A willingness to negotiate an offer of performance at variance with the terms of the agreement demonstrates the offering party's intention to abide by the contract and does not result in an anticipatory breach. However, an offer to engage in "negotiations" at which the offeror will merely reiterate his demands or withdraw them on a condition he has no right to impose, is not sufficient to prevent an anticipatory breach from occurring. In California, for a repudiation to result in an anticipatory breach of contract, it must be treated and acted upon as such by the party to which it was made.
The district court found that appellant engineering company had committed an anticipatory breach and that appellee construction company was justified in cancelling their contract for dam hoists, and awarded appellee $46,823 on its counterclaim. Appellant sought review of the judgment of the United States District Court for the Northern District of California.
Did appellant engineering company’s refusal to deliver goods unless additional payments were made by appellee construction company constitute a material breach of its contract, thus justifying the appellee’s cancellation?
The court affirmed, finding that appellant's refusal to deliver the hoists unless additional payments were made by appellee constituted a material breach of the contract. The court found that appellant had persistently demanded an unwarranted condition precedent to its required performance and that its continued demand culminated with an announcement that no performance would be forthcoming unless appellee paid more money than required by the terms of the contract. This was an absolute refusal to perform in accordance with any interpretation of the contract other than its own and was a repudiation of the contract. The court found that appellee was justified in acting upon the repudiation by cancelling the contract and ordering the hoists from another source because there was no attempted withdrawal of its demand by appellant.