## Facts

- A seller and a buyer entered into two wheat sales contracts (Nos. 78-2 and 81-3) containing payment terms that conditioned final payment on complete delivery, with the balance due 30 days after shipment of the total contract quantity; any earlier payment was an accommodation and not a waiver.
- The seller began performance and delivered approximately 9,086 bushels under one contract, then stopped deliveries after receiving third-party information suggesting the buyer might not pay.
- When a buyer’s truck arrived for another load, the seller refused to load and stated he was trying to reach the buyer and had been advised not to load until contacting the buyer to resolve questions.
- The seller and his attorney attempted, unsuccessfully, to contact the buyer by telephone for roughly two weeks.
- The buyer sent letters asserting no breach by the buyer, stating the seller’s failure to deliver was a breach, and later purporting to cancel the contracts while stating the buyer would still perform if the seller delivered.
- About two weeks after stopping deliveries, the seller sent a written letter demanding “adequate assurances,” but requiring the buyer to pay for the grain before delivery (prepayment).
- The seller sued for breach based on the buyer’s failure to prepay; the buyer counterclaimed, alleging wrongful non-delivery/anticipatory repudiation.

## Issues

1. Whether the seller had reasonable grounds for insecurity under Colo. Rev. Stat. § 4-2-609(1) to seek assurances and suspend performance.
2. Whether the seller made a statutorily and contractually proper demand for adequate assurance (including the writing requirement and permissible scope of assurance requested).
3. Whether the seller’s stoppage of deliveries and insistence on prepayment constituted anticipatory repudiation, entitling the buyer to cancel and pursue remedies.

## Decision

- The court held the seller had reasonable grounds for insecurity, and treated that determination as a factual finding supported by the record.
- The court held the seller did not make a proper § 4-2-609 demand before suspending deliveries; an oral refusal communicated to a truck driver was not a written demand and did not clearly request adequate assurance.
- The court held the seller’s later written demand was substantively improper because it required prepayment, which exceeded the contracts’ payment terms.
- The court concluded the seller’s unjustified suspension of performance and refusal to deliver except on new conditions amounted to anticipatory repudiation.
- The court reversed the judgment for the seller and reversed the dismissal of the buyer’s counterclaim, remanding for further proceedings consistent with its rulings.

## Legal Principles

- Under Colo. Rev. Stat. § 4-2-609(1) (U.C.C. § 2-609), reasonable grounds for insecurity permit a party to demand, in writing, adequate assurance of due performance and, if commercially reasonable, to suspend unreturned performance pending receipt of assurance.
- The statutory right to suspend performance is conditioned on a proper written demand; oral communications or vague refusals to perform do not satisfy § 2-609.
- A demand for adequate assurance must seek assurance of the performance required by the contract; it cannot be used to impose different or more burdensome terms (such as prepayment contrary to the agreed payment schedule).
- A party’s refusal to perform except on conditions beyond the contract can constitute anticipatory repudiation, allowing the other party to cancel and pursue U.C.C. remedies.

## Conclusion

Even when a seller has reasonable grounds for insecurity, § 2-609 requires a timely, written, and contract-consistent demand for assurance; suspending deliveries without such a demand and conditioning future performance on prepayment constitutes anticipatory repudiation, entitling the buyer to cancel and seek remedies.


Scott v. Crown, 765 P.2d 1043 (Colo. App. 1988)