Also known as: assurances of due performance · assure due performance · assuring due performance · adequate assurance of performance · demand for assurance
Written by attorneys · grounded in primary & secondary sources — see below
A contractual right that permits an obligee facing reasonable grounds to believe the obligor will commit a total breach to demand in writing adequate assurance of due performance and, if commercially reasonable, to suspend performance until the assurance is received. Failure to provide assurance adequate under the circumstances within a reasonable time constitutes a repudiation.
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Valley Hospital learned that MedEquip faced serious regulatory sanctions on quality control. Valley sent a written demand for concrete commitments on future ventilator deliveries. MedEquip responded only with vague statements about working through challenges. Valley treated the inadequate response as repudiation and canceled the contract.
NanoWireless announced it was exiting the consumer market and selling network assets. MetroCell demanded written assurance that NanoWireless would perform the remaining ten-year term. NanoWireless replied only that service would continue during the transition. MetroCell treated the response as repudiation and obtained substitute coverage.
BlueWave inspected HarborWorks shipyard and found little progress plus unpaid subcontractors. BlueWave demanded detailed written assurance that the vessel would finish on time. HarborWorks replied only that it would accelerate work. BlueWave suspended payments and hired another yard.
GalaWorks canceled other events and announced staff cuts. Harbor Hope demanded clear written assurance that GalaWorks would stage the gala. GalaWorks replied only that it was confident it could work something out. Harbor Hope suspended ticket sales and sponsor outreach.
Best was acquired by Sally Beauty. Nexxus demanded assurance that Sally Beauty would continue vigorous promotion of its products. Sally Beauty offered no concrete commitments. Nexxus treated the failure to assure as repudiation and terminated the distribution contract.
Reasonable grounds arise from objective facts such as regulatory sanctions, asset sales, production halts, unpaid subcontractors, or public announcements of strategic shifts that threaten future performance. The demand must be in writing and the grounds must support a belief that the obligor will commit a total breach.
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…obligation to use its best efforts to promote Nexxus products, but if so its remedy was not to cancel the contract but to demand assurances of due performance. See UCC § 2-609; Official Comment 5 to § 2-306. No such demand was made. An anticipatory repudiation by conduct requires conduct that makes the repudiating party unable to perform.…
…as a matter of law. While Defendants correctly note that courts have generally recognized that letters of credit provide
Failure to provide assurance adequate under the circumstances within a reasonable time, not exceeding thirty days under the UCC, constitutes repudiation. Vague or noncommittal replies are inadequate when the insecurity stems from serious operational or regulatory problems.
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Yes. If commercially reasonable or reasonable under the circumstances, the insecure party may suspend performance for which it has not yet received the agreed exchange until adequate assurance arrives. Suspension is justified even before any actual breach occurs.
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No. Acceptance of an improper delivery or payment does not prejudice the right to demand adequate assurance of future performance when new grounds for insecurity arise.
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The Restatement rule applies to all contracts and permits a demand for assurance when reasonable grounds exist to fear total breach. Courts have applied it to construction, service, and long-term supply agreements beyond the UCC.
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