10.5.1.1 The Burdens of Innocence: Anticipatory Repudiation and the Duty to Mitigate Damages Introduction | Kessler, Gilmore & Kronman | September 27, 2012

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10.5.1.1 The Burdens of Innocence: Anticipatory Repudiation and the Duty to Mitigate Damages Introduction

A (in return for a valuable consideration) promises B that on a specified date he will mow B's lawn, or deliver a truckload of coal to B's factory, or transfer to B the title to a particular parcel of land. If, on the appointed date, A fails without excuse to do what he has promised, he is in breach of contract and B is entitled to compensation for any loss he may have suffered as a result. (B may even have the right to compel A's performance, if the case is an appropriate one and it is still within A's power to comply.) But suppose that a week or a month or a year before the date set for his performance, A announces that he has no intention of keeping his promise and advises B to make alternative plans. An announcement of this sort is what has come to be known in the law of contracts as an "anticipatory repudiation," and a great deal of judicial energy has been spent, over the past century or so, in an effort to clarify its legal consequences.

Before the great case of Hochster v. De La Tour, 2 El. & Bl. 678 (1853), it appears to have been the rule that in circumstances of the sort just described, the promisee could not bring an action for damages before the time of performance agreed upon by the parties (which might, of course, be long after the promisor's repudiation of the contract). Whatever the reasons for the pre-Hochster view (whose most vigorous proponent was Samuel Williston, see infra p. 1287), it did not yield all at once, but gave way only by degrees and (in certain jurisdictions at least) only after considerable resistance. Nor did the eventual triumph of Hochster and the cases that canonized it (like Roehm v. Horst, infra p. 1279) mean the end of confusion and controversy in this area of law. In some contexts at least, as Phelps v. Herro, infra p. 1291, suggests, the old uncertainties linger on and a promisee may still find obstacles in the way of recovering the full value of his expectancy before the date on which the repudiating promisor had originally agreed to perform. And even where the existence of a right to recover immediately upon repudiation is a matter free of doubt, large problems can remain regarding the proper method for measuring the promisee's damages (which should, in theory, put him in the same position he would have been in had the promisor performed — no better and no worse).

The anticipatory repudiation cases collected in this section focus on the rights of the promisee; along with his rights, however, the promisee whose contract has been repudiated may also have certain responsibilities. Suppose A does announce that he no longer intends to deliver coal to B's factory on the appointed day. If B fails to obtain the coal he needs from someone else, may he sue A for the (easily foreseeable) damages that result when B is forced to close his factory for lack of fuel? This and related questions have traditionally been treated under the rubric of mitigation: When, and to what extent, must the innocent party in a contract dispute take steps to mitigate (i.e., reduce) the harm caused by the other party's breach? The scope of the duty to mitigate damages (which, strictly speaking, is not a duty at all but a condition or limit on the promisee's recovery) and its underlying rationale constitute the second set of problems addressed in the materials that follow. In fact, as the cases themselves make clear, the doctrinal distinction between mitigation and anticipatory repudiation is somewhat artificial and one should not expect the rules associated with these two ideas to be neatly separated. Functionally, they belong together, and in reflecting upon either, one is led by a natural progression to think about the other.

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May 21, 2013

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