Supply Agreement Forecast

To protect the supplier, the agreement may contain a language as follows: “The forecast requires the supplier and the customer to supply the following quantities of products: 100% of the amount reported in the first quarter of the forecast, +/- 20% of the amount reported in the second quarter of the forecast, +/-50% of the amount indicated in the 3d of the forecast, and the fourth quarter of the forecast is a non-binding estimate in good faith.” There is no doubt that most customers and suppliers who enter into an agreement for the manufacture and supply of goods will have legitimate doubts about the volume of future orders and production. As with any business relationship, a certain degree of trust is required. However, an attentive lawyer can often add a valuable level of contractual protection to the business. “If the supplier is informed that he may have difficulty reaching an expected quantity of products, he must immediately inform the customer in writing and provide details of the expected defect, the causes of the deficit and the proposed solution. The parties will consider all appropriate means to resolve the issue, including the establishment of an alternative source of supply, a back-up production facility or other measures. The main approach to resolving these concerns is through prediction, but if the client has superior bargaining power (or attorney capacity), the clause will be quite ineffective, like this one: (d) [minimum order. The minimum order quantity in a single order for a quarterly forecast period is [MINIMUM ORDER QUANTITY].] (a) Forecasts. During the term of this Agreement, [PART B] [PART A] shall provide a monthly [FORECAST PERIOD] which it shall update no less frequently than every [quarter/six months] on a rolling basis [six/twelve] months above its expected monthly product requirements in the coming [months of the forecast period] months from the date of the forecast. “Until the tenth day of each month, the customer shall provide the supplier with a non-binding rolling forecast of the customer`s estimated purchasing needs for the next twelve (12) months.` b) Mandatory forecasts. The first [commitment period] of each of those forecasts shall constitute a binding commitment which [Part B] intends to designate the amount provided for in [PART A] during that period. `The supplier shall keep an inventory of the raw materials and components necessary for the manufacture of products in accordance with the forecasts and shall make available to the customer quarterly updates on the extent of that inventory.` Such a provision has a limited value, since the forecasts are not binding and no solution is provided for non-compliance with the forecasts. .

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