Output contract

Output contract

An output contract is an agreement in which a producer agrees to sell its entire production to the buyer, who in turn agrees to purchase the entire output, whatever that is. Example: an almond grower enters into an output contract with an almond packer: thus the producer has a "home" for output of nuts, and the packer of nuts is happy to have a sure-fire supply, even though it may have to store away a glut. The converse of this situation is a requirements contract, under which a seller agrees to supply the buyer with as much of a good or service as the buyer wants, in exchange for the buyer's agreement not to buy that good or service elsewhere.

Uniform Commercial Code comment section 2-306: A term which measures the quantity by the output of the seller or the requirements of the buyer, means such actual output or requirements that may occur in good faith. Good faith cessation of production terminates any further obligations thereunder and excuses further performance by the party discontinuing production. However, the cessation of production must be in light of bankruptcy or other similar situations. The yield of less profit from a sale than expected does not excuse further performance of an output contract. See Feld vs. Henry S. Levy & Sons, Inc. (New York, 1975) or Technical Assistance International, Inc. vs. United States (U.S. Court of Appeals, 1998).



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Look at other dictionaries:

  • output contract — see contract Merriam Webster’s Dictionary of Law. Merriam Webster. 1996. output contract …   Law dictionary

  • output contract — A contract in which one party agrees to sell his entire output and the other agrees to buy it; it is not illusory, though it may be indefinite. Such agreements are governed by U.C.C. No. 2 306. See also requirements contract. contract entire… …   Black's law dictionary

  • output contract — A contract in which one party agrees to sell his entire output and the other agrees to buy it; it is not illusory, though it may be indefinite. Such agreements are governed by U.C.C. No. 2 306. See also requirements contract. contract entire… …   Black's law dictionary

  • output contract — noun a contract in which you promise to deliver your entire output to the other party who promises to accept it • Hypernyms: ↑contract …   Useful english dictionary

  • output contract —    An agreement in which a producer agrees to sell its entire production to a buyer, who in turn agrees to purchase the entire output such as might exist between a farmer and a supermarket chain …   Business law dictionary

  • contract — con·tract 1 / kän ˌtrakt/ n [Latin contractus from contrahere to draw together, enter into (a relationship or agreement), from com with, together + trahere to draw] 1: an agreement between two or more parties that creates in each party a duty to… …   Law dictionary

  • output — I noun accomplishment, achievement, amount produced, avail, benefit, creation, crop, discharge, earnings, effectuation, emanation, end, end product, fruit, gain, harvest, issuance, issue, manufactured product, merchandise, outcome, proceeds,… …   Law dictionary

  • entire output contract — Promise to deliver one s entire output (i.e. production) to the other. If no other detriment can be located, it will be found in the promisor s having surrendered his privilege of selling elsewhere. Such agreements are governed by U.C.C. No. 2… …   Black's law dictionary

  • entire output contract — Promise to deliver one s entire output (i.e. production) to the other. If no other detriment can be located, it will be found in the promisor s having surrendered his privilege of selling elsewhere. Such agreements are governed by U.C.C. No. 2… …   Black's law dictionary

  • contract — An agreement between two or more persons which creates an obligation to do or not to do a particular thing. As defined in Restatement, Second, Contracts No. 3: A contract is a promise or a set of promises for the breach of which the law gives a… …   Black's law dictionary

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