What constitutes "adequate assurance" is to be determined by factual conditions; the seller must exercise good faith and observe commercial standards; his satisfaction must be based upon reason and must not be arbitrary or capricious. If the assurances he demands are more than adequate and the other party refuses to accede to the excessive demands, the court may find that the demanding party was in breach or a repudiator.
A seller sued a buyer and the bank for breach of contract and failure to pay on a bond regarding a contract for the purchase and installation of windows. After seller missed the due date for delivery and installation of the windows, it notified buyer that it was suspending delivery of the windows until buyer provided assurances that there would be no back charge. The buyer declined and the seller notified bank, demanding payment. The bank, however, refused to pay.
Was the seller entitled to payment?
The court found in favor of bank and buyer, noting that the delivery of the goods was clearly untimely. It held that the seller's argument that the delay was caused by problems that were outside of its control was rejected because the seller gave no contemporaneous notice to the buyer of any problems and produced no evidence at trial of any problems. The court further found that the seller could not demand assurances under Kan. Stat. Ann. § 84-2-609 because it was already in breach at the time. Additionally, the seller was not permitted to recover under quantum meruit because it conferred no benefit on the buyer. Because of those rulings, the claim against bank under the statutory bond was necessarily denied.