Basic Contract Law Principles

Business Law

A contract was forced between Larson and Genix. This appears to be a legal contract. One month before the date on which the contract is to be fulfilled, Larson cancels this contract. It is not known what sort of clause might be in that contract with respect to cancellation, but presumably there was nothing. There are several remedies available to Genix at this point. At this point, the contract has not been breached, however. Genix can motivate Larson by pointing out the remedies that will be available on December 1st. This is the best option -- to convince the counterparty to fulfill the contract -- as it is relatively low cost and at this point would not represent any disruption to Genix.

However, should that approach fail, there are other remedies that are available. Genix can seek an injunction that would prevent Larson from selling five hundred machines to anybody else, knowing that Larson has these in inventory. Damages are also a possibility -- Genix can sue Larson for non-performance if it has suffered. Just because Larson wants to cancel a month in advance does not mean that there are no damages. Genix will have to show that it has attempted to mitigate the damages, but otherwise may be entitled to such damages. Even the threat of a suit, let alone a finding for damages, could prove cheaper for Larson than whatever else it had planned -- this might compel Larson to perform.

14-3. Anticipatory repudiation is defined as "the unjustifiable denial by a party to a contract of any intention to perform contractual duties, which occurs prior to the time performance is due." The facts of this situation are as follows. The initial contract was for the sale of the truck by Moore to Hammer. The truck was to be delivered on Wednesday, with payment on the Friday (the term "the following Friday" is ambiguous and in this case it taken to mean two days after delivery). On Tuesday, Hammer repudiated the contract. This was a legal repudiation because performance was not yet expected. On Friday, Hammer informed Moore that he had changed his mind and wanted the truck after all. In this situation, the contract had been repudiated, and the time at which performance was expected had already elapsed. While Hammer had the legal right to retract his repudiation before the date on which the contract was to be performed, he did not do so. Instead, he sought this after the performance was to have been complete. At this point, the contract has been fully repudiated, and Moore is under no legal obligation to fulfill the terms of that expired contract. Moore is correct -- the repudiation and subsequent passing of the date of performance released her from that obligation to perform.