Output Contract
(Long Form)

Summary

This template is a long-form output contract that measures the quantity of goods to be purchased by the output of the seller. This template includes practical guidance, drafting notes, and alternate and optional clauses. Output contracts measure the quantity of goods to be sold by the output of the seller. In an output contract, "output" means the actual good faith production of the seller. This good faith requirement makes an output contract sufficiently definite to be binding. Even though the quantity term may remain indefinite, no quantity unreasonably disproportionate to any stated estimate, or in the absence of a stated estimate, to any normal or otherwise comparable prior output, may be tendered or demanded. If an output agreement calls for the buyer and seller to buy and sell the kind of goods concerned only to and from each other, it imposes an obligation on the seller to use his or her best efforts to supply the goods and on the buyer to use his or her best efforts to promote their sale, unless otherwise agreed. Under the Uniform Commercial Code (UCC), a term measures the quantity of goods by the output of the seller means such actual output as may occur in good faith; however, no quantity may be unreasonably disproportionate to any stated estimate. If there is no stated estimate, the seller may not tender a quantity beyond any normal or comparable prior output. If an output contract provides for exclusive dealing of the subject goods, there is an obligation for the seller to use best efforts to supply the goods and on the buyer to use best efforts to promote their sale (unless otherwise agreed). U.C.C. § 2-306. This template can be used if the parties want a relatively detailed contract with clauses covering such points as patents and inventions ownership, noncompetition (exclusive dealing), indemnity, access to records, authority to buy raw materials, spare parts, and designs and specifications. For a simple output contract providing the basics of a contract such as price, term of agreement, and description of goods, see Output Contract (Short Form). For additional guidance, see Output and Requirement Contracts under Article 2 of the Uniform Commercial Code and Requirements and Output Contracts Stated Estimates.