Insights

Those familiar with the supplier and buyer contracting realm will have likely heard of a “requirements contract” or a “blanket purchase order” which essentially allows parties to mutually guarantee that they will buy and sell to each other for a specific period of time, but lets the parties figure out the exact amount of a product later, often on an order-by-order basis. This approach is often favored for its reliability in knowing your supply needs are met (or you have a reliable buyer), while letting the supply move up or down based on real and variable demand. These arrangements are particularly prevalent in supply agreements in the automobile industry.