Contracts matter. They are at the core of most modern commercial agreements. When a party fails to live up to its responsibilities under the terms of a legally valid contract, it can cause significant harm to the non-breaching party. The non-breaching party may be entitled to receive financial compensation for its damages.
Not all breach of contract cases are the same. There is a unique type of breach of contract called an anticipatory breach. While an anticipatory breach is still a breach of contract, it has important implications for any legal dispute. Here, our Monroe business litigation lawyer provides a guide to anticipatory contract breaches in North Carolina.
What is an Anticipatory Breach of Contract?
As explained by the court in the North Carolina Court of Appeals case of Cook v. Lawson, an anticipatory breach of contract is a type of contract breach that is “committed before there is a present duty of performance.” In other words, an anticipatory breach of contract occurs when one party declares that it cannot or will not live up to the terms of the contract ahead of time. In North Carolina, an anticipatory breach of contract can occur in two different ways:
- The breaching party provides a clear notice of its intent to breach the contract. Often, this includes an unequivocal repudiation of the agreement; or
- The breaching party takes some type of action that makes it impossible for contract performance to occur.
- An Anticipatory Breach of Contract is Not a Legal Defense
It is important to clarify that anticipatory breach of contract is not a legal defense. A party that announces its clear intent to breach a contract ahead of time can still be held legally responsible for the non-breaching parties’ damages. In North Carolina, the non-breaching party generally has the right to take legal action—including filing a breach of contract lawsuit—as soon as an anticipatory breach occurs. Even though performance has not yet been required, an anticipatory breach of contract still qualifies as a breach of contract.
North Carolina Policy: Non-Breaching Party Must Mitigate Damages
Through a breach of contract claim in North Carolina, the non-breaching party can seek financial compensation for its damages. The duty to mitigate requires non-breaching parties to be proactive in limiting their damages. That is to say that once an individual or business is aware of a breach of contract, it has a duty to limit any further losses. Failure to mitigate damages could limit the amount that can be recovered through a breach of contract claim. In North Carolina, the duty to mitigate damages is imposed on the non-breaching party from the moment that anticipatory breach occurs.
Schedule a Confidential Consultation With a North Carolina Business Litigation Attorney
At Perry, Bundy, Plyler & Long, LLP, our North Carolina business litigation attorneys are focused on helping clients find solutions. If you have questions about anticipatory breaches of contract, we can help. Contact us today to set up your fully private consultation with an experienced North Carolina business litigation attorney. We represent clients in civil litigation throughout all of Union County.