‘Adequate assurance’ in contract law refers to a formal declaration or act that sufficiently allays concerns over a contracting party’s future performance. It is determined by the specificity of contractual terms, precedent, and the nature of the performance at risk. It must be commercially reasonable and contextually appropriate.
For example: A retailer who purchases goods from a manufacturer may seek adequate assurance in the form of bank guarantees if there are sudden rumors about the manufacturer’s potential insolvency.