On March 31, Selco and Byco entered into a written agreement in which Selco agreed to fabricate and sell to Byco 10,000 specially designed brake linings for a new type of power brake manufactured by Byco. The contract provided that Byco would pay half of the purchase price on May 15 in order to give Selco funds to "tool up" for the work; that Selco would deliver 5,000 brake linings on May 31; that Byco would pay the balance of the purchase price on June 15; and that Selco would deliver the balance of the brake linings on June 30. On May 10, Selco notified Byco that it doubted that it could perform because of problems encountered in modifying its production machines to produce the brake linings. On May 15, however, Selco assured Byco that the production difficulties had been overcome, and Byco paid Selco the first 50 percent installment of the purchase price. Selco did not deliver the first 5,000 brake linings on May 31, or at any time thereafter; on June 10, Selco notified Byco that it would not perform the contractWhich of the following correctly states Byco's rights and obligations immediately after receipt of Selco's notice on May 10?
Byco could treat the notice as an anticipatory repudiation, and had a cause of action on May 10 for breach of the entire contract  Byco could treat the notice as an anticipatory repudiation, and could sue to enjoin an actual breach by Selco on May 31.  Byco had no cause of action for breach of contract, but could suspend its performance and demand assurances that Selco would perform.  Byco had no cause of action for breach of contract, and was required to pay the installment of the purchase price due on May 15 to preserve its rights under the contract.