WILLIAM DONALD SCHAEFER, Governor                            Ch. 535

SUBTITLE 4. PERFORMANCE OF LEASED CONTRACT: REPUDIATED, SUBSTITUTED,

AND EXCUSED

2A-401. INSECURITY: ADEQUATE ASSURANCE OF PERFORMANCE

(1)      A LEASE CONTRACT IMPOSES AN OBLIGATION ON EACH PARTY THAT THE
OTHER'S EXPECTATION OF RECEIVING DUE PERFORMANCE WILL NOT BE IMPAIRED.

(2)      IF REASONABLE GROUNDS FOR INSECURITY ARISE WITH RESPECT TO
THE PERFORMANCE OF EITHER PARTY, THE INSECURE PARTY MAY DEMAND IN
WRITING ADEQUATE ASSURANCE OF DUE PERFORMANCE. UNTIL THE INSECURE
PARTY RECEIVES THAT ASSURANCE, IF COMMERCIALLY REASONABLE, THE
INSECURE PARTY MAY SUSPEND ANY PERFORMANCE FOR WHICH HE (OR SHE) HAS
NOT ALREADY RECEIVED THE AGREED RETURN.

(3)      A REPUDIATION OF THE LEASE CONTRACT OCCURS IF ASSURANCE OF
DUE PERFORMANCE ADEQUATE UNDER THE CIRCUMSTANCES OF THE PARTICULAR
CASE IS NOT PROVIDED TO THE INSECURE PARTY WITHIN A REASONABLE TIME,
NOT TO EXCEED 30 DAYS AFTER RECEIPT OF A DEMAND BY THE OTHER PARTY.

(4)      BETWEEN MERCHANTS, THE REASONABLENESS OF GROUNDS FOR
INSECURITY AND THE ADEQUACY OF ANY ASSURANCE OFFERED MUST BE
DETERMINED ACCORDING TO COMMERCIAL STANDARDS.

(5)      ACCEPTANCE OF ANY NONCONFORMING DELIVERY OR PAYMENT DOES
NOT PREJUDICE THE AGGRIEVED PARTY'S RIGHT TO DEMAND ADEQUATE
ASSURANCE OF FUTURE PERFORMANCE.

2A-402. ANTICIPATORY REPUDIATION

IF EITHER PARTY REPUDIATES A LEASE CONTRACT WITH RESPECT TO A
PERFORMANCE NOT YET DUE UNDER THE LEASE CONTRACT, THE LOSS OF WHICH
PERFORMANCE WILL SUBSTANTIALLY IMPAIR THE VALUE OF THE LEASE
CONTRACT TO THE OTHER, THE AGGRIEVED PARTY MAY:

(A)     FOR A COMMERCIALLY REASONABLE TIME, AWAIT RETRACTION OF
REPUDIATION AND PERFORMANCE BY THE REPUDIATING PARTY;

(B)      MAKE DEMAND PURSUANT TO § 2A-401 AND AWAIT ASSURANCE OF
FUTURE PERFORMANCE ADEQUATE UNDER THE CIRCUMSTANCES OF THE
PARTICULAR CASE; OR

(C)      RESORT TO ANY RIGHT OR REMEDY UPON DEFAULT UNDER THE
LEASE CONTRACT OR THIS ARTICLE, EVEN THOUGH THE AGGRIEVED PARTY HAS
NOTIFIED THE REPUDIATING PARTY THAT THE AGGRIEVED PARTY WOULD AWAIT
THE REPUDIATING PARTY'S PERFORMANCE AND ASSURANCE AND HAS URGED
RETRACTION. IN ADDITION, WHETHER OR NOT THE AGGRIEVED PARTY IS
PURSUING ONE OF THE FOREGOING REMEDIES, THE AGGRIEVED PARTY MAY
SUSPEND PERFORMANCE OR, IF THE AGGRIEVED PARTY IS THE LESSOR, PROCEED
IN ACCORDANCE WITH THE PROVISIONS OF THIS ARTICLE ON THE LESSOR'S RIGHT
TO IDENTIFY GOODS TO THE LEASE CONTRACT NOTWITHSTANDING DEFAULT OR
TO SALVAGE UNFINISHED GOODS (§ 2A-524).

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