Anticipatory Repudiation in Contract Law During COVID-19

The COVID-19 pandemic has thrown the business world into a time of uncertainty. Many businesses are trying to adapt to the new circumstances while others are folding entirely. This situation has put many business owners into a position where they may be forced to either breach a contract, or be on the other side of a broken contract.

If you believe that a party you have contracted with cannot or will not perform their contractual obligations, there are certain steps you can take to protect your interests against uncertainty.

What is Anticipatory Repudiation?

While an actual breach of contract cannot occur until the time for performance has arrived, anticipatory repudiation, or anticipatory breach of contract, occurs before performance is actually due. A party anticipatorily repudiates a contract where they either refuse to perform, or where their conduct makes performance of their promise impossible.

Demand for Adequate Assurance

If you reasonably believe a party has anticipatorily repudiated a contract, or if you are concerned that they will not perform their contractual obligations, California Uniform Commercial Code section 2609 allows you to demand adequate assurance of performance. This demand must be in writing, and should mimic the language of section 2609.

A demand for adequate assurance can only be made when a party has “ reasonable grounds for insecurity” that the other side will perform. (UCC § 2609(1)) Further, if commercially reasonable, the party demanding adequate assurance may suspend its performance until assurance is received. (Id).

Once a demand for adequate assurance is made, the other party has a reasonable time, not to exceed 30 days, in which to provide assurance that it will perform. (UCC § 2609(1)). If the party does not provide adequate assurance within a reasonable time, it is considered an anticipatory repudiation of the contract.

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Getting Legal Help

Brown & Charbonneau, LLP represents individuals as well as large and small companies in cases involving all forms of business disputes. If you are involved in a business dispute, or would like to learn about your rights and how to protect them, we can provide you with the information you need. Contact us or call today at 714-505-3000 to schedule a consultation and learn more about how we can help you.

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