How do you prevent an anticipatory breach of contract from escalating into a litigation or termination?

Anticipatory breach of contract occurs when one party clearly indicates that they will not perform their obligations under the contract before the due date. This can cause serious problems for the other party, who may lose time, money, and opportunities as a result. How do you prevent an anticipatory breach of contract from escalating into a litigation or termination? Here are some tips to help you deal with this situation effectively and protect your interests.

1 Assess the situation

The first step is to assess the situation and determine the extent and impact of the breach. You need to gather evidence of the other party's words or actions that show their intention to breach the contract, such as written or verbal statements, missed deadlines, or failure to deliver goods or services. You also need to calculate the damages or losses that you may suffer as a result of the breach, such as lost profits, wasted expenses, or lost opportunities. This will help you decide how to respond and what remedies to seek.

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Mike Sandstrum

President/Executive Board Member at Armite Lubricants®. Military & Industrial Grade Lubricants, Anti-Seizes, etc. AS9100/ISO-9001Certified. DoD CMMC 2.0 Compliant & Sandstrum Law LLC, a Business Law Firm.
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So typical of I have to say younger inexperienced lawyers - follow follow and follow, the simple answer retain a lawyer who doesn't follow basic advice that gives you real time and meaningful advice. These assessments are book to book no life strategy and this is why the advice given by the above fails on all levels. Sandstrum Law, LLC - do it better

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2 Communicate with the breaching party

The second step is to communicate with the breaching party and try to resolve the issue amicably. You should send a formal notice of breach to the other party, stating the facts of the breach, the consequences for you, and the remedies that you require. You should also invite them to discuss the matter and negotiate a possible solution, such as a revised contract, a partial performance, or a compensation. You should keep a record of all your communications and attempts to reach an agreement.

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3 Consider alternative dispute resolution

The third step is to consider alternative dispute resolution (ADR) methods, such as mediation, arbitration, or conciliation. These methods can help you avoid the costs, risks, and delays of litigation, and preserve your business relationship with the other party. ADR methods involve a neutral third party who facilitates the dialogue and helps the parties reach a mutually acceptable settlement. You may need to check your contract to see if it contains an ADR clause or a choice of law clause that specifies how disputes should be handled.

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4 Seek legal advice

The fourth step is to seek legal advice from a qualified lawyer who specializes in business transactions and contract law. A lawyer can help you understand your rights and obligations under the contract, advise you on the best course of action, and represent you in any legal proceedings. A lawyer can also help you draft and enforce a settlement agreement, or file a lawsuit or a claim for damages if necessary.

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5 Mitigate your damages

The fifth step is to mitigate your damages, which means to take reasonable steps to minimize the harm that you suffer from the breach. This may include finding another supplier or customer, canceling or rescheduling your plans, or reducing your expenses. You have a duty to mitigate your damages under the law, and failing to do so may reduce the amount of compensation that you can recover from the breaching party.

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6 Review your contracts

The sixth step is to review your contracts and make sure that they are clear, comprehensive, and enforceable. You should include clauses that define the scope, terms, and conditions of the contract, as well as the remedies and penalties for breach. You should also include clauses that address contingencies, such as force majeure, termination, or modification. You should consult a lawyer before signing or modifying any contract, and review your contracts regularly to ensure that they reflect your current needs and expectations.

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Scott Gosnell

Large firm-trained business and litigation attorney with over 20 years of experience.
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This, to me, is the first and most fundamental step: have good written contracts and use them. Many people/businesses (1) do business without a written contract (i.e. work off quotes, invoices, estimates, handshakes, etc.); (2) draft their own contracts; (3) find a contract online that they think works; or (4) use an online legal service -- all in the name of saving money. When things go south, they wind up paying a whole lot more money in litigation costs, attorney fees, etc. to enforce what may in the end wind up to be unenforceable. Properly drafted contracts, carefully explained prior to execution and when breach is anticipated, will go a long way towards preventing a breach.

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7 Here’s what else to consider

This is a space to share examples, stories, or insights that don’t fit into any of the previous sections. What else would you like to add?

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Scott Gosnell

Large firm-trained business and litigation attorney with over 20 years of experience.
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One additional word of advice: document, document, document. The minute you believe a contract is "going south," start documenting everything. Of course, keep any written documentation, such as any contracts or other inception documents (quotes, invoices, etc.), including emails. If the other party is using text messages, find a way to preserve those (there are apps out there that will do that). Find a way to preserve voice mails. Make notes on every conversation -- telephone and in person -- including date and time of the conversation, who was involved, and the substance (content) of the conversation.

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How do you prevent an anticipatory breach of contract from escalating into a litigation or termination?

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1 Assess the situation

2 Communicate with the breaching party

3 Consider alternative dispute resolution

4 Seek legal advice

5 Mitigate your damages

6 Review your contracts

7 Here’s what else to consider

Business Transactions

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