Printable Format84-2-609. Right to adequate assurance of performance. (1) A contract for sale imposes an obligation on each party that the other's expectation of receiving due performance will not be impaired. When reasonable grounds for insecurity arise with respect to the performance of either party the other may in writing demand adequate assurance of due performance and until he receives such assurance may if commercially reasonable suspend any performance for which he has not already received the agreed return.
(2) Between merchants the reasonableness of grounds for insecurity and the adequacy of any assurance offered shall be determined according to commercial standards.
(3) Acceptance of any improper delivery or payment does not prejudice the aggrieved party's right to demand adequate assurance of future performance.
(4) After receipt of a justified demand failure to provide within a reasonable time not exceeding thirty days such assurance of due performance as is adequate under the circumstances of the particular case is a repudiation of the contract.
History: L. 1965, ch. 564, ยง 89; January 1, 1966.
KANSAS COMMENT, 1996
1. This section is an important Code innovation, and is intended to protect one contracting party when the other party's willingness or ability to perform has declined materially between the time of contracting and the time of performance. The approach is essentially a positive one, aimed at saving the bargain rather than creating a lawsuit. This section makes it possible to respond to questions about the other party's forthcoming performance when the other party has not yet repudiated and the provisions of the next section are not available. However, the section has its own uncertainties in application that can limit its usefulness. See James J. White & Robert S. Summers, 1 Uniform Commercial Code 286 (4 th ed. Practitioner Treatise Series 1995) ("section 2-609 sometimes does little more than extend the minuet between the weaseling party and the contractual counterpart and add a couple of new moves").
2. Subsection (1) provides the aggrieved party with the right to demand adequate assurances of performance from the other party when reasonable grounds for insecurity arise. The party demanding assurances may, if commercially reasonable, also suspend its own performance. The demand for assurances must be in writing, although courts construe that requirement liberally. See LNS Inv. Co. v. Phillips 66 Co., 731 F. Supp. 1484 (D. Kan. 1990) (citing AMF, Inc. v. McDonald's Corp., 536 F.2d 1167 (7 th Cir. 1976)). What constitutes reasonable grounds for insecurity and what assurances may be demanded are questions of fact. Official Comments 3 and 4 provide examples and guidance. See also 84-2-210(5) (delegation of performance creates reasonable grounds for insecurity). For recent cases applying these requirements, see Smyers v. Quartz Work Corp., 880 F. Supp. 1425 (D. Kan. 1995); LNS Inv. Co. v. Phillips 66 Co., supra. Subsection (2) provides that commercial standards govern these questions between merchants. Note that a party that is already in breach may not rely on 84-2-609 and demand assurances. See Hope's Architectural Prod., Inc. v. Lundy's Constr., Inc., 781 F. Supp. 711 (D. Kan. 1991), aff'd mem., 1 F.3d 1249 (10 th Cir. 1993).
3. Failure to provide adequate assurances after proper demand and in a reasonable time is a repudiation of the contract under subsection (4), and opens the way to all remedies for breach. A party that makes unreasonable demands for assurances, however, may itself be found to have breached or repudiated the contract. Hope's Architectural Prod., Inc. v. Lundy's Constr., Inc., supra.
Law Review and Bar Journal References:
Anticipatory breach and bankruptcy, Richard F. Broude, 17 K.L.R. 1, 12, 13, 14, 15 (1968).
CASE ANNOTATIONS
1. Failure of company to provide either quantity or quality of goods called for entitled buyer to suspend performance. LNS Inv. Co., Inc. v. Phillips 66 Co., 731 F. Supp. 1484 (1990).
2. Demand for assurances by seller overly broad and unreasonable. Hope's Architectural v. Lundy's Const., Inc., 781 F. Supp. 711, 714, 715 (1992).
3. When subcontractor failed to supply affidavits, considered repudiation with UCC remedies available. In Re John Gruss Co., Inc., 22 B.R. 236, 237, 242 (1982).
4. Whether buyer's failure to give assurances of payment after nonpayment constituted breach of contract examined. Smyers v. Quartz Works Corp., 880 F. Supp. 1425, 1432 (1995).
5. Statute inapplicable if the parties' agreement as to pilot project goods and non-pilot project goods involved separate contracts. School-Link Technologies v. Applied Resources, 471 F. Supp. 2d 1101, 1118 (D. Kan. 2007).
6. Three factors to suspend performance under Kansas law discussed and applied. GFSI, Inc. v. J-Loong Trading, Ltd., 505 F. Supp. 2d 935, 945 (2007).