Contracts and Sales Multistate Bar Practice Exam

In the context of anticipatory repudiation, what must occur for a party to exercise their rights?

1. The contract must be executory bilateral

2. There must be a written agreement to repudiate

3. There must be a counterperformance

4. There must be a mutual consent to rescind

The correct answer is: The contract must be executory bilateral

A party can exercise their rights in the context of anticipatory repudiation when the contract is executory bilateral. An executory bilateral contract is one in which both parties have ongoing obligations that are to be performed in the future. In situations where one party clearly indicates, either through words or actions, that they will not fulfill their part of the contract before the performance is due—this is referred to as anticipatory repudiation—the other party is then permitted to take action based on this repudiation. In these circumstances, the aggrieved party may choose to either treat the contract as breached and pursue remedies immediately or wait for the time of performance to see if the repudiating party changes their mind and performs. The nature of the executory bilateral contract is critical, as it establishes that both parties have current and future obligations, which validates the expectations and rights of the parties involved when one party indicates a withdrawal of their commitments. The other options do not fulfill the requirements for exercising rights due to anticipatory repudiation. There is no requirement that a written agreement to repudiate is necessary, nor is counterperformance needed to exercise these rights. Additionally, the mutual consent to rescind does not apply in cases of anticipatory repudiation, as anticipatory repudi