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f. Examples of Reasonable Grounds for Insecurity The official comments to § 2-609 and the cases have identified many examples of reasonable grounds for insecurity, including:
one party’s shaky or unreliable credit, one party’s significant breach of other contracts, delegation of contractual duties per § 2-210, one party demanding a kickback, the seller’s failure to deliver quantities for which the buyer has prepaid, market conditions surrounding the current contract, one party’s nonresponsiveness to inquiries about performance, the seller’s loss of a supply source, a party’s request for concessions or accommodations in light of her financial troubles, and one party’s insolvency.
[2 Hawkland UCC Series § 2-609:2, Westlaw (database updated June 2021).]
2. Adequate Assurances of Due Performance Generally, the factors relevant to reasonable grounds for insecurity are also relevant to whether any assurances of due performance are adequate. Indeed, the adequacy of any assurance of due performance depends greatly on the circumstances giving rise to reasonable grounds for insecurity. For instance, mere verbal assurance that a reputable seller is looking into the defect and that the defect will not be repeated may be enough, especially if the buyer can use the goods. However, if the seller is known to cut corners, then adequate assurances may require a guaranty or a swift replacement of defective goods. Similarly, if the delivery has defects that hinder the buyer from using the goods, even a reputable seller will likely need to cure the defect, as by replacing or repairing the goods, giving an allowance against the price, or implementing similarly effective measures. [ See U.C.C. § 2-609, cmt. 3 (1951).] Note : Between merchants, the adequacy of any assurances is evaluated by commercial standards. Any party’s nonmerchant status is, of course, one factor to consider. [U.C.C. § 2- 609(2) (1951).] Example : A buyer contracted to buy oil from a seller on 30 days’ credit, provided the buyer’s financial stability was satisfactory to the seller, with a 2 percent discount for payment within 10 days.
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