Legal Memorandum: Assurance of Contract Performance in MA

Issue: Under Massachusetts law, may a party demand assurance of contract performance when there are reasonable grounds to believe that the other party will commit a breach by non-performance?

Area of Law: Business Organizations & Contracts, UCC & Secured Transactions
Keywords: Assurance of performance; Contract; Breach by non-performance
Jurisdiction: Massachusetts
Cited Cases: 881 N.E.2d 792; 92 N.Y.2d 458; 563 A.2d 772; 725 N.E.2d 545; 157 N.H. 458; 730 F.2d 186; 826 N.E.2d 794; 953 A.2d 396; 931 N.E.2d 942; 705 N.E.2d 656; 366 N.E. 2d 779; 377 N.E.2d 324; 972 N.E.2d 449
Cited Statutes: Restatement (Second) of Contracts § 251 (1981); Mass. Gen. Laws ch. 106, § 2-609(1); Restatement (Second) of Contracts § 252
Date: 11/01/2012

At common law, no right to demand assurance of performance from another party to a contract existed.  However, the modern view adopted by the Restatement (Second) of Contracts and several jurisdictions allows for such demand when there are reasonable grounds for insecurity over the other party’s performance.  The Restatement (Second) of Contracts provides that where reasonable grounds arise to believe that an obligor will commit a breach by non-performance, the obligee may demand adequate assurance of performance, and if reasonable, the obligee may suspend any performance for which he has not been paid until the requested assurance is received.  The obligee may treat the obligor’s failure to provide the requested adequate assurance within a reasonable time as a repudiation of the contract.  Restatement (Second) of Contracts § 251 (1981).  

While frequently cited and well respected, the Restatement (Second) of Contracts is secondary authority and not binding on the courts.  Massachusetts courts do, however, cite and rely on the Restatement (Second) of Contracts on a regular basis.  See, e.g., Costa v. Brait Builder Corp., 463 Mass. 65, 76, 972 N.E.2d 449, 458 (2012); City of Springfield v. Dep’t of Telecomm., 457 Mass. 562, 568, 931 N.E.2d 942, 947 (2011); Miller v. Mooney, 431 Mass. 57, 62, 725 N.E.2d 545, 549 (2000).  In fact, in an unpublished opinion, the Appeals Court of Massachusetts relied on § 251 of the Restatement in holding that dishonest conduct was sufficient grounds for a party to […]

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