Also known as:demanding assurances · demanded assurances · demands assurances · assurance of performance · adequate assurance
Written by attorneys · grounded in primary & secondary sources — see below
A contractual principle allowing a party facing reasonable grounds for insecurity about the other party's future performance to demand adequate assurance of due performance. The demanding party may suspend its own performance until receiving assurance adequate under the circumstances. Failure to provide such assurance within a reasonable time constitutes repudiation.
Sources & Authorities
How it applies
Common Examples
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Shipyard Progress Concerns
Dustin Donovan contracted with Decker Electronics to build specialized testing equipment by a grant deadline. Midway through, Donovan's engineer observed stalled work, unpaid subcontractors, and rumors of a possible sale of the facility. Donovan demanded detailed written assurance of timely completion and suspended milestone payments. Decker replied only that it would accelerate work without providing schedules or financial safeguards. Donovan treated the response as repudiation and hired a replacement firm.
Prior Nonconforming Shipment
Denise Donovan accepted a partial delivery of components from Drake Logistics that contained documentation errors. Later shipments arrived late and appeared refurbished. Donovan demanded bank-backed written assurance of future conforming deliveries. Drake responded with an internal memo promising priority treatment. The response failed commercial standards between merchants, allowing Donovan to suspend further payments.
Select any source to read its text and confirm it supports the definition.
Uniform Acts
Restatements
Course Outlines
Merger and Best Efforts
Dominion Capital assigned its distribution contract with Dawson Steel to an affiliate of a competitor. Dawson feared the assignee would favor its own products. Instead of canceling, Dawson demanded written assurance of best-efforts promotion. The assignee provided no concrete commitments, allowing Dawson to treat the failure as repudiation.
Sally Beauty Co. v. Nexxus Products Co.801 F.2d 1001 (1986)
Common questions
Frequently Asked
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When may a party demand adequate assurance under the doctrine?+
A party may demand adequate assurance when reasonable grounds for insecurity arise with respect to the other party's performance. The grounds must support a belief that the other party will commit a breach giving rise to a claim for total damages. Visible lack of progress, unpaid subcontractors, and rumors of financial distress can supply such grounds.
Supporting sources
Does prior acceptance of nonconforming goods bar a later demand for assurance?+
No. Acceptance of any improper delivery or payment does not prejudice the aggrieved party's right to demand adequate assurance of future performance. Each demand is evaluated independently on its own facts.
Supporting sources
What constitutes an adequate response to a demand for assurance between merchants?+
Adequacy is measured by commercial standards in the relevant industry. A vague internal memo or statement that issues are resolved typically fails when prior defects have been reported. Detailed certifications or contingency plans are often required.
Supporting sources
What follows if adequate assurance is not provided within a reasonable time?+
Failure to provide assurance adequate under the circumstances within a reasonable time not exceeding thirty days constitutes repudiation of the contract. The demanding party may then pursue remedies for total breach, including cover and damages.
Supporting sources
801 F.2d 1001 (1986)Contracts
…of its 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…