## Facts

- A Kansas general contractor (Lundy’s) contracted with a manufacturer/installer of custom steel windows (Hope’s) to supply 93 windows for a public school remodeling project for $55,000.
- The transaction’s predominant purpose was the manufacture and supply of goods; the parties’ dispute centered on the promised delivery date and consequences of delay.
- Hope’s did not meet the delivery schedule it had represented; the windows were shipped late October 1988 with expected delivery in early November.
- Before delivery, Lundy’s communicated that it intended to impose an $11,000 “back charge” (offset) for late delivery.
- Hope’s responded by suspending delivery, demanding written assurance that no back charge would be assessed, and later insisting on full prepayment before it would release the shipped windows for delivery.
- Lundy’s refused to prepay and did not provide the demanded assurance; it canceled the contract and obtained replacement windows from another supplier.
- Hope’s sued for breach of contract and quantum meruit and sought recovery from the project surety (Bank IV) under a Kansas public-works bond.

## Issues

1. What delivery date did the parties’ agreement and dealings establish, and was Hope’s late?
2. Did Lundy’s threatened back charge create “reasonable grounds for insecurity” permitting Hope’s to suspend performance and demand “adequate assurance” under K.S.A. § 84-2-609 (UCC § 2-609)?
3. Were Hope’s demands (no back charge and full prepayment) and its stoppage of delivery commercially reasonable, or did they amount to repudiation justifying cancellation?
4. Could Hope’s recover the contract price or in quantum meruit despite non-delivery and replacement by Lundy’s?
5. To what extent, if any, did the Kansas statutory public-works bond cover Hope’s claimed losses against the surety?

## Decision

- The court found Hope’s was the party in breach and entered judgment for Lundy’s and the surety on Hope’s claims for breach of contract and quantum meruit.
- The court held that Hope’s lacked a sufficient basis to invoke UCC § 2-609 and that its stoppage of delivery and insistence on new terms (including prepayment) were not commercially reasonable.
- The court treated Hope’s conduct as an unjustified refusal to perform amounting to repudiation, which entitled Lundy’s to cancel and procure substitutes.
- The surety had no liability for Lundy’s alleged default; the bond did not secure Hope’s claim for contract-type damages arising from the termination dispute.

## Legal Principles

- A mixed goods/services contract is governed by UCC Article 2 when the predominant factor is the sale of goods.
- Under UCC § 2-609, a party may demand written “adequate assurance” only when it has reasonable grounds for insecurity about the other party’s due performance, and any suspension of performance must be commercially reasonable.
- A threat to assert an offset or damages claim for delay, without more, does not necessarily constitute reasonable grounds to believe the other party will fail to pay for conforming goods.
- UCC § 2-609 does not authorize a party to require the other side to waive potential claims or to impose materially different payment terms (such as full prepayment) as the price of continued performance.
- Stopping delivery and conditioning performance on new terms after goods have been shipped can constitute repudiation, allowing the other party to cancel and cover.
- Quantum meruit is unavailable where the claimant is the breaching party and the defendant did not receive and accept the goods or benefit claimed.
- Kansas public-works bond protection is limited to covered categories of unpaid labor/material claims and does not extend to a supplier’s claim for contract damages stemming from termination and delay disputes.

## Conclusion

The court held that Hope’s late performance did not permit it to suspend delivery and demand a no-offset commitment and full prepayment under UCC § 2-609; those demands were commercially unreasonable and treated as repudiation, so Lundy’s lawfully canceled, Hope’s recovered nothing, and the surety owed no bond payment on Hope’s asserted loss.


Hope's Architectural Prods., Inc. v. Lundy's Constr., Inc., 781 F. Supp. 711 (D. Kan. 1991)