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Output and Requirement Contracts

Somewhat related to the open-term rule concerning price is the rule involved in output and requirement contracts that the quantity to be sold or purchased is not a specific quantity. Instead, it is the amount that the seller should produce or the buyer should require. Although this introduces an element of uncertainty, such sales contracts are valid. To prevent oppression, these contracts are subject to two limitations: (1) the parties must act in good faith, and (2) the quantity offered or demanded must not be unreasonably disproportionate to prior output or requirements or to a stated estimate.