When either party repudiates the contract with respect to a performance not yet due, the loss of which will substantially impair the value of the contract to the other, the aggrieved party may:

(a) for a commercially reasonable time await performance by the repudiating party; or

(b) resort to any remedy for breach (Section 2-703 [55-2-703 NMSA 1978] or Section 2-711 [55-2-711 NMSA 1978]), even though he has notified the repudiating party that he would await the latter's performance and has urged retraction; and

(c) in either case suspend his own performance or proceed in accordance with the provisions of this article on the seller's right to identify goods to the contract notwithstanding breach or to salvage unfinished goods (Section 2-704 [55-2-704 NMSA 1978]).

History: 1953 Comp., § 50A-2-610, enacted by Laws 1961, ch. 96, § 2-610.

OFFICIAL COMMENTS

UCC Official Comments by ALI & the NCCUSL. Reproduced with permission of the PEB for the UCC. All rights reserved.

Prior uniform statutory provision. — See Sections 63(2) and 65, Uniform Sales Act.

Purposes. — To make it clear that:

1. With the problem of insecurity taken care of by the preceding section and with provision being made in this article as to the effect of a defective delivery under an installment contract, anticipatory repudiation centers upon an overt communication of intention or an action which renders performance impossible or demonstrates a clear determination not to continue with performance.

Under the present section when such a repudiation substantially impairs the value of the contract, the aggrieved party may at any time resort to his remedies for breach, or he may suspend his own performance while he negotiates with, or awaits performance by, the other party. But if he awaits performance beyond a commercially reasonable time he cannot recover resulting damages which he should have avoided.

2. It is not necessary for repudiation that performance be made literally and utterly impossible. Repudiation can result from action which reasonably indicates a rejection of the continuing obligation. And, a repudiation automatically results under the preceding section on insecurity when a party fails to provide adequate assurance of due future performance within thirty days after a justifiable demand therefor has been made. Under the language of this section, a demand by one or both parties for more than the contract calls for in the way of counter-performance is not in itself a repudiation nor does it invalidate a plain expression of desire for future performance. However, when under a fair reading it amounts to a statement of intention not to perform except on conditions which go beyond the contract, it becomes a repudiation.

3. The test chosen to justify an aggrieved party's action under this section is the same as that in the section on breach in installment contracts - namely the substantial value of the contract. The most useful test of substantial value is to determine whether material inconvenience or injustice will result if the aggrieved party is forced to wait and receive an ultimate tender minus the part or aspect repudiated.

4. After repudiation, the aggrieved party may immediately resort to any remedy he chooses provided he moves in good faith (see Section 1-203). Inaction and silence by the aggrieved party may leave the matter open but it cannot be regarded as misleading the repudiating party. Therefore the aggrieved party is left free to proceed at any time with his options under this section, unless he has taken some positive action which in good faith requires notification to the other party before the remedy is pursued.

Point 1: Sections 2-609 and 2-612.

Point 2: Section 2-609.

Point 3: Section 2-612.

Point 4: Section 1-203.

"Aggrieved party". Section 1-201.

"Contract". Section 1-201.

"Party". Section 1-201.

"Remedy". Section 1-201.

Effect of value lost from "used" condition of goods on mitigation of damages. — The duty of the seller of a boat to mitigate damages arose after the seller was notified of the repudiation of the buyer, and where a loss in value of the boat due to its "used" condition occurred before the buyer's repudiation letter, the boat's "used" value was a proper damage for the court to consider, and was not subject to the duty to mitigate. Elephant Butte Resort Marina, Inc. v. Wooldridge, 1985-NMSC-014, 102 N.M. 286, 694 P.2d 1351.

Law reviews. — For comment, "Commercial Law - Uniform Commercial Code - Section 2-609: Right to Adequate Assurance of Performance," see 7 Nat. Resources J. 397 (1967).

Am. Jur. 2d, A.L.R. and C.J.S. references. — 50 Am. Jur. 2d Letters of Credit, and Credit Cards § 75 et seq.

Breach of one contract as ground for rescission of another, 27 A.L.R. 1157.

Election to rescind for fraud as barring action for damages, 35 A.L.R. 1155, 123 A.L.R. 378.

Refusal to accept crops to be grown, 44 A.L.R. 215, 108 A.L.R. 1482.

Return or tender of consideration for release or compromise of claim on contract of sale, as condition of action for rescission, 134 A.L.R. 146.

What constitutes anticipatory repudiation of sales contract under UCC § 2-610, 1 A.L.R.4th 527.

77A C.J.S. Sales § 121 et seq.