## Facts

- A. Merowitz and Company, Inc. (Merowitz) agreed in writing to supply plumbing and heating materials to Development Corporation of America (DCA) for an FHA low-income housing project (“Church Street South”) in New Haven, Connecticut.
- The contract price was \$358,381 plus Connecticut sales tax.
- The purchase order set an installment payment schedule tied to invoice dates: invoices for deliveries made from the 1st–15th of a month were payable on the 25th of that month, and invoices for deliveries made from the 15th–30th were payable on the 10th of the next month.
- DCA could take a 2% discount only if it paid invoices within the time limits stated in the purchase order.
- Merowitz made deliveries and sent invoices; DCA fell behind and failed to pay for multiple deliveries.
- Merowitz demanded payment; DCA gave assurances it would pay but did not bring the account current.
- As arrearages grew, Merowitz demanded that DCA provide security/assurance (including an escrow-type arrangement) before Merowitz would continue making further deliveries; DCA refused.
- Merowitz sued DCA for breach of contract seeking the amounts due for past deliveries that had been made and accepted.
- Merowitz later entered bankruptcy, and Stephen Kunian, the trustee in bankruptcy, was substituted as plaintiff.
- DCA Builders, Inc., DCA’s wholly owned subsidiary associated with the project, was also a defendant; the record reflected that DCA acted as its agent and DCA Builders stipulated it would be bound by the same judgment.
- A state referee (acting with the powers of the Superior Court) entered judgment for Kunian for \$32,164.94 plus interest, and the defendants appealed (with a cross-appeal by the plaintiff).

## Issues

1. Whether DCA’s repeated failure to pay installments when due, combined with its refusal to provide assurances requested by the seller, constituted a breach/repudiation permitting the seller to suspend further performance and sue for unpaid installments.
2. Whether the seller’s demand for adequate assurance under UCC § 2-609 could be treated as sufficient in the circumstances even though the demand was not made in a formal writing.
3. Whether the action was properly treated as a contract action and whether the evidence supported an award measured by the unpaid contract price for goods delivered and accepted (plus interest).

## Decision

- The Supreme Court of Connecticut sustained judgment for the plaintiff trustee on liability, concluding that the defendants’ nonpayment and refusal to provide adequate assurances justified the seller’s suspension of further deliveries and suit for breach.
- Applying UCC principles on insecurity and adequate assurance, the court treated the seller’s demand for assurance as effective on the facts presented, despite the statutory reference to a demand “in writing.”
- The court treated the complaint as an action on the contract and upheld a contract-based recovery for delivered goods that had not been paid for, including the award of \$32,164.94 plus interest.
- Judgment was entered against both Development Corporation of America and DCA Builders, Inc. (consistent with the agency/stipulation reflected in the record).

## Legal Principles

- Under UCC § 2-609, when a party has reasonable grounds for insecurity about the other party’s performance, it may demand adequate assurance of due performance and may suspend its own performance until assurance is received.
- In an installment sales contract, a buyer’s repeated failure to pay when due, along with refusal to provide reasonable assurances after demand, can amount to repudiation/breach allowing the seller to stop further deliveries and seek contract remedies.
- A demand for adequate assurance may be treated as sufficient when the surrounding communications and conduct show the demand was clearly made and understood, even if not presented as a formal written notice in the usual form.
- When the seller has delivered goods that the buyer accepted, the seller may recover the unpaid portion of the contract price for those deliveries (contract price minus payments made), with interest as allowed.
- Ambiguous contract language is construed most strongly against the party whose language it is and for whose benefit the language was inserted.

## Conclusion

In *Kunian v. Development Corp. of America*, the Connecticut Supreme Court held that a supplier (through its bankruptcy trustee) could recover unpaid amounts under an installment sales contract where the buyer repeatedly failed to pay invoices on the agreed schedule and then refused to provide requested assurances of future payment; the seller was entitled to suspend further deliveries under UCC § 2-609 and obtain contract-based damages measured by the unpaid contract price for goods delivered and accepted, plus interest.


Kunian v. Development Corp. of America, 334 A.2d 427 (1973)