Also known as: demands for assurance · demand assurance · adequate assurance · assurance of performance
Written by attorneys · grounded in primary & secondary sources — see below
A contractual right that permits 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 the assurance is received if doing so is commercially reasonable. Failure to provide adequate assurance within a reasonable time constitutes a repudiation.
MetroCell leased cell-site space from Apex Towers under a long-term contract. Apex defaulted on loans, lost towers to its lender, and refused to confirm continued access to key sites after MetroCell's written demand for assurance. MetroCell suspended further payments. Apex's failure to provide concrete assurance allowed MetroCell to treat the contract as repudiated and defend the subsequent breach suit.
River Coastal bought containers and parts from Silver Sea under a UCC-governed sales contract. After accepting one shipment with minor documentation errors, River Coastal received an incomplete delivery and reports of warehouse damage. It demanded written assurance of future performance. Silver Sea's informal response failed to satisfy the demand, preserving River Coastal's right to seek further assurance on new quality concerns.
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Reasonable grounds exist when objective facts create insecurity about the other party's ability or willingness to perform, such as financial distress, loss of key assets, or repeated delivery failures. The demand must be in writing under the UCC and must be justified by those facts rather than mere suspicion.
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Failure to furnish adequate assurance within a reasonable time, not exceeding thirty days under the UCC, constitutes a repudiation. The demanding party may then suspend performance, treat the contract as breached, and pursue remedies including cover and damages.
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No. Acceptance of an improper delivery or payment does not waive the right to demand adequate assurance of future performance when new grounds for insecurity arise. Each demand is assessed independently on its own facts.
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No. The doctrine allows a party to act on reasonable insecurity about future performance without waiting for a total breach. The demand and any justified suspension protect the insecure party while the other side has an opportunity to dispel the concern.
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…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, §…