MIAMI BUSINESS LITIGATION: ANTICIPATORY REPUDIATION OF A CONTRACT

Under Florida law, breach of contract by anticipatory repudiation allows the non-breaching party to terminate his own contract and then sue for damages. The Supreme Court of Florida in Hospital Mortgage Group v. First Prudential Development Corp., 411 So.2d 181 (Fla. 1982), explained in pertinent part that, “[i]n dealing with anticipatory repudiations[,] the law is clear that a repudiation gives rise to a claim for damages by the nonbreaching party.” Relying on earlier precedent from the Supreme Court of Florida in Poinsettia Dairy Products, Inc. v. Wessel Co., 123 Fla. 120 (Fla. 1936), Hospital Mortgage explained that “the nonbreaching party is relieved of its duty to tender performance and has an immediate cause of action against the breaching party.” Peter Mavrick a Miami business litigation attorney, and represents clients in Fort Lauderdale, Boca Raton, and Palm Beach. The Mavrick Law Firm represents businesses and their owners in breach of contract litigation and related claims of fraud, non-compete agreement litigation, trade secret litigation, trademark infringement litigation, employment litigation, and other legal disputes in federal and state courts and in arbitration.

In its Hospital Mortgage decision, the Supreme Court of Florida adopted important aspects of the Restatement (Second) of Contracts concerning the law of anticipatory breach of contract. As stated in Restatement (Second) of Contracts at Section 253 (1979):

(1) Where an obligor repudiates a duty before he has committed a breach by non-performance and before he has committed a breach by non-performance and before he has received all of the agreed exchange for it, his repudiation alone gives rise to a claim for damages for total breach.

(2) Where performances are to be exchanged under an exchange of promises, one party’s repudiation of a duty to render performance discharges the other party’s remaining duties to render performance.

However, being relieved from performance because of anticipatory repudiation does not necessarily mean the non-breaching party is entitled to damages. Hospital Mortgage explained that: “This alone, however, does not entitle the nonbreaching party to damages. Anticipatory repudiation obviates the requirement that the conditions be performed, not that they be performable.” Concerning the issue of damages, the Restatement (Second) of Contracts at Section (1979) states that: “A party’s duty to pay damages for total breach by repudiation is discharged if it appears after the breach that there would have been a total failure by the injured party to perform his return promise.” The term “total failure” is defined the the comment to this section as: “A failure is total in this context if it would have been sufficient to have discharged any remaining duties of the party in the breach to render his performance…The result follows even if it appears that the failure would have been justified and not a breach.” The Supreme Court found the Restatement persuasive because its reasoning was consistent with earlier precedent, including Thomson v. Kyle, 39 Fla. 582 (Fla. 1897) and Slaughter v. Barnett, 114 Fla. 352 (1934), requiring compliance with the contract provisions. In this regard, Hospital Mortgage stated that: “In those decisions performance or tender of performance was required as a prerequisite to recovery. The holder of the duty based upon a condition precedent cannot profit from an anticipatory repudiation of contract that he would have breached himself. It follows that if performance of the conditions precedent is excused the ability to perform them must still be shown.”

Business litigation concerning anticipatory breach of contract sometimes deals with cases where there has been anticipatory repudiation of the contract, but the non-breaching party seeks to use that repudiation as a means to get substantial damages from the the opposing party. To recover damages, Florida law requires that the non-breaching party prove it could have performed under the contract. Hospital Mortgage explained in pertinent part that, “[w]hen the lender causes an anticipatory repudiation of a loan commitment after an extension of the termination date, the nonbreaching party is required to plead and prove compliance with all conditions precedent or the ability to comply if the performance has been excused by the repudiation.” Concerning the issue of when damages are recoverable for anticipatory breach of contract, a leading treatise, 4 A. Corbin, Contracts, at Section 978, states that: “In an action for breach of an unconditional repudiation[,] it is still a condition precedent to the plaintiff’s right to a judgment for damages that he should have the ability to perform all such conditions. If he could not or would not have performed the substantial equivalent for which the defendant’s performance was agreed to be exchanged, he is given no remedy in damages for the defendant’s non-performance or repudiation.”

Peter Mavrick is a Miami business litigation lawyer, and represents clients in Fort Lauderdale, Boca Raton, and Palm Beach. This article does not serve as a substitute for legal advice tailored to a particular situation.