37. Does the company have a viable claim against the supplier for breach of contract?

Requirement contracts are agreements in which a seller promises to sell to a buyer as much of an item as the buyer requires. Under Uniform Commercial Code (UCC) § 2-306, a requirements contract assumes that the buyer will get its supplies exclusively from the seller, as well as that the buyer will, in good faith, order quantities that are reasonably proportionate to the estimate. The good faith obligation also applies to the seller in that the seller should use its best efforts to supply those necessary goods to the buyer. Although requirements contracts used to be unenforceable because they were considered illusory for lack of consideration, they are now upheld on the basis that consideration exists in the buyer's surrendering of the option to buy its supplies elsewhere and the good faith of both parties.

B is correct. The company and the supplier entered into a valid, enforceable requirements contract when they agreed that the company would purchase all necessary lawn supplies from the supplier over the next calendar year. This requirements contract is valid under UCC § 2-306; consideration existed because the company essentially surrendered its ability to purchase goods from other suppliers, and both parties were expected to perform in good faith. In the contract, they agreed that the company would receive a 10% discount off of the published prices, reserving the right of the supplier to increase the published prices over time. However, the supplier did not reserve the right to revoke the 10% discount applied to those prices. Because the contract was enforceable, the supplier's refusal to give the company the 10% discount was a breach of the agreed-upon terms.

A is incorrect. This answer reaches the correct answer with the wrong reasoning. The company's claim is viable, but not because the contract was enforceable due to part performance by the parties. Whether the parties partially performed was not dispositive on the enforceability of the contract. The contract became enforceable when the company agreed to purchase all necessary lawn supplies from the supplier for the calendar year. Had the agreement lacked consideration, part performance may have been relevant to whether it constituted an enforceable contract. But the parties agreed to a valid one-year requirements contract under UCC § 2-306.

C is incorrect. As previously explained, when the parties entered into the written contract for the company to purchase all required lawn supplies from the supplier for the next calendar year, they formed a valid and enforceable requirements contract. At that point, the time for revocation had passed, and the supplier was not permitted to refuse to give the company the 10% discount without breaching the agreed-upon terms.

D is incorrect. A requirements contract is valid even without a minimum quantity term under the assumption that the buyer will, in good faith, order quantities similar to those estimated originally or those in comparable agreements. Although historically it was true that requirements contracts were considered illusory, that is no longer the case under UCC § 2-306, as explained above.