/yoo see see SEK-shuhnz too-dash-SIX-oh-nine and too-dash-SEV-uhn-teen/·statute
Also known as:UCC § 2-609 · UCC § 2-717 · 2-609 · 2-717 · adequate assurance · deduction of damages
Written by attorneys · grounded in primary & secondary sources — see below
A statutory rule permitting a party to a contract for the sale of goods who has reasonable grounds for insecurity about the other party's performance to demand in writing adequate assurance of due performance. Until receipt of that assurance the insecure party may if commercially reasonable suspend any performance for which the agreed return has not been received. Failure to provide adequate assurance within a reasonable time constitutes a repudiation of the contract.
Sources & Authorities· 8 primary sources
Select any source to read its text and confirm it supports the definition.
Uniform Acts
Restatements
Casebooks
How it applies
Common Examples
3
Demand After Regulatory Reports
Stone Resource contracted with Stone Clean for phased delivery of compactors over eighteen months. Media reports of pending enforcement actions against Stone Clean prompted Stone Resource to send a written demand for adequate assurance of future deliveries. Stone Clean replied only that production remained on track without contingency plans. More than thirty days later Stone Resource treated the failure to assure as repudiation and suspended its own payments while arranging cover.
Retraction With Required Assurance
BlueWave Oceanographic contracted with HarborWorks Shipyard to build a research vessel by a fixed date. BlueWave demanded detailed written assurance after seeing little progress and unpaid subcontractors. HarborWorks replied only that it would accelerate work. BlueWave treated the vague response as inadequate and hired a replacement yard after HarborWorks failed to retract with the demanded assurance.
Assignment Creating Insecurity
Nexxus Products contracted with Best Beauty for exclusive distribution of hair-care products in Texas. Best was acquired by Sally Beauty a competitor of Nexxus. Nexxus treated the assignment as creating reasonable grounds for insecurity and demanded assurance from the assignee. When Sally Beauty provided no assurance Nexxus repudiated the contract and arranged alternative distribution.
Sally Beauty Co. v. Nexxus Products Co.801 F.2d 1001 (1986)
Common questions
Frequently Asked
5
What constitutes reasonable grounds for insecurity under the adequate-assurance rule?+
Reasonable grounds arise from objective facts such as media reports of enforcement actions that could close a plant, visible lack of progress on a project, unpaid subcontractors, or an assignment to a competitor. These facts must support a belief that the other party will commit a breach giving rise to a claim for total damages.
How long does a party have to respond to a demand for adequate assurance?+
The response must come within a reasonable time not exceeding thirty days. Failure to provide assurance adequate under the circumstances within that period constitutes repudiation.
What makes an assurance adequate under commercial standards?
+
Adequacy is judged by commercial standards between merchants. A vague statement that production remains on track or that the party is confident it can work something out is ordinarily inadequate when prior defects or operational disruptions have been reported.
May a party suspend its own performance while awaiting assurance?+
Yes. If commercially reasonable the insecure party may suspend performance for which it has not received the agreed return until adequate assurance is received.
Does prior acceptance of nonconforming goods waive the right to demand assurance later?+
No. Acceptance of any nonconforming delivery or payment does not prejudice the right to demand adequate assurance of future performance.
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, §…
2-609
without demanding
adequate assurance
and despite receiving such
assurance
from Defendants. Defendants do not seek any offset or
damages
related to the warehouse goods; accordingly, the Court considers whether Rocheux demanded…
Professional ResponsibilityRegulation of the legal profession · Responsibilities of partners, managers, supervisory and subordinate lawyersMPREFoundational