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Anticipatory Breach of a Construction Contract: What Is It?

The anticipatory breach of a construction contract can have significant ramifications for your company, regardless of which party will fail to fulfill their obligations. In a worst case scenario, an anticipatory breach can be a costly endeavor and may require legal action to resolve. In this editorial, a construction lawyer in Wilmington, NC, will define what an anticipatory breach of a construction contract is and provide you with more information about the implications and options for recourse.

What is an Anticipatory Breach of a Construction Contract?

An anticipatory breach, sometimes referred to as an anticipatory repudiation, is when one party declares to the other party that they will not honor their obligations as expressed under a signed contract. This can be voluntary or involuntary. It can stem from an unwillingness or inability to fulfill their contract terms.

3 Types of Anticipatory Breaches

There are three basic types of anticipatory breaches of construction contracts, with each type having different strategies for remediation. Here is an overview of the most common types of repudiation in the construction industry.

Express Repudiation

This happens when one party tells the other party that they will not honor the terms of the deal despite having signed a contract. One of the parties must clearly state that they will not be delivering supplies,  providing materials, or performing the work that they agreed to. An example of this is if an electrical contractor who your company hires says, “I will not be able to complete the wiring of this structure as promised.” As soon as you are notified that a subcontractor does not plan to fulfill their contractual obligations, it is imperative that you contact a Raleigh contractor attorney to discuss your options. The sooner you are able to seek legal assistance, the less of an impact the repudiation will have.

Property Transfers

An anticipatory breach can occur when a property owner sells or agrees to sell the property to a new owner, even if they fail to let your company know about the sale. For instance, if a person hires you to build a new residential home on a property but then enters into a contract to sell the property to a new owner before your project would start or be completed, it can mean that your construction contract is repudiated.

Impossible Terms

If the other party in your contract takes action that makes honoring the terms of a contract impossible, this is a type of repudiation. In construction, this can happen when a client enters into a construction contract only to run out of funds and abandon the project before a contractor can start or finish the agreed-upon job. Technically, your company is responsible for honoring the terms of your contract. However, it is impossible to do so if the other party abandons the project.

Recourse

Generally, there are two forms of recourse for repudiation. First, your company can accept the repudiation and terminate the contract. In many cases, this is what happens in the construction industry. It can be less bothersome and costly to accept it and move on with the project. 

The second option is to try to force the contractor to perform the work. This will likely require a court order and may or may not be successful. It can be extremely difficult to try to make another professional perform work that they don’t want to, especially if a lack of finances, skill, or materials caused the repudiation in the first place.

No matter which option your company chooses, you can sue the party that breached the contract for any damages that you may be entitled to. Call a contractor attorney in Wilmington, NC, to discuss the specifics of your contract dispute.

Timeliness

If you plan to take legal action against the party that repudiated, it is important to start the process as soon as possible. If you take action that re-affirms the contract, you may not be able to terminate it. And if you do not pursue legal action after you find out that another party plans to breach the contract, it could be perceived as accepting the breach and terminating the contract.

It is also possible to terminate a contract and be responsible for an anticipatory breach if you perceive that the other party does not plan to honor their contractual obligations. It is important that your company clarify in writing what the other party plans or does not plan to do. 

All parties involved in a contract should do what they can to ensure that they honor their contractual obligations. If one party repudiates, it hinders the completion of the project and the other party’s ability to perform their portion of the work. If your company is dealing with an anticipatory breach of a construction contract, consult with an attorney from a Raleigh construction law firm to discuss your options for legal recourse. Breached contracts put everyone’s interests in jeopardy. 

If you would like to speak with a Raleigh contractor lawyer, please contact us today.

Disclaimer: The information contained in this article is for general educational information only. This information does not constitute legal advice, is not intended to constitute legal advice, nor should it be relied upon as legal advice for your specific factual pattern or situation.