What is anticipatory breach?

Anticipatory breach occurs when one party to a contract indicates, either through their actions or statements, that they will not fulfill their obligations under the contract before the performance is due. This premature failure to perform effectively allows the other party to take action without having to wait until the actual due date for performance.

In this context, the correct answer highlights that the breach occurs before the contract's performance is due, which is crucial for the non-breaching party to make informed decisions on how to proceed, whether that's seeking damages or finding an alternative arrangement. By acknowledging that one party will not perform as promised before the deadline, it gives the other party clarity, enabling them to mitigate their losses immediately rather than waiting passively. This concept is pivotal in contract law, as it allows for more proactive measures and better management of potential losses.