Also known as: adequate assurances doctrine · adequate assurance · adequate assurances · UCC 2-609 · assurance of performance
Written by attorneys · grounded in primary & secondary sources — see below
A contractual principle allowing a party facing reasonable grounds for insecurity about the other's future performance to demand written assurance of due performance. The demanding party may suspend its own remaining performance until adequate assurance arrives. Failure to provide assurance within a reasonable time constitutes repudiation.
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MetroCell leased space on Apex Towers cell sites under a ten-year agreement. Apex defaulted on loans and lost towers to a lender while refusing to confirm continued access to key locations. MetroCell sent a written demand for assurance of future access. When Apex provided no concrete response, MetroCell suspended its monthly payments.
River Coastal bought refrigerated containers from Silver Sea under a UCC-governed sales contract. An incomplete shipment arrived and a warehouse storm damaged Silver Sea's facility. River Coastal demanded written assurance of future performance. Silver Sea replied informally that issues were resolved but supplied no certifications or timelines.
River Coastal accepted earlier engine-part shipments containing minor documentation errors. A later delivery appeared refurbished rather than new. River Coastal demanded detailed written assurance that remaining parts would be brand new with proper certificates. The prior acceptances did not prevent the fresh demand.
Reasonable grounds arise from objective facts showing a substantial risk of nonperformance, such as financial distress, loss of key assets, or repeated delivery failures. Media reports of enforcement actions that could close a plant or a lender's seizure of essential equipment supply such grounds. The demand must be in writing and the suspension of performance must be commercially reasonable.
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…good faith aspects of the output and requirement problems of subsection (1). It also raises questions of insecurity and right to adequate assurance under this Article.” Section 2-306 is consistent with prior New York case law (Buerger and O’Connor, Practice Commentaries, McKinney’s Cons Laws of NY, Book 62½, Uniform Commercial Code, §…
…a matter of law. While Defendants correctly note that courts have generally recognized that letters of credit provide
A response must supply concrete information such as production schedules, contingency plans, or performance certifications that dispel the insecurity according to trade usage. Vague statements that production remains on track or that issues are resolved fall short when prior defects have been reported. Between merchants the adequacy determination follows commercial standards.
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No. Acceptance of any improper delivery or payment does not prejudice the right to demand adequate assurance of future performance. Each demand is evaluated on its own facts, and new concerns about quality or capacity create fresh grounds for insecurity.
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Failure to provide adequate assurance within a reasonable time not exceeding thirty days constitutes a repudiation of the contract. The demanding party may then treat the contract as breached and pursue remedies including cover and damages for total breach.
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