A supplier writes to say they will not be delivering next month. A buyer says the funds will not be there. The instinct is either to panic or to stop your own performance immediately, and both can be costly. The law gives you a genuine choice here, and which branch you take should be a decision rather than a reaction.
What counts as anticipatory breach
| Conduct | Generally amounts to repudiation? |
|---|---|
| Clear written statement that they will not perform | Yes |
| Disabling themselves - selling the subject matter to another | Yes |
| Making performance impossible by their own act | Yes |
| Demanding terms outside the contract as a condition of performing | Often, depending on the facts |
| Expressing doubt or difficulty | Usually not, by itself |
| Being late on an earlier, minor obligation | Usually not |
| Silence | Rarely, without more |
The last three rows matter, because parties frequently treat expressions of difficulty as repudiation and terminate on that basis - which can convert them into the party in breach. Renunciation must be clear and absolute; a counterparty saying they are struggling is not the same as one saying they will not perform.
The choice you have
| Accept the repudiation | Affirm and wait | |
|---|---|---|
| Contract | Treated as at an end | Remains alive for both sides |
| Your obligations | Discharged | Continue - you must remain ready and willing |
| When you can sue | Immediately | On the performance date, if they then fail |
| Damages assessed | Generally by reference to acceptance | Generally by reference to the due date |
| Risk | Getting it wrong makes you the breaching party | The market may move against you |
| Mitigation | Duty engages at once | Engages on actual breach |
Row two is the trap. If you affirm the contract, you must stay ready and willing to perform your own side. A party who says "we hold you to the contract" and then quietly stops performing has manufactured its own breach - and hands the other side the very defence it needed.
What to do when it happens
- Get the renunciation in writing if it was verbal - ask them to confirm their position.
- Do not respond in anger or terminate the same day.
- Read the contract - termination clause, notice provisions, cure periods.
- Take advice on whether the conduct is genuinely repudiatory.
- Decide deliberately whether to accept or affirm.
- Communicate the decision clearly and in writing.
- Begin mitigating if you accept - source elsewhere, resell, redeploy.
- Document the loss as it accrues.
Step three matters more than people expect. Many contracts contain a cure period requiring you to give notice and an opportunity to remedy before terminating - and terminating without following it is itself a breach, however badly the other side has behaved.
The duty to mitigate
Once you accept a repudiation, you are generally expected to take reasonable steps to limit your loss rather than let it accumulate.
- Source replacement goods or services at a reasonable price.
- Resell subject matter you are left holding.
- Redeploy staff, capacity or materials committed to the contract.
- Act within a reasonable time - delay itself can be unreasonable.
- Keep records of every step and the prices obtained.
- You need not act unreasonably or take extraordinary measures.
Document mitigation as you go, with quotes and dates. In a damages claim the defendant will argue you could have mitigated better, and a contemporaneous file showing what you tried, when, and at what price is what answers that - reconstructing it afterwards is far less persuasive.
What you can recover
- Loss naturally arising from the breach in the usual course of things.
- Loss in the parties' contemplation when the contract was made.
- The difference in price where you covered elsewhere.
- Wasted expenditure in some circumstances.
- Agreed damages where the contract stipulates a sum, subject to reasonableness.
- Not remote or speculative loss.
- Not loss you could reasonably have avoided.
Damages compensate rather than punish, under the Contract Act 1872. See damages for breach and remedies generally.
When you want performance, not damages
Sometimes damages are inadequate - the subject matter is unique, or the contract is for immovable property.
- Consider specific performance under the Specific Relief Act 1877.
- Affirming rather than accepting is generally consistent with seeking performance.
- Remain ready and willing, and be able to prove it.
- Consider an injunction to restrain a disposal to a third party.
- Act quickly - delay weakens a claim for discretionary relief.
- Take advice early, because the two branches point in different directions.
This is the strongest reason not to react instinctively. Accepting a repudiation and treating the contract as ended may sit awkwardly with later seeking performance of it. If what you actually want is the property or the goods rather than money, say so from the outset and structure your response accordingly - see specific performance in property matters.
Drafting to make this easier
Most of the uncertainty above can be reduced at drafting stage:
- Define material breach and what entitles a party to terminate.
- Include a cure period and say how notice is given.
- Include express termination rights for insolvency and specified events.
- Provide for security - advance payment, guarantee, retention.
- Agree damages for defined failures, where reasonable.
- Specify the dispute resolution route and the governing law.
- Require adequate assurance of performance where doubts arise.
The last is underused in Pakistani contracts and is genuinely useful - a right to demand written assurance of performance converts an ambiguous situation into a clear one, since a refusal to give assurance is itself informative.
The common mistakes
| Mistake | Consequence |
|---|---|
| Treating difficulty as repudiation | You become the breaching party |
| Terminating without following the cure clause | Wrongful termination |
| Affirming, then stopping your own performance | You breach the contract you affirmed |
| Not mitigating | Damages reduced |
| Waiting too long to decide | May be treated as affirmation |
| Verbal termination only | No record of what was communicated |
| Letting limitation run during negotiations | The claim is lost on time |
Do not let the decision drift. Continuing to correspond for months without electing either way risks being treated as having affirmed, while the commercial position deteriorates around you. Decide, communicate it in writing, and act consistently with the branch you chose.
Frequently asked questions
What is anticipatory breach of contract?
Where a party renounces the contract or disables itself from performing before performance falls due, making clear it will not perform when the time comes.
What are my options if the other side says they will not perform?
You may accept the repudiation, treat the contract as at an end and sue immediately, or affirm the contract and wait for the performance date. The choice affects damages and your own obligations.
If I affirm the contract, do I still have to perform?
Yes. You must remain ready and willing to perform your own side. A party that holds the other to the contract and then quietly stops performing has manufactured its own breach.
Is expressing difficulty the same as repudiation?
No. Renunciation must be clear and absolute. A counterparty saying they are struggling is not the same as one saying they will not perform, and terminating on that basis can make you the party in breach.
Do I have to mitigate my loss?
Once you accept a repudiation you are generally expected to take reasonable steps to limit the loss - sourcing replacements, reselling, redeploying capacity - within a reasonable time, and to document what you did.
Can I still get the goods or property rather than damages?
Possibly, through specific performance under the Specific Relief Act 1877 where damages are inadequate. Accepting a repudiation may sit awkwardly with later seeking performance, so decide early what you actually want.
What should I check in the contract first?
The termination clause, notice provisions and any cure period. Terminating without following a required notice and cure process is itself a breach, however badly the other side has behaved.
What if we are still negotiating?
Negotiate if you wish, but do not let limitation run out and do not drift without electing. Prolonged correspondence without deciding risks being treated as affirmation of the contract.
Sources & official references
- Contract Act 1872 - the statute governing contracts in Pakistan
- Specific Relief Act 1877 - specific performance, injunctions and declaratory relief
- Supreme Court of Pakistan - judgments and case information