A Buyer Breaches Contract – Now What?
Entering into a contract for goods or services often comes with the risk of the other party not fulfilling their obligations, leading to a stressful dilemma. What happens when they do not uphold their end of the bargain and there is a breach of contract? This becomes problematic in cases of anticipatory breach, leaving you with expenses and no compensation. Fortunately, legal remedies like monetary damages exist to make the non-breaching party whole again, ensuring that you can either reject the breach and enforce the contract, or accept it and seek the best possible outcome for your situation.
Anticipatory Breach
An anticipatory breach occurs when one person tries to pull out of the contracted agreement after you have already gathered the necessary supplies to perform your end, but before the product or service has been delivered. Anticipatory breach by a buyer occurs when the buyer indicates that they will not accept the goods or services from you, before the date set for delivery of the goods or services. If you find yourself in a situation where you have already ordered and paid for your materials and are now out of money, you may have a remedy under the law.
Monetary Damages
Monetary damages are the primary remedy for a breach of contract to make the non-breaching party whole again, by putting them in the position they would have been in, had the contract been completed. In order to claim any monetary damages from the buyer, you must first decide whether to accept the buyer’s breach of the contract and use the materials elsewhere, or whether to treat the contract as binding on the buyer and refuse to accept the breach.
Do You Accept The Buyer’s Breach?
The seller must either accept or reject the buyer’s breach. It is preferable to reject the buyer’s breach if the materials acquired in anticipation of completing the contract are unique to the buyer, and it is unlikely that you would find another use for them. If the materials could be sold or used in another contract, it is preferable to accept the buyer’s breach of the contract.
Breach Acceptance
If you accept the buyer’s breach, you do not have to deliver the goods or perform the services originally required under the contract. When you are stuck with the materials ordered for the completion of the original contract, the law generally requires that you lessen the amount of your loss. If you are not able to sell your materials for the same price you would have received under the original contract, then you are able to sue the original buyer for the difference in price.
Breach Rejection
If you do not accept the buyer’s breach of the contract, you can fulfill your end of the bargain and then force the buyer to uphold their end. To do this, you must deliver all of the goods originally required to be provided under the contract to the buyer and then demand payment in full. If the buyer does not provide payment, you can then sue the buyer for the amount owing under the contract. This option is only available when goods are to be delivered, and not for services. For example, if you have contracted with a buyer to pave their driveway and the buyer backs out of the deal, you cannot continue to pave the driveway without permission and then demand payment. A court will not award damages for this.
