Citation. 22 Ill.536 F.2d 1167 (7th Cir. 1976)
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McDonalds (Defendant), contracted with AMF Inc. (Plaintiff) to build automated cash registers for its stores. After the prototype kept breaking down and Plaintiff and Defendant could not agree on performance and reliability standards for the new cash registers, Defendant canceled the order.
Synopsis of Rule of Law.
One acts in accordance with the Uniform Commercial Code (UCC) when, upon finding reason to doubt the other party will perform a contract, one communicates the wish for assurance, even if it is not a written request for assurance. If assurance is not given, one has the right to back out of the contract.
Facts.
Plaintiff and Defendant entered into a contract to build automated cash registers for the Defendant’s stores. Plaintiff installed the prototype in one of Defendant’s stores.
The prototype kept breaking down. Because of this, Plaintiff and Defendant met to discuss performance reliability standards. They could not reach an agreement.
Plaintiff also had trouble assuring Defendant that Plaintiff could produce the machines because the factory did not have experienced personnel.
Defendant canceled the order.
Issue.
Was trial court correct in finding that Defendant was justified in canceling the contract according to the UCC?
Held.
Yes.
Plaintiff argues that the Section 2-609 of the UCC does not apply, because Defendant did not demand written assurance that Plaintiff would perform the contract. Defendant did ask for assurance in person when they requested that Plaintiff and Defendant work out a standard of performance reliability.
Between the prototype malfunctioning and the problems with the factory, Defendant had every right to worry that Plaintiff would not be able to perform.
When Plaintiff did not agree to performance, or to standards that satisfied Defendant, or to assure Defendant in any other way, Defendant had every right to cancel the contract.
Discussion.
To justify canceling a contract, one must 1) justifiably doubt the other party’s ability to perform; 2) ask for assurance; and 3) not get assurance.
