Also known as: assurances of performance · adequate assurance of performance · adequate assurance
Written by attorneys · grounded in primary & secondary sources — see below
A contractual principle permitting a party facing reasonable grounds for insecurity about the other's future performance to demand adequate assurance of due performance and to suspend its own remaining performance until the assurance is received. Failure to provide adequate assurance within a reasonable time constitutes repudiation. Prior acceptance of nonconforming performance does not eliminate the right to demand assurance for future obligations.
Harbor Hope Foundation contracted with GalaWorks Events to stage its annual gala. GalaWorks canceled other nonprofit events and announced major staff cuts. Harbor Hope halted ticket sales and sponsor outreach while demanding written assurance of full performance. GalaWorks offered only a vague statement of confidence without concrete commitments.
Valley Hospital contracted with MedEquip for customized ventilators over three years. Regulators imposed quality-control sanctions on MedEquip. Valley demanded written assurance of timely compliant deliveries. MedEquip responded with only vague statements about working through challenges.
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River Coastal accepted prior shipments of engine parts despite minor documentation errors. A later shipment appeared refurbished rather than new. River Coastal demanded detailed written assurance that remaining parts would be brand new and fully documented. The prior acceptances did not bar the new demand.
A party may demand adequate assurance when reasonable grounds for insecurity arise with respect to the other's future performance. Objective facts such as canceled events, regulatory sanctions, or visible lack of progress supply those grounds. The demand must be in writing under the UCC.
An assurance is adequate when it supplies concrete commitments or information that reasonably restores confidence in performance. Vague statements of confidence or general optimism do not qualify when the insecurity stems from serious operational problems. Commercial standards between merchants guide the adequacy determination.
Failure to provide adequate assurance within a reasonable time constitutes repudiation of the contract. The insecure party may then cancel and pursue remedies such as cover. The time limit is thirty days under the UCC.
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 when new grounds for insecurity appear.
…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, §…