Anticipatory repudiation: breaking a promise before it is due

California, January nineteen sixty five. A breeder of thoroughbred racehorses in Los Angeles County contracts with a horse farm in Ontario, California, to breed his two mares, Sunday Slippers and Sandy Fork, to the farm's stallion Fleet Nasrullah in the year nineteen sixty six. The fee is three thousand five hundred dollars a mare, due by the first of September nineteen sixty six, with a live foal guaranteed.
On the fourth of October nineteen sixty five, the farm sells Fleet Nasrullah for one million dollars cash and ships him to Kentucky. The same day it writes to the breeder. Fleet Nasrullah has been sold and will stand the nineteen sixty six season in Kentucky. You are, therefore, released from your reservations made to the stallion. The breeder does not want to be released. His lawyer writes twice, insisting on performance and threatening suit.
On the twenty seventh of October the farm writes back. Arrangements have been made to breed the two mares to Fleet Nasrullah in Kentucky. The breeder ships his mares east in January. But in Kentucky the stallion has been syndicated into thirty six or thirty eight shares, and shareholders have priority. Every time the breeder's agent tries to book a day when a mare is in heat, a shareholder has it.
April, May, June. Booked, cancelled, booked, cancelled. The woman who keeps the stallion's book keeps saying, keep in touch. On the seventh of June the breeder gives up and breeds Sunday Slippers to a Kentucky Derby winner for ten thousand dollars. A week later, Sandy Fork too. Both mares conceive twins, which racing people consider dangerous, and both are aborted. He sues for the foals he should have had, and wins one hundred and thirty two thousand dollars at trial.
So here is the question. The breeding season had not ended. Nobody at the farm ever said the mares would not be bred. Was there a breach at all, in June, when the breeder walked away? Think about it before I go on, because the answer will feel unfair, and the reason it is the law is the lesson.
And now the question I keep asking. What exactly did these people promise each other? One breeding of each mare to a named stallion, during nineteen sixty six, for three thousand five hundred dollars. Last lecture the breach happened when performance was due. Today the question is whether a party can breach before performance is due, by saying, or showing, that he will not perform. The doctrine is called anticipatory repudiation.
It began in an English case of eighteen fifty three, Hochster against De La Tour, about a courier hired for a summer tour whose employer cancelled in May, before the tour began. The courier sued at once, and the court let him. Here is the first line for the board. There can be no actual breach of a contract until the time specified therein for performance has arrived. Before that day, a party breaches only by repudiating.
Second line. A repudiation must be unequivocal. An express repudiation is a clear, positive, unequivocal refusal to perform. An implied repudiation results from conduct where the promisor puts it out of his power to perform so as to make substantial performance of his promise impossible. Doubt, delay, evasion and requests are none of these.
Third line. When a party repudiates, the injured party has an election. He can treat the repudiation as an anticipatory breach and immediately seek damages for breach of contract, thereby terminating the contractual relation between the parties, or he can treat the repudiation as an empty threat, wait until the time for performance arrives and exercise his remedies for actual breach. But if he waits and the repudiating party retracts before the day, the repudiation is nullified.
Fourth line, from the Code. Section two six ten. 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, or resort to any remedy for breach, and in either case suspend his own performance.
Section two six eleven. Until his next performance is due the repudiating party can retract, unless the aggrieved party has cancelled, materially changed his position, or indicated that he considers the repudiation final.
Now the case. Taylor against Johnston, Supreme Court of California, nineteen seventy five. The court split the farm's conduct into two episodes. First, the letter of October. Defendants clearly repudiated the contracts when, after selling Fleet Nasrullah and shipping him to Kentucky, they informed plaintiff, you are, therefore, released from your reservations made to the stallion. Selling the horse and sending the letter was as clear as a repudiation gets.
But the breeder did not accept it. He insisted on performance, and the farm arranged for the stallion to be available in Kentucky. The court held that the subsequent arrangements by defendants to make Fleet Nasrullah available to service plaintiff's mares in Kentucky constituted a retraction of the repudiation. Since the breeder had not elected to treat the repudiation as an anticipatory breach and in fact had shipped the mares to Kentucky in reliance on defendants' arrangements, this retraction nullified the repudiation.
So episode one ended with a live contract. Episode two is the runaround in Kentucky. The trial court found that the breeder was justified in concluding that defendants were just giving him the runaround and had no intention of performing their contract. The Supreme Court asked the only question that matters. Was there an unequivocal refusal?
There is no evidence in the record that defendants or their agents Dr. Pessin and Mrs. Judy ever stated that Sunday Slippers and Sandy Fork would not be serviced by Fleet Nasrullah during the nineteen sixty six breeding season or that they ever refused to perform. No express repudiation, then. And no implied one either, because implied repudiation needs impossibility. Once the mares arrived in Kentucky, defendants had the power to perform the contracts. Fleet Nasrullah could breed with the mares.
The shareholders' priority, the court said, rendered performance more difficult to achieve. It may even have cast doubt upon the eventual accomplishment of performance. It did not render performance impossible.
Then the old California standard. To justify the adverse party in treating the renunciation as a breach, the refusal to perform must be of the whole contract and must be distinct, unequivocal and absolute. Cancelled bookings and keep in touch are not that. The breeder had walked away from a live contract. He lost his judgment, all of it.
Notice what the court did not decide. It did not say the farm behaved well. The farm sold the horse, tried to release itself, and then put the breeder behind thirty eight shareholders. The trial judge had called the breach wholly unwarranted, high-handed, and oppressive. None of that mattered, because the breeder sued on repudiation, and a repudiation must be unequivocal. He may have had a claim for delay, a partial breach, but that was not the case he brought.
Now the second case, and a buyer who said less than he thought. Maryland, nineteen seventy two. A man contracts to buy a condominium unit to be built at Bethany Beach, Delaware, for seventy four thousand nine hundred dollars, with a deposit of five thousand in cash and a note for six thousand two hundred and thirty five. Settlement is to take place within thirty days of written notice that the unit is substantially complete.
In May nineteen seventy four, with prices rising, he asks the seller's agent whether he may assign the contract. He may not. He then says, in his own words, that I would be interested in getting out of the contract, that the units were selling for substantially more than my contract price, and asks whether the seller would take the contract back and resell. The agent's version is stronger. Mr. Harrell stated he wanted to cancel the contract, did not want to proceed with settlement.
In July the seller sends a cancellation request which must be signed by you in order for us to process your release. The buyer signs it and returns it with a condition written in. This release is contingent upon refund of deposit by July twenty fifth. Nobody answers.
On the eighteenth of August the seller sells the unit to someone else for eighty two thousand dollars. Five days later it writes to the buyer. We are accepting your request to cancel. However, we are keeping your deposit as liquidated damages.
The trial court held the buyer had repudiated in May. The Court of Special Appeals of Maryland, in Harrell against Sea Colony, nineteen seventy seven, reversed. In our view, Sea Colony unilaterally attempted to convert Harrell's request for a mutual rescission of the contract to an anticipatory breach or repudiation on his part. Then the standard, from Corbin.
In order to constitute an anticipatory breach of contract, there must be a definite and unequivocal manifestation of intention on the part of the repudiator that he will not render the promised performance when the time fixed for it in the contract arrives. Doubtful and indefinite statements that the performance may or may not take place will not be held to create an immediate right of action.
A mere request for a change in the terms or a request for cancellation of the contract is not in itself enough to constitute a repudiation.
Asking to be let out is not refusing to perform. The buyer never said he would not close. He asked whether the seller would release him, and then signed a release that took effect only if his deposit came back. The court also swept aside the seller's other point, that the buyer had not answered letters asking which lawyer's office he preferred for settlement. There was no duty to answer, and no notice of completion had ever been sent.
Put the two cases side by side, and add the Code. In California a sale of the horse and a release letter was a repudiation, retracted by the Kentucky arrangements. The runaround that followed was not. In Maryland, a request to be let out was not. The line is the same in both. Words or conduct that leave the other side in doubt do not repudiate. Only a distinct, unequivocal and absolute refusal, or an act that makes performance impossible, will do.
Now let's change one fact. The Kentucky farm, in May, had written to the breeder. Shareholders come first all season. We cannot promise you any date. Do not bring your mares back into heat for us. Does the breeder have a repudiation in May? Choose an answer before I go on.
Closer, and most courts would say yes. A statement that the promisor will perform only on terms the contract does not allow, shareholders first, no date promised, is a refusal to perform the contract as made. It is the answer to Taylor. The court there found nothing anyone said amounted to a refusal. Give them words that do, and the breeder may elect at once, breed elsewhere, and sue.
Change one fact again. The Maryland buyer had written, in May, I will not be attending settlement under any circumstances and you may treat this contract as at an end. Choose.
Now it is a repudiation. Definite, unequivocal, unconditional. The seller may accept it, resell, keep the deposit if the contract permits, and sue for any further loss. And notice the timing point from the Code. Until the seller relies, the buyer can retract. A letter the next week saying, I have reconsidered and will close, would reinstate the contract, with allowance for any delay it caused. Once the seller has resold, retraction is too late.
Change one fact a third time. The breeder in California, after the October release letter, had written back the same week. I accept that you will not perform. I am breeding my mares elsewhere and will hold you to damages. Choose.
Then the election was made, and the farm's later Kentucky arrangements came too late to retract. The California court said the retraction worked because the breeder had not elected and had shipped the mares in reliance on defendants' arrangements. Take the reliance away and put an election in its place, and the October repudiation stands as a total breach. The breeder sues on that, and his damages are measured from October.
Here is what people get wrong here, and why it is tempting. The first mistake is reading bad behaviour as repudiation. Delay, evasion and the runaround are breaches, or may be, but they are not a refusal. The second mistake is treating a request as a refusal. Can you let me out is a question. It commits the asker to nothing.
The third mistake is forgetting that the injured party has to choose, and that until he chooses the other side can take it back. Silence keeps the contract alive. Election and reliance close the door.
Here is the rule, in one breath. A party breaches before performance is due only by repudiating, which requires a distinct, unequivocal and absolute refusal to perform or an act that makes performance impossible, and doubtful statements or requests for cancellation are not enough. The injured party may then treat the contract as ended and sue at once, or await performance, and until he elects or relies the repudiating party may retract. Now, five questions.