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

19 April 2023 Manufacturing Industry Advisor Blog
Author(s): Eugenia Wang

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:

UCC Article 2

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.

This blog is made available by Foley & Lardner LLP (“Foley” or “the Firm”) for informational purposes only. It is not meant to convey the Firm’s legal position on behalf of any client, nor is it intended to convey specific legal advice. Any opinions expressed in this article do not necessarily reflect the views of Foley & Lardner LLP, its partners, or its clients. Accordingly, do not act upon this information without seeking counsel from a licensed attorney. This blog is not intended to create, and receipt of it does not constitute, an attorney-client relationship. Communicating with Foley through this website by email, blog post, or otherwise, does not create an attorney-client relationship for any legal matter. Therefore, any communication or material you transmit to Foley through this blog, whether by email, blog post or any other manner, will not be treated as confidential or proprietary. The information on this blog is published “AS IS” and is not guaranteed to be complete, accurate, and or up-to-date. Foley makes no representations or warranties of any kind, express or implied, as to the operation or content of the site. Foley expressly disclaims all other guarantees, warranties, conditions and representations of any kind, either express or implied, whether arising under any statute, law, commercial use or otherwise, including implied warranties of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Foley or any of its partners, officers, employees, agents or affiliates be liable, directly or indirectly, under any theory of law (contract, tort, negligence or otherwise), to you or anyone else, for any claims, losses or damages, direct, indirect special, incidental, punitive or consequential, resulting from or occasioned by the creation, use of or reliance on this site (including information and other content) or any third party websites or the information, resources or material accessed through any such websites. In some jurisdictions, the contents of this blog may be considered Attorney Advertising. If applicable, please note that prior results do not guarantee a similar outcome. Photographs are for dramatization purposes only and may include models. Likenesses do not necessarily imply current client, partnership or employee status.


Related Services