Anticipatory repudiation is a clear and unequivocal indication by one party, prior to the time that its performance under the contract is due, that it will not perform its obligations under the contract. Short of an indication that one party does not intend to perform or will not be able to perform, the other party nevertheless may become insecure about the prospect of receiving the benefit of its promised performance. For transactions in goods, where there are reasonable grounds for such insecurity, the Uniform Commercial Code, which has been adopted in some form by almost all states, provides a right of the insecure party to demand and receive adequate assurance of performance from the other.
The following is an example of a state statute dealing with anticipatory repudiation:
"When either party repudiates the contract with respect to a performance not yet due the loss of which will substantially impair the value of the contract to the other, the aggrieved party may:
- For a commercially reasonable time await performance by the repudiating party; or
- Resort to any remedy for breach (section 47-2703 or 47-2711), even though he has notified the repudiating party that he would await the latter's performance and has urged retraction; and
- In either case suspend his own performance or proceed in accordance with the provisions of this chapter on the seller's right to identify goods to the contract notwithstanding breach or to salvage unfinished goods (section 47-2704)."