## Facts

- BRC Rubber & Plastics, Inc. (buyer) manufactured rubber and plastic products and relied on carbon black as a key input.
- Continental Carbon Co. (seller) entered a five-year supply contract with BRC for the period January 1, 2010 through December 31, 2014.
- The contract required Continental to supply approximately 1.8 million pounds of prime furnace black annually in roughly equal monthly quantities, with base prices by grade and a formula for feedstock-based adjustments.
- In spring 2011, amid tightened market conditions, Continental demanded a unilateral two-cents-per-pound increase to the contract’s base price, separate from feedstock adjustments; BRC objected and continued ordering at contract pricing.
- Continental missed a shipment on May 11, 2011, and did not provide clear confirmations about future shipping while continuing to press for the base-price increase.
- On May 16, 2011, BRC sent a written demand for adequate assurance under U.C.C. § 2-609, seeking confirmation that Continental would perform without the unilateral base-price increase.
- Continental sent mixed signals: counsel stated on May 20 that Continental would abide by the contract, but Continental continued conduct linking performance to acceptance of the higher base price.
- On June 2, 2011, BRC treated the contract as repudiated, filed suit, and purchased substitute carbon black from other suppliers at higher prices for the remaining term.
- After a bench trial on remand, the district court found repudiation under § 2-609, found BRC’s cover commercially reasonable under § 2-712, and awarded damages plus prejudgment interest; Continental appealed.

## Issues

1. Whether Continental repudiated the contract by failing to provide adequate assurance after BRC’s U.C.C. § 2-609 demand.
2. Whether BRC’s substitute purchases were commercially reasonable cover under U.C.C. § 2-712.
3. Whether the district court properly awarded prejudgment interest on BRC’s cover damages.

## Decision

- The Seventh Circuit affirmed the judgment for BRC in full.
- Continental’s conduct and communications, taken together, failed to provide adequate assurance and therefore constituted repudiation under U.C.C. § 2-609.
- BRC’s cover purchases were made in good faith and without unreasonable delay, and were commercially reasonable under U.C.C. § 2-712.
- The prejudgment interest award was affirmed because the damages were ascertainable and the district court did not err in awarding interest.

## Legal Principles

- Under U.C.C. § 2-609, a party with reasonable grounds for insecurity may demand adequate assurance in writing; failure to provide adequate assurance within a reasonable time is a repudiation.
- Adequacy of assurance is assessed from the totality of communications and conduct in the commercial setting; a formal assurance can be negated by contradictory behavior that conditions performance on changed terms.
- A party may treat a contract as repudiated under § 2-609 even without an explicit refusal where the counterparty’s response leaves reasonable doubts unresolved and effectively conditions future performance on unilateral modifications.
- Under U.C.C. § 2-712, cover must be made in good faith and without unreasonable delay and must be reasonable under the circumstances; the buyer need not obtain the best possible substitute transaction.
- Prejudgment interest is generally appropriate where damages are readily calculable rather than speculative, including cover-based price differentials that can be computed from contract and replacement prices.

## Conclusion

The court held that a seller’s contradictory responses to a proper § 2-609 demand—paired with continued efforts to impose a unilateral price increase—can amount to failure to provide adequate assurance and thus repudiation, and it confirmed that the buyer’s substitute purchases need only be commercially reasonable to support cover damages and prejudgment interest.


BRC Rubber & Plastics, Inc. v. Continental Carbon Co., 981 F.3d 618 (7th Cir. 2020)