Prior Posts: Remedies: Copylease

1. Output and Requirements Contracts

I am still having difficulty determining what an output contract is as well as what a requirement contract is?

An output contract is when the buyer agrees to buy all the output of the seller (normally manufacturer).   For example, a company may contract with a knitter of shawls in which the company agrees to buy as many shawls as the knitter produces.  The number of shawls bought in any time period may be undetermined as the knitter may work slower or faster at different times.  2-306 imposes a duty on the knitter to make good faith efforts to produce.

A requirements contract is one in which the seller agrees to sell the  buyer all the goods (of certain kind(s)) that the buyer requires.  For example, Chevron may agree to sell a gas station all the gasoline that the gas station requires.  The amount of gasoline that the station requires may vary in any time period because the gas station may have fewer or more customers needing more or less gasoline. 2-306 imposes a duty on the  buyer to make good faith estimates to have requirements.

2-306 also deals with the situation in which the contract includes estimates  of either the output or the requirements.  for example, the output contract may say that the knitter will produce 2 sweaters/month.  This may allow the buyer to avoid buying all the sweaters produced in one month should the knitter produce 100 sweaters in one month.

We will return to the duties imposed by 2-306 at a later point in the course.

2. Cover as Mitigation

How exactly is mitigation different from "cover"? Are the same thing, with the only difference being the difference in the application meaning that cover refers specifically to what a buyer can do in the sale of goods (Copylease v Memorex) and mitigation is something that is done in other cases (i.e. Parker v 20th century)?

Almost.  Cover is a form of mitigation.  Cover is the form of mitigation that "a buyer can do in the sale of goods."  Buying substitute goods mitigates the buyer’s loss.

The concept of cover was inappropriate for the holding of Copylease as one cannot cover ( i.e., buy substitute goods)  for having the exclusive dealership for Memorex toner in the Midwest.

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