Valley General Hospital v. Smith (2008) 162 Cal.App.4th 501.)
Element 3: Repudiating Party’s Performance Not Yet Due
Repudiation must occur before the repudiating party’s performance is due under the contract; if the repudiation occurs after the performance is due, then the proper action is breach of contract. (County of Solano v. Vallejo Redevelopment Agency (1999) 75 Cal.App.4th 1262.)
While an essential element of an anticpatory breach is that repudiation by the promissor occur before his performance is due, where there is a partial breach of the contract followed by repudiation of the contract by the promissor, although the breach is total, it is not characterized as an anticpatory breach as to which an election by claimanint would lie to treat the contract as still binding and wait until the time for performance arrived before bringing suit. (Fox v. Dehn (1974) 42 Cal.App.3d 165.)
Element 4: Repudiation Treated as Breach
The non-repudiating party must have treated the repudiation as a breach of the contract. (Mammoth Lakes Land Acquisition, LLC v. Town of Mammoth Lakes (2010) 191 Cal.App.4th 435.)
“In the event the promisor repudiates the contract before the time for his or her performance has arrived, the plaintiff has an election of remedies—he or she may ‘treat the repudiation as an anticipatory breach and immediately seek damages for breach of contract, thereby terminating the contractual relation between the parties, or he or she can treat the repudiation as an empty threat, wait until the time for performance arrives and exercise his or her remedies for actual breach if a breach does in fact occur at such time.’ ” (Romano v. Rockwell Internat., Inc. (1996) 14 Cal.4th 479.)
Repudiation of a Contract Excuses Non-Repudiating Party’s Performance
If the non-repudiating party acts upon the repudiation, then he need not allege his performance under the contract, because the repudiation of a contract excuses the other party’s performance. (In re Marriage of Burkle (2006) 139 Cal.App.4th 712.)
Element 5: Ability and Willingness to Perform
In order to recover damages, the non-repudiating party must plead and prove that he would have had the ability to perform, and was ready and willing to do so, if not for the repudiating party’s breach. (Gaggero v. Yura (2003) 108 Cal.App.4th 884.)
Ability and Willingness to Perform
The non-repudiating party is not obligated to actually tender performance in order to be entitled to damages, but he must plead in the complaint and present evidence at trial sufficient to satisfy the trier of fact that, but for the repudiating party’s breach, he was ready, willing and able to perform as required by the contract. (Ersa Grae Corp. v. Fluor Corp. (1991) 1 Cal.App.4th 613.) (plaintiff was required to prove that it had the ability to form consortium and fund deal to construct office building and failed to do so only because defendant repudiated the contract).
Repudiating Party Rebuttal that Non-Repudiating Party was able to Perform
The repudiating party is then allowed to present evidence that the non-repudiating party would not have performed, and therefore, the breach caused the non-repudiating party no damage. (Ibid.)
Upon repudiation constituting an anticipatory breach, non-repudiating party may rescind contract, attempt to keep contract alive, or treat contract as coming to an end and seek to recover damages. (Softex, Inc. v. Am. Int’l Group (2007) Cal.App.Unpub. LEXIS 5777 (citing (Winegar v. Gray (1962) 204 Cal.App.2d 303.)
Immediately after an anticipatory breach, non-repudiating party may recover damages for a total breach of contract before repudiating party’s performance is due; however, recovery of prospective damages is limited to their value at time of judgment. (Mission Beverage Co. v. Pabst Brewing Co., LLC (2017) 15 Cal.App.5th 686.)
Mitigation of Damage
After a party to a contract receives notice of the other party’s repudiation of the contract and elects to not sue immediately under the contract, but rather, to wait until the repudiating party’s performance is due, he cannot continue to perform under the contract, and therefore, increase his damages, unless other circumstances exist that make his performance necessary. (Agam v. Gavra (2015) 236 Cal.App.4th 91.)
STATUTE OF LIMITATIONS
The statute of limitations is four years for claims based on a written instrument. Civ. Proc. Code § 337(1).
For claims based on an oral agreement, the limitations period is two years. Civ. Proc. Code § 339(1).
When Does the Statutory Period Begin to Run?
The statute of limitations does not begin to run until such time as performance is due under the contract, or until the plaintiff elects to regard the anticipatory repudiation as a final breach. (Romano v. Rockwell Int’l, Inc. (1996) 14 Cal.4th 479.) (statute of limitations under employment contract began to run when employee was terminated, not over two years earlier when employee was notified of the future termination).
AFFIRMATIVE DEFENSES TO ANTICIPATORY BREACH
Retraction or Waiver of Repudiation
A repudiation of a contract may be nullified by a retraction of the repudiation before the injured party materially changes his position in reliance on it or brings suit, or by the non-repudiating party’s treating the contract as if it is still in force. Com. Code § 2611.
Note: Where the non-repudiating party has treated the repudiation as a breach, brought an action for such breach, and treated the repudiation, at the time of trial, as ending the contract for all purposes except the recovery of damages, then the non-repudiating party’s attempts to enforce performance under the contract do not constitute a waiver of the repudiation. (Winegar v. Gray (1962) 204 Cal.App.2d 303.)