AMF v. McDonald’s

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AMF v. McDonald’s
Court 7th Circuit
Citation 536 F.2d 1167
Date decided June 22, 1976

Facts

In the 1960s, American Machine and Foundry ("AMF" ; AMF, Inc.) began producing computerized cash registers. For $20,000, McDonald's purchased a prototype in Illinois.

The prototype was installed in April of 1968. Later, McDonald's order 23 units. In turn, AMF promised to deliver the units by the middle of 1969.

The prototype was functioning sub-par; so, it constantly needed service. McDonald's was disappointed with the unit's design flaws. Logically, McDonald's asked AMF to stop production until performance standards could be leveled up.

Date Event
Mid 1968 McDonald's ordered 23 computerized cash registers from AMF
May 1969 AMF offered assurances that only 5 registers could be ready soon
July 1969 McDonald's cancelled the orders for the registers

Procedural History

AMF sued McDonald's for wrongful repudiation of the contract.

McDonald's sued AMF for to recover the $20,000 it had paid for the malfunctioning prototype register.

AMF partially lost.

Issues

May a party seek assurance of the other party's performance if circumstances suggest that the party will fail to perform key aspects of the contract?

Holding

Yes. A party with reasonable grounds for insecurity may seek adequate assurance of the other party's performance. Failure to provide it enables the insecure party to use remedies for breach.

Reasons

Under § 2-609 of the UCC, a party who has reasonable grounds for insecurity can demand adequate assurance the other party will reform.

AMS had demonstrated no ability to meet the delivery deadline for 23 registers.

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