Also known as: adequate assurances of performance · assurance of performance · assurances of performance · demand for assurance · reasonable grounds for insecurity
Written by attorneys · grounded in primary & secondary sources — see below
A contractual right that permits one party to demand written assurance of due performance when reasonable grounds for insecurity arise concerning the other party's ability or willingness to perform. The demanding party may suspend its own performance until adequate assurance is received if commercially reasonable to do so. Failure to provide adequate assurance within a reasonable time constitutes a repudiation of the contract.
Select any source to read its text and confirm it supports the definition.
BlueWave Shipping chartered a vessel from HarborLine under a one-year agreement. After the vessel twice failed safety inspections and was detained by port authorities, BlueWave sent a written demand for documentation confirming repairs and seaworthiness. HarborLine responded only that repairs were ongoing. BlueWave suspended hire payments and chartered a substitute vessel.
ARB contracted to purchase specialized equipment from E-Systems. When the delivered equipment failed to meet express quality warranties, ARB withheld payment and demanded written assurance that future deliveries would conform. E-Systems provided no response addressing the warranty concerns. ARB treated the lack of assurance as a repudiation and refused further payment.
Reasonable grounds exist when objective facts create a substantial doubt about the other party's future performance, such as repeated inspection failures, financial distress, loss of key subcontractors, or vague responses to performance inquiries. The grounds are evaluated under commercial standards between merchants. A justified demand triggers the right to suspend performance until assurance arrives.
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An adequate response must provide concrete commitments, documentation, or timelines that dispel the insecurity under commercial standards. Vague statements of ongoing efforts or general commitment are insufficient when prior defects or delays have occurred. Between merchants, adequacy is judged by trade usage and the specific circumstances creating the insecurity.
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Failure to provide adequate assurance within a reasonable time, not exceeding thirty days under the UCC, constitutes a repudiation. The demanding party may then treat the contract as breached and pursue remedies including suspension of performance, cover, or damages. The repudiation excuses the demanding party's further performance.
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No. Acceptance of an improper delivery or payment does not prejudice the right to demand adequate assurance of future performance. Each demand is assessed independently based on new grounds for insecurity that arise after acceptance.
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