Anticipatory Breach of Contract under Section 39 of the Indian Contract Act, 1872: Repudiation Before the Due Date, the Promisee's Election, Damages and the Measure of Loss

An anticipatory breach occurs when a party announces, before the time for performance has arrived, that he will not perform, or puts it out of his power to perform. The injured party is not required to wait for the appointed day and watch a breach he already knows is coming. Section 39 gives him an election, and the whole of the subject lies in the consequences of that election. Accepting the repudiation converts a future breach into a present one and accelerates the right to sue. Refusing to accept it keeps the contract alive for both parties, with everything that follows from that, including the risk that a supervening event will discharge it and leave the injured party with nothing.

1. The Statutory Basis

Sections 39 and 73, Indian Contract Act, 1872

39. When a party to a contract has refused to perform, or disabled himself from performing, his promise in its entirety, the promisee may put an end to the contract, unless he has signified, by words or conduct, his acquiescence in its continuance.

73. When a contract has been broken, the party who suffers by the breach is entitled to receive, from the party who has broken the contract, compensation for any loss or damage caused to him thereby, which naturally arose in the usual course of things from such breach, or which the parties knew, when they made the contract, to be likely to result from the breach of it.

In estimating the loss or damage arising from a breach of contract, the means which existed of remedying the inconvenience caused by the non-performance of the contract must be taken into account.

Section 39 does not use the expression anticipatory breach, and the doctrine is a judicial construction on the section. Its foundation is the proposition that a contract creates an obligation from the moment it is made, and that a party who announces he will not honour it has broken an obligation that already exists, even though the time for performance has not arrived.

2. The Two Forms of Anticipatory Breach

By express renunciation. The party states, in words, that he will not perform. The renunciation must be clear, absolute and unconditional. An expression of difficulty, a request for more time, a proposal to vary the terms, or an assertion of a genuinely held but mistaken view of the contract does not amount to repudiation.
By implied renunciation, that is disabling oneself. The party does something that makes performance impossible for him: selling the specific thing to another, granting the same exclusive right to a third party, or dissipating the means of performance. The disability must be self-induced; impossibility arising from an event the promisor could not prevent is governed by the second paragraph of Section 56 and is not a breach at all.

3. The Right to Sue Immediately

📖 Hochster v. De La Tour, (1853) 2 E & B 678

Facts: In April the defendant engaged the plaintiff as a courier to accompany him on a European tour beginning on 1 June. On 11 May the defendant wrote saying that he had changed his mind and declining the plaintiff's services. The plaintiff sued on 22 May, before the date on which performance was to begin, and had in the meantime obtained an alternative engagement commencing after 4 July.

Held: The action was maintainable although it was brought before the day of performance. A contract creates a relation between the parties from the date it is made, and a renunciation before the day of performance is a breach of that relation. It would be unreasonable to require the injured party to remain idle and ready to perform when he has been told that performance will not be accepted, and it is better for both parties that he should be free to seek alternative employment and to sue at once.

Ratio: A party faced with an unequivocal renunciation before the time for performance may treat it as an immediate breach and sue at once, without waiting for the date of performance.

Indian law applies the same principle through Section 39. In Frost v. Knight, (1872) LR 7 Ex 111, decided shortly afterwards, the doctrine was extended to a contract whose performance was contingent on a future event, the court holding that the promisee need not wait for the contingency and could sue at once on the renunciation, or alternatively keep the contract alive and await the event.

4. The Election and Its Consequences

Everything turns on what the injured party does when the repudiation is communicated to him. He has two courses and must choose one.

	Accepting the repudiation	Keeping the contract alive
When may he sue?	Immediately, without waiting for the date of performance	Only when the time for performance arrives and performance is not made
His own obligations	Discharged. He need not remain ready and willing	He must remain ready and willing to perform throughout
Duty to mitigate	Arises at once; he must take reasonable steps to reduce his loss, as the last paragraph of Section 73 requires	Ordinarily does not arise until the actual breach, since the contract is still on foot
Date for measuring damages	The date of the acceptance of the repudiation, or of the breach as the court finds it	The date fixed for performance, which may be more or less favourable
Can the repudiating party change his mind?	No. The contract is at an end and he cannot withdraw the repudiation	Yes. He may retract at any time before acceptance and perform on the due date
Risk of supervening events	None. The breach has already crystallised	The contract remains liable to be discharged by frustration, which will defeat the claim
Risk of the injured party's own default	None on his side	He must perform when the time comes, and a failure of his own will be a breach

4.1 The risk of keeping the contract alive

The classical illustration is Avery v. Bowden, (1855) 5 E & B 714, where a shipmaster who was told there was no cargo nonetheless stayed at the port insisting on one. The contract having been kept alive for both parties, the outbreak of the Crimean War made performance unlawful and discharged it, and the shipowner recovered nothing. The lesson is that a party who declines to accept a repudiation takes the risk of every event that may afterwards discharge the contract.

4.2 The right to affirm and perform

📖 White & Carter (Councils) Ltd. v. McGregor, [1962] AC 413 (HL)

Facts: An advertising contractor agreed to display advertisements for a garage on litter bins for three years. On the same day the garage owner repudiated the contract and asked that it be cancelled. The contractor refused to accept the repudiation, went ahead and displayed the advertisements for the full period, and then sued for the agreed price rather than for damages.

Held: By a majority, the contractor was entitled to the full contract price. A party faced with a repudiation is not bound to accept it; he may affirm the contract, perform his own side and sue for the agreed sum, which is a debt and not a claim in damages, so that no question of mitigation arises. The majority acknowledged that the right might be qualified where the innocent party has no legitimate interest in performing rather than claiming damages, or where he cannot complete performance without the other party's co-operation.

Ratio: An innocent party may decline to accept a repudiation, perform and claim the agreed price as a debt, subject to his having a legitimate interest in doing so and to his being able to perform without the defaulter's co-operation.

⚠ The affirmation route is narrower than it appears

Two limits confine White & Carter in practice, and both are important. The first is co-operation: where the contract cannot be performed without some act of the repudiating party, such as admitting workers to a site or supplying materials, the innocent party cannot perform and must sue for damages, which brings the duty to mitigate with it. The second is legitimate interest: a party who performs an unwanted service merely to manufacture a debt claim, where damages would fully compensate him, may be held to have had no legitimate interest in doing so. In India the last paragraph of Section 73, which requires the means of remedying the inconvenience to be taken into account, points in the same direction.

The two branches of the election, and what each costs

5. Remedies and the Measure of Loss

Damages under Section 73. The injured party recovers the loss that naturally arose in the usual course of things, or which the parties knew when contracting to be likely to result. Remote and indirect loss is excluded.
The date of assessment follows the election. Where the repudiation is accepted, damages are assessed as at that date, so a rising or falling market between then and the contract date can significantly alter the figure. Where the contract is kept alive, damages are assessed at the date fixed for performance.
Mitigation. The closing paragraph of Section 73 requires the means of remedying the inconvenience to be taken into account. A party who accepts a repudiation must take reasonable steps to reduce his loss, and cannot recover loss he could reasonably have avoided. He is not required to take unusual risks or to act at his own expense beyond what is reasonable.
The agreed sum as a debt, where the innocent party affirms and performs, as in White & Carter, in which case mitigation does not arise because the claim is not for damages.
Specific performance or injunction under the Specific Relief Act, 1963, where damages are not an adequate remedy and the contract is of a kind the court will enforce in specie.
Restitution of advances paid, where the contract is put an end to, on the principle underlying Section 65 and the general law of money paid on a consideration that has failed.

6. What Is Not an Anticipatory Breach

An honest assertion of a mistaken view of the contract, made in good faith and coupled with a willingness to perform on the party's own understanding of the terms.
A request for variation, indulgence or extension, which invites agreement rather than announcing refusal.
A statement of difficulty or doubt about the ability to perform, unless it amounts in substance to an announcement that performance will not be made.
Supervening impossibility not caused by the promisor, which is governed by the second paragraph of Section 56 and discharges the contract rather than breaking it.
A partial failure, since Section 39 requires the refusal or disability to relate to the promise in its entirety, though a failure going to the root is treated as such.

7. The Position Stated Shortly

Anticipatory breach arises where a party refuses to perform, or disables himself from performing, before the time for performance.
The renunciation must be clear, absolute and unconditional, and any disability must be self-induced.
Hochster v. De La Tour: the injured party may treat the renunciation as an immediate breach and sue at once.
Frost v. Knight extends the doctrine to contingent contracts.
Section 39 gives an election, and it is final once exercised.
Accepting the repudiation discharges the injured party, accelerates the right to sue, fixes the date of assessment and brings the duty to mitigate into play.
Keeping the contract alive preserves it for both parties, allows the repudiating party to retract, and exposes the injured party to supervening discharge, per Avery v. Bowden.
White & Carter: an innocent party may affirm, perform and sue for the agreed price as a debt, subject to legitimate interest and to being able to perform without co-operation.
Damages are measured under Section 73, and its closing paragraph requires the means of remedying the inconvenience to be taken into account.
A party who wrongly treats conduct as repudiation becomes the party in breach himself.

8. Related Topics and Provisions

Topic or provision	Connection
Performance of Contract under Sections 37 to 39	The obligation, tender, and the text of Section 39
Contingent Contracts under Sections 31 to 36	Anticipatory repudiation of a contingent contract, per Frost v. Knight
Contingent Contract vs Absolute Contract	Frustration as distinct from breach
Performance of Contracts under Sections 37 to 67	The chapter as a whole
Section 39, Indian Contract Act	Refusal to perform wholly and the promisee's election
Section 56, Indian Contract Act	Supervening impossibility, which is not a breach
Section 73, Indian Contract Act	Compensation, remoteness and mitigation
Section 75, Indian Contract Act	Compensation to a party who rightfully rescinds the contract
Specific Relief Act, 1963	Specific performance and injunction as alternative remedies