Contract Repudiation Essay ⋆ Business Essay Examples ⋆ EssayEmpire

Repudiation is a term used to describe circumstances where a party acts or expresses intent not to accept the obligation of a contract, hence the term contract repudiation. Repudiation amounts to a breach of contract where the refusal to perform is clear. Refusal to perform may be evidenced by words or voluntary acts, but it must be distinct, unequivocal, and absolute. In today’s global economy, business law is a global practice, and the obligations of contracts have become increasingly important; therefore, contract repudiation often leaves at least one party to a contract dissatisfied. Generally, a definite and unconditional repudiation of a contract by a party, communicated to the other, is a breach of contract, creating an immediate cause of action in a court of law. This is so even if it takes place long before the time prescribed for the promised performance; further, before conditions specified in the promise have even occurred. Ironically, contract repudiation should be encouraged where the promisor is able to profit from his default, so long as he or she places the promisee in as good a position as the promisee would have been in had performance been rendered. Typically, a breach of contract entitles the other party to compensation for the loss sustained as a consequence of the breach. But with the exceptions and subject to express contractual rights of determination, a breach of contract by one party does not discharge the other party from performance of his or her unperformed obligations. Otherwise stated, repudiation by one party standing alone does not terminate the contract. It takes two to end it: Repudiation on one end, and acceptance of repudiation on the other. There are, however, two circumstances where a breach of contract by one party entitles the other to elect to put an end to all remaining primary obligations of both parties. The first is where the contracting parties have agreed, whether by express words or implication of law, that any breach of the contractual term in question shall entitle the other party to terminate the contract—where there is a breach of condition. The second is where the event resulting from the breach of contract has the effect of depriving the other party of a substantial portion of the benefit as intended by the contract. In other words, where there is a “fundamental breach.” When one party elects to put an end to all remaining primary obligations of both parties, it is referred to as the determination or rescission of the contract, or as treating the contract as “repudiated” or “accepting the repudiation” of the contract breaker. Under Florida law, for example, where an obligor repudiates a duty before he has committed a breach of contract by nonperformance, and before he or she has received all of the agreed exchange for it, his or her repudiation alone gives rise to a claim for damages. The contract is not rescinded as from the beginning, however. But both parties are discharged from further performing obligations under the contract. Still, rights that have already been unconditionally acquired are not divested or discharged, and a full arbitration clause will normally continue to apply to disputes arising upon the acceptance of repudiation. In rare circumstances, advance payment may be recovered—that is, if the contractor has provided no consideration in the nature of part performance. Such an instance is made clear in the realm of anticipatory repudiation. Anticipatory repudiation is a term in the law of contracts that describes a declaration by one party to a contract, the promising party, that they do not intend to live up to their obligations under the contract. Where such an event occurs, the other party to the contract, the performing party, is excused from having to fulfill their obligations. The repudiation, however, can be retracted by the promising party so long as there has been no material change in the position of the performing party; further, a retraction of the repudiation restores the performer’s obligation to perform on the contract. In the event that the promising party’s repudiation makes it impossible to fulfill its promise, then retraction is not possible and no act by the promising party can restore the performing party’s obligations. For example, if Willie promises to give Guillermo his new golf clubs in exchange for Guillermo’s building him a new residence, but Willie sells his golf clubs to Chuck before Guillermo commences the job, Willie’s act constitutes an anticipatory repudiation. Essentially, Guillermo is excused from performing. Once the golf clubs have left Willie’s possession, it is impossible for Willie to fulfill his promise to give Guillermo his new golf clubs. In the global markets of today, contract repudiation can have devastating effects not only on individuals, but also on the local economy. Because business in the United States is very much intertwined with business in several other economies, a strong foreign presence in international markets may help to make up for a downturn in the local economy. As a result, the performance of contractual obligations is of utmost importance. Bibliography: Gerald E. Berendt et al., Contract Law and Practice (Matthew Bender and Company, 2007); Amy Hilsman Kastely, Deborah Waire Post, and Sharon Kang Hom, Contracting Law, 3rd ed. (Carolina Academic Press, 2005); Restatement (Second) Contracts § 253.

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