Class 15 Lecture 4: Anticipatory Repudiation

Anticipatory Repudiation

• New topic: Anticipatory repudiation.

Definition of Repudiation

• Restatement (Second) of Contracts, § 250:
  • A statement by the obligor to the obligee indicating that the obligor will commit a breach that would itself give the obligee a claim for damages for total breach under § 243 (material breach).
  • A voluntary affirmative act which renders the obligor unable or apparently unable to perform without such a breach.
• In plain language:
  • When one party tells the other that they will not perform a duty under the contract in the future.

Effect of Repudiation

• Restatement (Second) of Contracts, § 253:
  • If an obligor repudiates a duty before committing a breach by nonperformance and before receiving all of the agreed exchange, the repudiation alone gives rise to a claim for damages for total breach.
  • Repudiating a duty that would result in a material breach is itself a material breach.
• UCC § 2-610 recognizes the same concept.
• Rationale:
  • The non-breaching party shouldn't have to wait for the breach to occur before seeking a remedy.
  • Repudiation is itself a material breach.

Hockster v. de la Tour (1853)

• Background:

  • The case comes from 1853, Queen's Bench in England.
  • Defendant de la Tour contracted with plaintiff Hockster for the plaintiff to act as his valet during travels in Europe, commencing on June 1, 1852.
  • Travel in 1852 was slow (boats, coaches).
  • Contract made in April 1852.
  • On May 11, the defendant informed the plaintiff that he no longer required his services and would not pay him.
  • The plaintiff sued for breach before the trip's planned commencement.

• Issue:

  • Must the plaintiff wait until the performance date (June 1) to claim breach, or can he sue immediately after the defendant's repudiation?

• Plaintiff's Argument:

  • A contract was made, and the defendant made it clear he would not perform; therefore, the plaintiff should be able to sue for breach.

• Defendant's Argument:

  • If the plaintiff didn't agree to dissolve the contract, he was bound to remain ready and willing to perform until June 1, and only after non-payment on June 1 could he sue.

• Court's Reasoning:

  • The court rejected the argument that no action can be brought until the performance date.
  • Examples of actions for breach prior to performance being due:
    • If a man promises to marry a woman on a future day and marries another woman before that day, he is liable for breach of promise of marriage.
    • If a man contracts to execute a lease on a future day and executes a lease to another for the same term before that day, he may be sued immediately.
    • If a man contracts to sell and deliver specific goods on a future day and sells them to another before that day, he is immediately liable.
  • The results in prior cases were not justified because performance was rendered impossible.
  • In each case, the court implied an obligation not to renounce or prejudice the other party's rights under the contract.
  • Breaching this implied promise provides an excuse to performance for the non-breaching party.

• Rationale for the Rule:

  • If the plaintiff had to wait, he would have to remain unemployed and ready.
  • It is more rational for the plaintiff to be at liberty to consider himself absolved of future performance and seek other employment to mitigate damages.
  • It would be unfair to make the plaintiff wait for a remedy.

• Rule Summary from the Case:

  • A man who wrongly renounces a contract cannot justly complain if he is immediately sued for compensation.
  • It seems reasonable to allow the injured party to either sue immediately or wait until the performance date.
  • If renunciation dispenses with a condition to be performed in the meantime, there seems no reason to require waiting until the performance date.
  • The renunciation may be treated as a breach of contract.

• Takeaway: Once one party makes clear they do not intend to perform a future obligation, the repudiation is itself a material breach, and the non-breaching party can sue for damages.

• Outcome: Judgment for the plaintiff.

  • Hockster recovered what he should have been paid under the contract, minus any amount he earned working for someone else during the contractual period (mitigation of damages).
  • He gets put back in the same position that he would have been, but for de la Tour's breach.

Mitigation of Damages

• If Party A breaches, Party B has a duty to try and mitigate damages by finding someone else to perform the contract or getting a new job.

Wrap-up

• Class 16 will cover when a repudiation may be retracted and the doctrine of adequate assurances.