Matrix Corporation,a computer manufacturer,agrees to purchase from Chipmaster,Inc.all the computer chips that Chipmaster can produce during the next 12 months,at cost plus a twelve-percent markup.Matrix later does not purchase any computer chips during the 12-month year.Can Chipmaster enforce the agreement made with it?

Question

Quizplus · Accepted Answer

This is an enforceable output contract. An output contract is a contract in which one party agrees to buy all of the goods or services that the other party produces or supplies. This type of contract is enforceable as long as the output is made in good faith and does not impose an undue hardship on the party producing the goods. In this case, Matrix Corporation agreed to purchase all of the computer chips that Chipmaster could produce within a 12-month period, at cost plus a 12% markup. This is a valid output contract, and Chipmaster can enforce it against Matrix Corporation, even if Matrix Corporation did not end up purchasing any computer chips. Therefore, the best answer is D.

Matrix Corporation,a Computer Manufacturer,agrees to Purchase from Chipmaster,Inc