Your vendor emails that it "will not be able to deliver" the custom equipment due in ninety days. Your buyer announces it is walking away from the purchase before closing. Do you have to wait for the deadline to pass before doing anything? In California, usually not. The doctrine of anticipatory breach — also called anticipatory repudiation — lets you act on a clear refusal to perform before performance is due. Used correctly, it saves months. Used carelessly, it can turn you into the breaching party.
What counts as anticipatory breach
An anticipatory breach occurs when one party repudiates the contract before its performance is due. The California Supreme Court's decision in Taylor v. Johnston (1975) 15 Cal.3d 130 recognizes two forms:
- Express repudiation — a clear, positive, and unequivocal refusal to perform. "We are not going forward with this contract" qualifies. "We are having some difficulties and may need more time" does not.
- Implied repudiation — conduct that makes performance impossible, such as transferring the promised property so that the seller can no longer convey it or shutting down the division that was supposed to do the work.
The "unequivocal" requirement does real work. Expressions of doubt, requests to renegotiate, complaints about price, and hedged statements about future performance are generally not repudiation. Courts require a refusal so clear that a reasonable party would understand the deal is off.
Your three options after a repudiation
When the other side clearly repudiates, California law gives the non-breaching party a choice:
- Treat the contract as breached now. You may stop your own performance, sue immediately for damages, and cover — for example, hire a replacement vendor — without waiting for the original deadline. Civil Code § 1440 excuses the other side from performing or offering to perform its own conditions when advance notice of nonperformance is not retracted before performance is due.
- Wait and see. You may keep the contract alive and urge the repudiating party to perform. This preserves the deal but carries a catch: while the contract remains open, the other side can retract the repudiation, and you must generally remain ready to perform your own obligations.
- For goods contracts, demand adequate assurance. Under California Commercial Code § 2609, if you have reasonable grounds for insecurity about a sale-of-goods contract, you may demand adequate assurance of performance in writing and, if commercially reasonable, suspend your own performance in the meantime. If assurance does not arrive within a reasonable time — not exceeding 30 days — the contract is treated as repudiated. This is often the safest path when the other side's statements are worrying but short of unequivocal.
Retraction: the deadline on your decision
A repudiating party can take it back. Under Taylor, a repudiation may be retracted any time before performance is due, unless the injured party has already treated the repudiation as final — by filing suit, covering with a substitute, or otherwise materially changing position. Once an effective retraction lands, the contract is back on and both sides must perform. That is why the "wait and see" option should be a deliberate choice with a time limit, not drift.
The trap: calling breach too early
The most expensive mistake in this area is treating an ambiguous statement as a repudiation. If you declare the contract over, stop performing, and a court later decides the other side never unequivocally refused to perform, you are the one who breached. Before acting, pressure-test the record:
- Is the refusal in writing, and is it truly unconditional? A statement contingent on events ("if the permits do not come through, we cannot deliver") is usually not enough.
- Can you convert ambiguity into clarity? A short letter asking the other side to confirm in writing whether it intends to perform by the contract date often produces either a commitment or an unmistakable refusal — both useful.
- Have you performed, or are you excused? Your own material breach can defeat the claim regardless of their statements.
Damages and deadlines
Damages for anticipatory breach are measured the same way as for ordinary breach: the amount needed to put you where you would have been had the contract been performed — typically cover costs, lost profits that were foreseeable and provable, and prejudgment interest where the sum is certain. You still have a duty to mitigate, and acting promptly on a repudiation is often exactly what mitigation requires. The statute of limitations is generally four years for written contracts and two years for oral contracts, although sales-of-goods claims generally have a four-year limitations period regardless of whether the agreement is written. The limitations period generally begins to run when you elect to treat the repudiation as a breach, or at the time set for performance if you wait.
Because the election among these options is one-time and fact-sensitive, it is worth getting advice before you send the "we consider the contract terminated" letter. Our business litigation practice regularly advises on repudiation disputes from both sides, and careful contract drafting — including assurance and termination clauses — can give you cleaner exits before a dispute ever starts.
Talk to a California business attorney
If the other side has signaled it will not perform — or has accused you of repudiating — the right response in the first week can shape the entire dispute. Schedule a free consultation or call (949) 418-2113.
This article is attorney advertising and provides general information only. It is not legal advice and does not create an attorney–client relationship. Facts matter; consult a lawyer about your specific situation.
