When two parties enter a contract, the expectation is that both will fulfill their agreed-upon duties. However, a situation can arise where one party indicates they will not perform their end of the bargain before the deadline arrives. This scenario introduces the legal concept of anticipatory repudiation, which has specific implications under Hawaii law.
Defining Anticipatory Repudiation in Hawaii
Anticipatory repudiation, sometimes called anticipatory breach, is a clear declaration or action by one party that they will not perform their contractual obligations. For the doctrine to apply, the intention not to perform must be positive and unequivocal. Hawaii courts have affirmed that the statement or act must be a distinct and definite refusal, ensuring that mere expressions of doubt are not treated as a breach.
In contracts for the sale of goods, this principle is codified in the Uniform Commercial Code (UCC) under Hawaii Revised Statutes §490:2-610. This statute allows the aggrieved party to take action when a repudiation will “substantially impair the value of the contract.” While the UCC directly addresses goods, Hawaii courts apply similar common law principles to other contracts, such as those involving real estate.
Recognizing an Act of Anticipatory Repudiation
An act of anticipatory repudiation must be a clear and unconditional refusal. For example, a contractor might state, “I will not be able to build the garage we agreed upon.” Repudiation can also be an action, such as when the seller of a unique painting sells it to someone else before the original delivery date.
Conversely, not every expression of difficulty amounts to repudiation. A party expressing concern about meeting a deadline or requesting a modification of terms does not automatically constitute a breach. A supplier stating they “might have trouble sourcing materials” is likely not a repudiation because the communication must be a firm refusal.
The distinction is important because wrongly declaring a repudiation can have negative consequences. If a party incorrectly treats an expression of doubt as a breach and terminates the contract, they themselves could be found in breach.
Your Legal Choices After an Anticipatory Repudiation
Once a clear anticipatory repudiation occurs, the non-repudiating party has several options. The first is to immediately resort to any remedy for breach of contract, which means filing a lawsuit for damages without waiting for the performance date to arrive.
Another option is to suspend their own performance and wait a “commercially reasonable time” for the repudiating party to perform. During this period, the non-breaching party can urge the other party to retract their repudiation. This approach keeps the contract alive while preserving the right to sue later.
For contracts involving the sale of goods, the non-breaching party has a right under Hawaii Revised Statutes §490:2-609 to demand “adequate assurance of due performance.”1U.S. Law :: Justia. Hawaii Revised Statutes § 490:2-609 (2022) – Right to adequate assurance of performance. If you have reasonable grounds to believe the other party will not perform, you can make a written demand for assurance. If the other party fails to provide such assurance within a reasonable time, not exceeding 30 days, this failure is treated as a repudiation.
Withdrawal of an Anticipatory Repudiation
A party who has repudiated a contract can sometimes retract it under Hawaii Revised Statutes §490:2-611, as long as their next performance is not yet due.2U.S. Law :: Justia. Hawaii Revised Statutes § 490:2-611 (2024) – Retraction of anticipatory repudiation. However, the right to retract is lost if the non-breaching party has already canceled the contract, materially changed their position, or otherwise indicated they consider the repudiation final.
For a retraction to be effective, it must be clearly communicated and include any assurances of performance that were justifiably demanded. A proper retraction reinstates the contract, with an allowance made to the aggrieved party for any delay caused by the repudiation.
Available Remedies for Anticipatory Repudiation
If a repudiation is not retracted, the non-breaching party is entitled to remedies. The primary remedy is monetary damages, known as “expectation damages,” which aim to place the injured party in the position they would have been in if the contract had been performed.
For a seller of goods, remedies include withholding delivery, reselling goods and recovering the price difference, or suing for non-acceptance under Hawaii Revised Statutes §490:2-703 and §490:2-708. For a buyer, remedies include “covering” by purchasing substitute goods and recovering the difference, or suing for non-delivery under HRS §490:2-711 and §490:2-713.
In rare cases involving unique goods or property, a court might order specific performance, compelling the breaching party to perform their duties. The non-breaching party must also take reasonable steps to mitigate their damages by minimizing losses from the breach.