In an output contract, the seller can operate a factory on a 24-hour-a-day schedule and insist that the buyer take all of the output when that buyer had operated only eight hours a day at the time the contract was made and the buyer had knowledge only of the eight-hour-a-day operating schedule.

Question

Quizplus · Accepted Answer

An output contract requires the seller to act in good faith and not unreasonably increase production beyond what was contemplated at the time of the contract. Operating 24 hours a day when the buyer expected only an eight-hour schedule would likely be considered unreasonable and not in good faith.

In an Output Contract, the Seller Can Operate a Factory