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 obligates the buyer to purchase all of the seller's production, but it must be within the reasonable expectations and knowledge of both parties at the time the contract was made. A significant increase in production beyond what was initially understood may not be enforceable.

In an Output Contract, the Seller Can Operate a Factory