Which of the following is true of output contracts?
A) It cannot contain the best-efforts clause.
B) It provides the seller with reduced selling costs.
C) It assures the purchaser that the seller will use his or her best efforts to achieve the contract's objective.
D) It assures the seller of a purchaser for all its outputs.

Question

Quizplus · Accepted Answer

Output contracts are agreements between a producer and a purchaser where the producer agrees to sell all its output to the purchaser. This assures the seller of a purchaser for all its outputs, regardless of market changes. Hence, option D is the correct choice. Option A is incorrect as an output contract does not prohibit the inclusion of a best-efforts clause. Option B is incorrect as output contracts may not necessarily provide the seller with reduced selling costs. Option C is also incorrect since an output contract is not a best-efforts contract; it does not assure the purchaser that the seller will use his or her best efforts to achieve the contract's objective.

Which of the Following Is True of Output Contracts