Anticipatory Breach (sort of) in Laos

Under Laos contract law there is a concept referred to as “Suspension of Contract Performance.” This concept is important to understand when entering into contracts with Laos parties because it is liable to abuse and subsequent litigation.

To explain.

A party to a contract may suspend performance of the contract if it has reason to believe that the other party to the contract is in one of the following situations:

• It is bankrupt or there has been a request filed with the court to pursue bankruptcy;
• There is a lack of reliability in performance such that the suspending party suspects the non-suspending party incapable of performance of the contract;
• Some other situation exists that causes the non-suspending party to be unable to perform the contract.

To properly suspend performance, the suspending party must send a written notice to the non-suspending party of their intention to suspend performance.

Once the non-suspending party has received this notice, they can either confirm or repudiate their circumstances. If they confirm their circumstances and indeed are incapable of performing the contract the suspending party may terminate the contract. If they repudiate the notice then the contract performance must resume.

Now, this becomes subject to abuse at a couple of different points. The first and most obvious point is that there are no time limits set for the notice, nor for repudiation. Due to recent experience I would suggest that this is almost a sure fire point of abuse. A party who wishes to terminate a contract and can’t come up with any other excuse to do so can claim anticipatory breach and require confirmation within a very short period of time. When the non-suspending party doesn’t respond in time, the suspending party can take this to mean confirmation rather than repudiation and thus terminate the contract. Unfortunately, such a ploy stands a good chance of being upheld by the courts.

The other area of abuse is one of brazenness. A party who claims anticipatory breach is technically responsible for damages caused to the non-suspending party if such wrongly suspended. A party could easily claim suspension and stop performance of the contract, assuming that the other party would not pursue litigation and even if they did, that the courts would either not grant an award in that party’s favor or not grant an award at all.

The best way to avoid either of these pitfalls is to define the specifics of anticipatory breach in the contract itself. Set out the specific instances in which one party may suspend the contract. Set out the time limits for confirmation or repudiation and the consequences for wrongful suspension. While this may not completely stymie abuse, it will increase your chances of obtaining a favorable award in court, and it might just chill the other side’s interest in pursuing suspension.

Remember, in Indochina you have to define what is not defined by law and, for the most part, that’s a lot.