MBE Rules · Contracts
Output and Requirements Contracts
UCC §2-306
The rule
Quantities measured by seller's output or buyer's requirements are enforceable, bounded by good faith and no quantity unreasonably disproportionate to estimates; exclusive dealing implies best efforts.
In plain English
Output and requirements contracts allow a seller to fulfill a buyer's needs based on the buyer's actual requirements or the seller's output. However, these contracts must be executed in good faith and cannot demand quantities that are unreasonably disproportionate to what was estimated.
Worked example
A bakery agrees to supply a local coffee shop with all the bread it needs for a year, based on the shop's requirements. If the coffee shop suddenly triples its orders without notice, the bakery can refuse to fulfill the excessive demand since it is not in good faith and is disproportionate to the original estimate. The bakery is only required to provide what was reasonably anticipated.
Memory hook
Output and requirements contracts: fulfill needs, but keep it reasonable!
The trap
Students often confuse output and requirements contracts with fixed quantity contracts, leading them to miscalculate enforceability based on quantity. They may overlook the good faith requirement and the limits on disproportionate demands.
How examiners test it
Questions typically present a scenario involving fluctuating demands or output and ask whether the contract remains enforceable, often testing the boundaries of good faith and reasonable estimates.
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