Instability of granular material may lead to catastrophic events such as the gross collapse of earth structures, and thus it is an important topic in geotechnical engineering. In this paper, we adopt the micromechanics approach for constitutive modeling, in which the soil is considered an assembly of particles, and the stress-strain relationship for the assembly is determined by integrating the behavior of the interparticle contacts in all orientations. Although analyses regarding material instability have been extensively studied for a soil element at the constitutive level, it has not been considered at the interparticle contact level. Through an eigenvalue analysis, two modes of instability are identified at the local contact level: the singularity of tangential stiffness matrix and the loss of positiveness of second-order work. The constitutive model is applied to simulate drained and undrained triaxial tests on Toyoura sand of various densities under various confining pressures. The predictions are compared with experimentally measured instability at the assembly level. The modes of stability at the interparticle contact level and their relations to the overall instability of the assembly are also analyzed.