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How to handle an anticipated breach in Illinois

On Behalf of | Aug 30, 2022 | Partnership Law

Any business transaction’s success depends on the parties meeting their contractual duties. Unfortunately, sometimes one party agrees to do something but acts in a way that suggests otherwise. That party’s behavior can make it difficult for you to trust them and may jeopardize the venture’s success.

Identifying the warning signs

The following actions might suggest that your partner might back out of the deal. Therefore, you should take immediate measures to avoid potential losses, costs, or expenses that may come with the anticipatory breach.

  • The other party expresses doubt about its ability to meet its contractual obligations.
  • They request a change in the contract terms that make performance more difficult for the counterparty to meet their obligations.
  • They stop communicating with you or become evasive when you try to discuss the contract.
  • They take actions that indicate they will not uphold their end of the deal, such as canceling orders or failing to make timely payments.

Taking action

Often the first step when any problem occurs is to confront the issue. Many people seek to avoid conflict. As David Augsburger said, “The more we run from conflict, the more it masters us; the more we try to avoid it, the more it controls us; the less we fear conflict, the less it confuses us; the less we deny our differences, the less they divide us.”

Your first step involves confronting the fact that you have an issue. The sooner you address it, the more likely it will be to manage. Second, attempt to negotiate. Sometimes, communicating can solve many contract disputes without the need to take further action.

If you cannot change the other party’s behavior or reach a satisfactory agreement, you can send a demand letter. This formal notice outlines the issue in dispute and states your intent to take legal action if the other party does not uphold its contractual obligations.

What to consider before filing a lawsuit

Litigation has money and time costs.

When you have reasonable concerns that the other party will not perform, you can make a written demand for adequate assurance of due performance. If the transaction concerns the sale and purchase of goods, you may, if commercially reasonable, suspend your performance. You can provide the other party, whether the seller who has to deliver goods or the buyer who has failed to pay timely or otherwise indicated an issue concerning payment exists, with a reasonable time of no more than thirty days to assure you that it will provide due performance.

If a seller or the other party does not provide adequate assurance of future performance, you

Other people also wait until an actual breach occurs before taking action. However, this can be risky as it can be more challenging to prove the other party’s breach if they’ve already completed most of their obligations under the contract. Therefore, dealing with the anticipatory breach may be more beneficial, especially if time is of the essence.

Anticipatory Breach and filing a lawsuit with Illinois courts

If the seller of goods fails to deliver the product you ordered or delivers nonconforming goods, the Uniform Commercial Code allows you to “cover” by making in good faith and without unreasonable delay any reasonable purchase of or contract to purchase goods in substitution for those due from the seller. Similarly, if a buyer orders unique goods, such as specially manufactured products, you can sell them for what you can “cover” by selling the products for what the market will provide, even if the sale price falls well below the agreed price.

If you “cover,” you can recover as damages the difference between the cost of the substituted goods and the contract price together with any incidental or consequential damages after deducting any expenses saved in consequence of the seller’s breach. Please note that you can “cover,” but if you decide not to do so, you do not forfeit other legal rights.

If negotiations, demand letters, and “cover” does not work and leave you with a loss, you may have no choice but to file a lawsuit. Illinois courts will require you to show that the other party is acting in a way that might suggest a future breach of your contract and that you suffered or are likely to incur damages. You will also need to prove that you took reasonable steps to try and mitigate your losses.

In any breach of contract lawsuit, the measure of your damages is the loss of profits plus incidental or consequential damages.