Scott v. Crown - 765 P.2d 1043 (Colo. App. 1988)

Rule:

Generally, the express language of Colo. Rev. Stat. § 4-2-609(1) of the Uniform Commercial Code is followed such that a demand for assurances of performance must be in writing in order to be effective. However, in some cases an oral demand for assurances has sufficed. In such cases, there appears a pattern of interaction which demonstrated a clear understanding between the parties that suspension of the demanding party's performance was the alternative, if its concerns were not adequately addressed by the other party.

Facts:

During February 1983, Larry Scott (Seller) and Dennis Crown d/b/a Crown Company (Buyer) entered into contract No. 76 for the sale of 16,000 bushels of U.S. No. 1 wheat. Pursuant to the contract, Buyer paid Seller $ 2,000 as an advanced payment. The contract provided that the full balance would be paid 30 days after shipment of the total contract quantity of grain. By March 13, 1983, Seller had delivered all the wheat called for in the contract. Payment of the full contract balance of approximately $ 49,000 was due on April 13, 1983. On March 1, 1983 Seller and Buyer executed contract 78-2 for the sale of 13,500 bushels of U.S. No. 1 wheat and contract No. 81-3 for the sale of approximately 30 truck loads of U.S. No. 1 wheat. These contracts are the subject of this action. With the exception of quantity, the contracts had identical terms and conditions as those in contract No. 76. Seller brought an action against Buyer in the District Court of Rio Grande County (Colorado), claiming that Buyer had breached a contract to purchase a large quantity of wheat by failing to pay for the shipment prior to delivery pursuant to their demand for adequate assurance of performance, although payment was not due until after delivery. The trial court entered judgment for Seller. Buyer appealed.

Issue:

Did Seller have the right to suspend performance based on an oral statement before suspending performance?

Answer:

No.

Conclusion:

The court stated that under Colo. Rev. Stat. § 4-2-609(1) of the Uniform Commercial Code, whether the sellers had reasonable grounds for insecurity was a question of fact, and that the evidence supported the trial court's conclusion. The court noted that generally, the express language of § 4-2-609(1) was followed such that a demand for assurances of performance had to be in writing. The court pointed out that Seller made only an oral statement before suspending performance, and determined that that was insufficient to make the suspension justified. The court also pointed out that there was not a subsequent pattern of interaction between the parties that would clearly demonstrate that Buyer understood that Seller had requested assurances of performance, and concluded that the conditions necessary to validate an oral demand were not met. The court concluded that Seller did not have the right to suspend performance, and that their action constituted an anticipatory repudiation which gave Buyer the right to cancel the contracts.