Breach, Anticipatory Repudiation, and the Perfect Tender Rule

Present Breach and the Order of Performance

A present (actual) breach occurs when performance is due and a party fails to perform, performs defectively, or performs late. Whether the non-breaching party may merely recover damages or may ALSO suspend and terminate turns on whether the breach is minor or material (see the conditions section). A minor breach gives a damages claim but does not discharge the other party's duty; a material breach lets the injured party suspend performance, and an uncured material breach (or one going to the essence) lets them terminate and sue for total breach.

One related concept is prospective inability to perform: even before a clear repudiation, if reasonable grounds arise to believe the other party will be unable or unwilling to perform (insolvency, selling the unique subject matter to another, repeated defaults), the worried party may suspend its own performance and seek assurances. This bleeds into anticipatory repudiation and the UCC's adequate-assurance mechanism, discussed next.

Anticipatory Repudiation

Anticipatory repudiation occurs when, BEFORE performance is due, a party unequivocally indicates — by words or by a voluntary act inconsistent with the contract — that it will not perform a future obligation (Hochster v. De La Tour). The statement must be clear and unequivocal; mere doubts, requests to renegotiate, or expressions of difficulty are NOT repudiation (they may instead justify a demand for assurance).

On a genuine repudiation, the non-repudiating party has FOUR options:

Two important limits: (1) The injured party may not continue to perform and run up damages after a repudiation — they must avoid increasing the loss (mitigation). (2) Anticipatory repudiation applies only to executory bilateral contracts; if the non-repudiating party has already FULLY performed (e.g., a lender who fully advanced funds owed only repayment), the doctrine does NOT apply, and that party must wait until the payment date to sue.

Retraction (2-611): A repudiator can retract and reinstate the contract UNLESS the other party has already cancelled, materially changed position in reliance, or otherwise indicated it considers the repudiation final. After retraction, the repudiating party may perform, with allowance to the other party for any delay caused.

Adequate Assurance: UCC 2-609

When one party has reasonable grounds for insecurity about the other's performance, UCC 2-609 allows a written demand for adequate assurance of due performance and permits suspending one's own performance (for which it has not already received the agreed return) until assurance is received. If the insecure party does not receive adequate assurance within a reasonable time not exceeding 30 days, the failure is treated as a repudiation of the contract.

This converts vague anxiety into a concrete, fair mechanism: instead of guessing whether the other side has repudiated, demand assurance in writing; their silence or inadequate response ripens into an actionable repudiation. The Restatement (Second) 251 adopts a parallel common-law rule. Grounds for insecurity might include the other party's delivery of defective goods on a separate contract, rumors of insolvency, or failure to make progress.

The Perfect Tender Rule and Cure

For a single-delivery contract for the sale of goods, the perfect tender rule (UCC 2-601) governs: if the goods or the tender fail to conform to the contract in ANY respect, the buyer may (a) reject the whole, (b) accept the whole, or (c) accept any commercial units and reject the rest. This is far stricter than the common law's substantial-performance standard — even a trivial nonconformity permits rejection.

The rule is tempered by the seller's right to cure (2-508):

• If the time for performance has not yet expired, the seller may notify the buyer and make a conforming delivery within the contract time.
• Even after the time has expired, the seller gets a further reasonable time to cure if the seller had reasonable grounds to believe the nonconforming tender would be acceptable (e.g., a prior course of dealing, or an offer of a money allowance).

Rejection must be within a reasonable time and with notice; a buyer who accepts goods (or fails to reject) loses the right to reject and is relegated to a claim for breach (and possibly revocation of acceptance under 2-608 for substantial nonconformity not reasonably discoverable or induced by assurances).

Installment contracts (2-612): Perfect tender does NOT apply. The buyer may reject a single installment only if its nonconformity substantially impairs the value of that installment and cannot be cured; the buyer may treat the WHOLE contract as breached only if a nonconformity or default substantially impairs the value of the whole contract.