Requirements and Output Contracts Stated Estimates


Summary

This practice note addresses stated estimates with respect to requirement contracts and output contracts. A common type of purchase and sale of goods contracts between commercial entities is a requirement or output contracts. Such contracts are measured not by a stated, fixed quantity of goods to be sold or purchased, but rather by the output of the seller or the requirements of the buyer. The Uniform Commercial Code (UCC) section 2-306overns this scenario; it requires that the parties act in good faith and that "no quantity unreasonably disproportionate to any stated estimate or in the absence of a stated estimate to any normal or otherwise comparable prior output or requirements may be tendered or demanded."