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Law Offices of Jonathan M. Cooper

Anticipatory Breach of Contract Under New York Law

Unfortunately, the following scenario has become all-too-common in recent years: you finally succeed in landing a big contract, and then proceed to hire additional staff and incur additional overhead just in order to fulfill the job. But then you start hearing rumors that the other side to the contract is experiencing financial difficulty. When you check with your bookkeeper, you learn that they are in arrears by over 60 days.

And although you previously enjoyed a wonderful cameraderie with the CEO (and maybe the COO) of the other company, now you can never get them on the phone. And when you see reports (and maybe even correspondence) confirming that they do not have the financial wherewithal to pay your bills, you are left in a quandary:

You're in the middle of the job you were hired to do, and to undertake the next staqe of the job will require an even greater investment of time and money - and you have good, objective reasons to believe that the other side to the contract is going to renege on their end of the deal.

In legalese, this is called anticipatory breach of contract.

So what are your options?

In truth, every case is fact-specific, but the general rule is that the party who is keeping their end of the deal (the "non-breaching party") has the choice of either considering the other side in breach of the agreement (and thereby terminating its own responsibilities regarding the contract), or to continue performing its end of the agreement and holding the other side responsible for its end of the complete contract.

Naturally, each option has its own positives and drawbacks, and requires very careful contemplation.