Repudiation refers to a situation where one party to a contract clearly communicates to the other party, either through words or actions, that they are unwilling or unable to perform their contractual obligations and no longer intend to be bound by the terms of the contract. In other words, repudiation is a breach of contract where one party communicates an intention to no longer fulfill their obligations under the agreement.
For example, if a seller agrees to sell goods to a buyer and then tells the buyer that they will not deliver the goods, they may be deemed to have repudiated the contract.
When one party repudiates a contract, the other party has the following legal options:
- accepting the repudiation and terminating the contract,
- affirming the contract and requiring the other party to fulfill their obligations, and
- suing for damages resulting from the repudiation.
It is important to note that repudiation does not automatically terminate a contract, but rather gives the innocent party the right to elect to terminate.