UCC § 2-306
Output, Requirements and Exclusive Dealings
(1) A term which measures the quantity by the output of the seller or the requirements of the buyer means such actual output or requirements as may occur in good faith, except that no quantity unreasonably disproportionate to any stated estimate or in the absence of a stated estimate to any normal or otherwise comparable prior output or requirements may be tendered or demanded. (2) A lawful agreement by either the seller or the buyer for exclusive dealing in the kind of goods concerned imposes unless otherwise agreed an obligation by the seller to use best efforts to supply the goods and by the buyer to use best efforts to promote their sale.
Professor's notes
Section 2-306 governs two related contract types. Subsection (1): an output contract (seller agrees to sell all it produces) or requirements contract (buyer agrees to buy all it needs) is not indefinite for lack of specified quantity; the quantity is measured by the party's actual good-faith output or requirements. Neither party may demand or tender an amount unreasonably disproportionate to prior output, requirements, or stated estimates. Subsection (2): an exclusive-dealing arrangement imposes an obligation to use best efforts to supply the goods and to promote their sale.
The doctrinal work of § 2-306 is to enforce output and requirements contracts as sufficiently definite while cabining abuse through the good-faith and reasonableness limits. Without § 2-306, a buyer who promises to purchase all its requirements might argue the contract is illusory because it could set its requirements at zero. The section forecloses that argument: good-faith actual requirements govern, not the party's strategic choice to minimize or maximize.
Subsection (2)'s best-efforts obligation is the Wood v. Lucy, Lady Duff-Gordon principle codified. Wood v. Lucy (Chapter 16) involves an exclusive-dealing arrangement for designs; Justice Cardozo found an implied best-efforts obligation that supplied the missing mutuality. Section 2-306(2) makes that implied term explicit in goods contracts.
Students frequently get the mutuality question wrong: they see a requirements contract and call it illusory because the buyer could have zero requirements. Walk through the good-faith constraint: if B has been purchasing 10,000 units a year, what does good faith permit B to demand? What happens if B changes its business model and genuinely needs zero? The answer (real business change vs. strategic zero) is the core of the good-faith analysis.
Connect to UCC § 2-305 (open price — similar indefiniteness-tolerating approach), R2d § 77 (illusory promises and the mutuality problem), and Wood v. Lucy, Lady Duff-Gordon in Chapter 16. The pairing of § 2-305 and § 2-306 as Chapter 16 rules shows how the UCC systematically converts common-law indefiniteness problems into good-faith measurement problems.
Text
UCC § 2-306. Output, Requirements and Exclusive Dealings.
(1) A term which measures the quantity by the output of the seller or the requirements of the buyer means such actual output or requirements as may occur in good faith, except that no quantity unreasonably disproportionate to any stated estimate or in the absence of a stated estimate to any normal or otherwise comparable prior output or requirements may be tendered or demanded.
(2) A lawful agreement by either the seller or the buyer for exclusive dealing in the kind of goods concerned imposes unless otherwise agreed an obligation by the seller to use best efforts to supply the goods and by the buyer to use best efforts to promote their sale.
Source: UCC Article 2 (post-2022 amendments), as in the LawJ statutory corpus.