Repudiation (anticipatory breach)

Repudiation comes up when a buyer or seller says, or acts as though, they will not close. The Supreme Court of Canada, in Guarantee Co. v. Gordon Capital, described it as words or conduct evincing an intention not to be bound by the contract. It can arise before the closing date, which is why it is also called anticipatory breach.

What the other side can do

Gordon Capital says the effect of a repudiation depends on the election made by the non-repudiating party. If that party treats the contract as still in force, it remains in being for the future on both sides, and each side may sue for damages for past or future breaches. If the party accepts the repudiation, the contract is terminated and the parties are discharged from future obligations. Rights and obligations that have already matured are not extinguished.

Which breaches count

In Potter v. New Brunswick Legal Aid Services Commission, the reasons of Chief Justice McLachlin and Justice Cromwell say a breach is a repudiation if it breaches a condition or another sufficiently important term, so that there is a substantial failure of performance. Anticipatory repudiation arises if words and conduct show an intention to breach a term that would, if actually breached, be a repudiation. See also what happens if the buyer walks away before closing.

• Has the other side said or done something that shows it will not perform, or is the dispute over a minor term?
• Does the agreement set its own notice and termination steps that must be followed first?
• Has anything been done since that could be read as treating the contract as still in force?