Restatement Second of Contracts 59: Explained and Analyzed for Better Understanding

If you are a contract practitioner, you must have come across the term Restatement Second of Contracts 59. The Restatement Second of Contracts (RSC) is a prestigious legal treatise that provides legal guidance on the formation, interpretation, and enforcement of contracts. It was developed by the American Law Institute (ALI) in 1981 and has since been cited in numerous court cases and legal journals.

Section 59 of the Restatement Second of Contracts deals with the doctrine of anticipatory repudiation, also known as anticipatory breach. Anticipatory repudiation occurs when one party to a contract communicates to the other party that they will not perform their contractual obligations when the time comes. This communication could be verbal or in writing and could be direct or indirect.

Anticipatory repudiation represents a significant breach of the contract by the repudiating party. It gives the non-repudiating party the right to terminate the contract and seek damages for any losses incurred due to the repudiation. The non-repudiating party must, however, act reasonably and mitigate their losses to the extent possible.

An anticipatory repudiation could be overt or implied. Overt repudiation occurs when the repudiating party expressly tells the non-repudiating party that they will not perform their contractual obligations. For example, if a seller tells a buyer that they will not deliver the goods as agreed, that would be an overt repudiation.

On the other hand, implied repudiation occurs when the repudiating party`s conduct indicates that they will not perform their contractual obligations. For example, if a contractor substantially alters the scope of work without the consent of the client, that could indicate an implied repudiation.

The Restatement Second of Contracts provides guidance on how to deal with anticipatory repudiation. According to Section 59, the non-repudiating party may wait and see whether the repudiating party will perform their contractual obligations or treat the repudiation as a breach and terminate the contract immediately. The non-repudiating party must, however, act reasonably and mitigate their losses to the extent possible.

In conclusion, the doctrine of anticipatory repudiation is an essential legal concept that is covered under Section 59 of the Restatement Second of Contracts. It provides guidance on how to deal with a situation where one party communicates to the other party that they will not perform their contractual obligations. If you are a contract practitioner, it is crucial to understand this doctrine and its implications to better protect your clients` interests.