Quantity Requirements Under UCC Art. 2: Let’s Ensure Supply

In the business world, many companies enter into long-term contracts with respect to high volume, expensive, or essential transactions. A long-term contract is certainly beneficial for these types of transactions, but companies should also consider whether the long-term contract should contain a specific quantity for the products being purchased. This is because, under Article 2 of the Uniform Commercial Code ("UCC"), there is no enforceable sale of goods without a specified quantity set forth in the contract. Failure to agree to purchase or sell a specific quantity of goods could be problematic if assurance of supply is important for business.

UCC § 2-201(1). Formal Requirements; Statute of Frauds.

Except as otherwise provided in this section a contract for the sale of goods for the price of $500 or more is not enforceable by way of action or defense unless there is some writing sufficient to indicate that a contract for sale has been made between the parties and signed by the party against whom enforcement is sought or by his authorized agent or broker. A writing is not insufficient because it omits or incorrectly states a term agreed upon but the contract is not enforceable under this paragraph beyond the quantity of goods shown in such writing.

So, what are some ways that companies specify binding quantities in their contracts? Here are some common approaches:

While sometimes a business team may be hesitant to agree to purchase or sell a certain volume, unfortunately this commitment is needed to bind the other party to the quantity of supply. However, the failure to establish a set quantity in a contract does not necessarily abrogate the utility of entering into a long-term supply agreement; the terms agreed to in a long-term supply agreement may still be useful to set forth terms that will govern sales once quantities have been established (e.g. via a purchase order fulfilled pursuant to the agreement).

Ultimately, businesses that consistently put long-term contracts in place that contain defined quantity requirements for the sale or purchase of high-volume, expensive, or essential products are well-positioned to ensure supply and maintain a reliable supply chain.

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