Hawa v. Moore
2011 WL 1137337, 947 N.E.2d 421, 2011 Ind. App. LEXIS 550 (2011)
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Rule of Law:
A party's failure to provide adequate assurance of due performance within a reasonable time, after the other party develops reasonable grounds for insecurity based on the first party's words or actions, constitutes a repudiation of the contract.
Facts:
- Mike Hawa hired contractor Gerald Moore to install a recycled concrete parking lot base for $12,000.
- The contract required Hawa to make a second payment of $5,000 when half of the area was completed.
- After work began, Hawa complained about the materials, stated he was 'not happy,' and told Moore he would not make the second payment.
- Hawa then unilaterally changed the payment term, stating he would not pay the second installment until 80% of the work was done.
- Later, Hawa claimed his bank needed to inspect the work before releasing funds for the second payment.
- Moore agreed to a bank meeting and moved equipment to the site for the inspection, but after waiting five days, Hawa failed to arrange for the bank representative to visit.
- Following Hawa's failure to arrange the bank inspection, Moore walked off the job.
Procedural Posture:
- Mike Hawa filed a breach of contract claim against Gerald Moore in small claims court.
- Moore filed a counterclaim against Hawa demanding payment under the contract.
- Following a bench trial, the small claims court entered a judgment of $4745 in favor of Moore on his counterclaim.
- Hawa's motion to correct error was denied by the small claims court.
- Hawa, as the appellant, appealed the small claims court's judgment to the Court of Appeals of Indiana.
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Issue:
Does a party repudiate a contract by failing to provide adequate assurance of payment after their words and actions give the other party reasonable grounds to believe they will not perform?
Opinions:
Majority - Vaidik, J.
Yes, a party repudiates a contract by failing to provide adequate assurance after creating reasonable grounds for insecurity. Hawa's actions—complaining, unilaterally changing payment terms from 50% to 80% completion, and then blaming his bank for non-payment—gave Moore reasonable grounds to believe Hawa would breach the contract. This entitled Moore to demand adequate assurance of performance, which he did by agreeing to the bank inspection. Hawa's failure to secure the bank inspection within a reasonable time was a failure to provide such assurance, which Moore was entitled to treat as a repudiation of the contract under the principles of Restatement (Second) of Contracts § 251.
Analysis:
This case provides a clear application of the doctrine of anticipatory repudiation through a demand for adequate assurance, a principle derived from the UCC and articulated in the Restatement (Second) of Contracts. The decision is significant because it shows that a formal or explicit declaration of intent to breach is not required for repudiation. Instead, a series of actions creating reasonable insecurity is sufficient to trigger the right to demand assurance, and the failure to provide it ripens into a treatable breach. This precedent protects parties from having to continue performing their contractual duties when the other party's conduct makes future payment or performance appear unlikely.
