Anticipatory Breach

DEFINITION of 'Anticipatory Breach'

In contract law, an action that shows a party's intention to fail to perform or fulfill its contractual obligations to another party. An anticipatory breach negates the counterparty's responsibility to perform its requirements under the contract. By demonstrating a party's intention to breach, the counterparty may also begin legal action.

Also referred to as an "anticipatory repudiation."

BREAKING DOWN 'Anticipatory Breach'

An anticipatory breach occurs when a party demonstrates its intention to break a contract. However, vocal or written confirmation is not required, and failure to perform an obligation in a timely matter can result in a breach. By declaring an anticipatory breach, the counterparty may begin legal action immediately rather than waiting until a contract's terms are actually broken.

For example, if Company A refuses to pay substantial interim payments to Company B, Company B can begin legal action due to anticipatory breach. Company B could also stop performing its contractual obligation, potentially saving time and or money.

RELATED TERMS
  1. Anticipatory Hedge

    A hedge position taken in anticipation of a future buy or sell ...
  2. Counterparty Risk

    The risk to each party of a contract that the counterparty will ...
  3. Counterparty

    The other party that participates in a financial transaction. ...
  4. Replacement Risk

    The risk that a contract holder will know that the counterparty ...
  5. Unilateral Contract

    A legally enforceable promise - between legally competent parties ...
  6. Third Party Beneficiary

    A person who will benefit from a contract made between two other ...
Related Articles
  1. Markets

    Who is a Counterparty?

    The counterparty is the other party in a financial transaction.
  2. Managing Wealth

    Explaining Counterparty Risk

    Counterparty risk is the risk that the other party in an agreement will default, or fail to live up to its contractual obligation.
  3. Investing

    What Do Central Counterparty Clearing Houses Do?

    A central counterparty clearing house facilitates trading in European derivatives and equities markets.
  4. Trading

    Contract for Difference (CFD) Risks

    Contracts for differences are flexible, highly leverageable trading instruments. They offer potentially outsized returns accompanied by noteworthy risks.
  5. Markets

    Do Data Breaches Really Matter for Retailers? (TJX, TGT)

    Do data breaches hurt the stock price of retailers? Let's have a look at a few examples.
  6. Markets

    Noodles & Company Reveals a Massive Card Hack

    Noodles & Company (NASDAQ: NDLS) has joined the long list of American companies that have reported breaches of customer data. The fast-casual chain is investigating a data breach which hits ...
  7. Trading

    Futures, Derivatives and Liquidity: More or Less Risky?

    Futures and derivatives get a bad rap after the 2008 financial crisis, but these instruments are meant to mitigate market risk.
  8. Investing

    Introduction To Counterparty Risk

    Unlike a funded loan, the exposure from a credit derivative is complicated. Find out everything you need to know about counterparty risk.
  9. Investing

    Derivatives 101

    Learn how to use this type of investment as an alternative way to participate in the market.
  10. Trading

    Derivatives 101

    A derivative investment is one in which the investor does not own the underlying asset, but instead bets on the asset’s price movement with another party.
RELATED FAQS
  1. What is the default risk of a derivative?

    Learn about default and counterparty risk for derivatives, and understand why derivatives traded over the counter have significant ... Read Answer >>
  2. Who is the counterparty of a derivative?

    Learn about the counterparty to a derivative contract, and how derivative swap agreements traded over the counter have counterparty ... Read Answer >>
  3. How do currency swaps work?

    Learn about how a currency swap works, including who uses these transactions, and the mechanics and purpose of the different ... Read Answer >>
  4. How are forward contracts regulated in the United States?

    Read about the risks of forward contracts and why they are not readily subject to regulation, including what happens when ... Read Answer >>
  5. How can a futures trader exit a position prior to expiration?

    A futures contract is an agreement to buy or sell a commodity at a pre-determined price and quantity at a future date in ... Read Answer >>
  6. What are the different ways I can file my income tax return?

    Learn about the potential consequences of violating the terms of a letter of intent, such as breakup fees, damages and agreement ... Read Answer >>
Trading Center