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er can suspend performance, if it com-
mercially reasonable, until it receives
assurance from the buyer. Addition-
ally, the seller can consider the contract
repudiated if the buyer fails to respond
to the demand for adequate assurance
within a reasonable time, but not to
exceed 30 days. If the buyer does re-
spond then the seller has to determine
if the response is adequate. Not only
must the seller’s demand for assurance
be based upon reasonable grounds, the
seller must act reasonably when de-
ciding if the assurances are adequate.
Unfortunately, there is no bright line
rule that defines “reasonable grounds”.
The courts have set forth criteria to
consider, however, those criteria are
different depending on what state you
are in. If confronted with a situation
where you are uneasy about the buy-
er’s ability to fulfill its obligations you
should consult with an experienced
construction attorney to determine if
you have reasonable grounds to make
a demand for adequate assurance.
SPECIAL REMEDY FOR INSOLVENCY
Where the supplier of the goods
or materials discovers that the buyer is
insolvent the supplier can refuse deliv-
ery of the goods except for cash. The
seller also has the option to stop deliv-
ery of the goods.
The information contained in this article
is not intended as legal advice. This infor-
mation is subject to frequent changes and
thus you should seek legal counsel. If you
have any questions relating to this article
or commercial construction law in general
please feel free to contact jbailey@thecon-
structionlaw.com.
