When two companies enter in to a relationship for the manufacture and supply of goods, both sides often have legitimate concerns about the volume of future orders and production.
The customer seeks assurance that all of its orders will be filled, so it won’t be left in the lurch in times of high demand. The supplier seeks assurance that purchasing volume will remain steady, or increase, so its initial investment will be recaptured, profit margin will be realized and it won’t be stuck with a warehouse full of costly, unwanted inventory.
Those legitimate concerns on both sides may largely be alleviated through the artful drafting of several possible contract provisions. The variations are endless, but here are a few basics. Continue reading