Breach of Contract, Actual and Anticipatory

In one line

A breach is a failure to keep the bargain, it comes in two shapes according to when it happens, and the innocent party's most important decision is the election he makes in response.

In the words a student can write in an exam: a breach of contract occurs when a party fails or refuses to perform his promise, or disables himself from performing it, without lawful excuse. Where it occurs at or after the time for performance it is an actual breach; where it occurs before that time it is an anticipatory breach, and section 39 of the Indian Contract Act 1872 provides that where a party has refused to perform, or disabled himself from performing, his promise in its entirety, the promisee may put an end to the contract, unless he has signified by words or conduct his acquiescence in its continuance.

Why the classification matters

The Act does not define breach and does not use the words actual or anticipatory. They are the names the courts give to the two situations, and they matter because they change three practical things.

When the innocent party may sue. On an actual breach he sues once the time has passed. On an anticipatory breach, if he accepts the repudiation, he may sue at once.

Whether he must stay ready. If he affirms, he must remain ready and willing to perform his side. If he accepts the repudiation, he is discharged.

How damages are measured. The date at which the loss is assessed shifts according to the election he makes.

Breach, and what is not a breach

A breach is a failure to perform without lawful excuse. So before calling anything a breach, eliminate the excuses the Act itself provides, and this is a useful checklist in a problem question.

• Performance was tendered and refused, section 38.
• Performance became impossible or unlawful, section 56.
• The parties agreed otherwise: novation, rescission, alteration, section 62; remission, waiver, extension, section 63.
• The promisee prevented performance, section 53, or neglected to afford reasonable facilities, section 67.
• The other party's reciprocal promise had to be performed first and was not, section 54.

Where none of these applies, the failure is a breach.

Actual breach

The ordinary case: the time for performance arrives and the party does not perform, or performs defectively.

Two forms.

• Failure at the time fixed. Whether it also ends the contract depends on section 55 and whether time was of the essence. See [Time as the Essence of the Contract].
• Failure during performance. A contract performed in stages may be broken part way through, and whether the innocent party may treat the whole as at an end depends on whether the failure goes to the root of the contract.