## Facts

- A construction contractor (Elia) contracted with a scaffolding supplier (Beeche) to furnish a scaffolding system for a bridge rehabilitation project.
- The agreement was structured as a purchase at a price roughly twice the rental value, coupled with a buy-back provision allowing Elia to require repurchase at 50% of contract cost after purchase.
- Elia issued a purchase order for $117,810, with a deposit due on execution and the remaining balance due shortly after delivery and acceptance by the project owner.
- Shortly after the purchase order, Beeche filed a voluntary Chapter 11 petition; Elia asserted it was unaware of the filing at the time.
- Beeche’s performance was delayed, and Elia warned of potential backcharges; Beeche sought modified, accelerated payment terms.
- Beeche ultimately delivered the scaffolding. After delivery, Elia refused to pay the remaining balance, citing concern about Beeche’s financial condition and future ability to honor the buy-back.
- Elia demanded immediate repurchase under the buy-back clause instead of making final payment.
- In Beeche’s Chapter 11 case, Beeche (as debtor-in-possession) sued for the unpaid balance and return of the scaffolding; Elia counterclaimed for the buy-back price.

## Issues

1. Whether a seller’s Chapter 11 filing, without more, constitutes anticipatory repudiation under UCC § 2-610 that excuses the buyer’s remaining performance.
2. Whether the seller’s non-disclosure of the bankruptcy filing and performance delays constituted an anticipatory breach under UCC § 2-609 for failure to provide adequate assurances after reasonable grounds for insecurity arose.
3. Whether the buyer could invoke a contract buy-back provision as an immediate obligation while withholding the final payment allegedly required to trigger the buy-back.

## Decision

- The district court affirmed the bankruptcy court’s judgment.
- Elia was required to return the scaffolding to Beeche.
- Beeche was denied recovery of the unpaid contract balance.
- Elia’s counterclaim for the buy-back price was denied.
- The court rejected Elia’s theory that the Chapter 11 filing or related conduct amounted to anticipatory repudiation or an adequate-assurance-based anticipatory breach that would permit Elia to refuse payment and compel immediate buy-back.

## Legal Principles

- Anticipatory repudiation under UCC § 2-610 requires a clear manifestation of intent not to perform; a Chapter 11 filing, standing alone, does not satisfy that standard where the debtor continues performance.
- Under UCC § 2-609, a party with reasonable grounds for insecurity may suspend performance only after demanding adequate assurances; the analysis turns on whether assurances were demanded and whether the other party’s conduct shows inability or unwillingness to perform.
- A contractual buy-back right is enforceable according to its conditions; when the contract makes buy-back contingent on full payment, a buyer who withholds the final payment cannot accelerate the seller’s buy-back obligation and recover the buy-back price.

## Conclusion

The court held that Chapter 11 filing and related concerns about financial condition did not, without a clear refusal to perform or a properly invoked adequate-assurance process, excuse the buyer’s payment obligation or allow it to compel an immediate buy-back; the affirmed judgment ordered return of the equipment while denying both the seller’s claim for the remaining price and the buyer’s counterclaim for buy-back damages.


In re Beeche Sys. Corp., 164 B.R. 12 (N.D.N.Y. 1994)