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herself. If the other party elects to fix a reasonable price herself, she must do so in good faith. [U.C.C. § 2-305(3) (1951); 2 Hawkland UCC Series § 2-305:3, Westlaw (database updated June 2012).] d. Fixing a Reasonable Price Article 2 offers no elaboration on what constitutes a reasonable price. Generally, though, courts try to set the price with reference to the context of the agreement and some external, objective factor. Even so, this standard affords vast flexibility. Courts have employed various standards such as a comparison with prices charged by similarly situated sellers, the buyer’s or seller’s profit margin, a discounted price, the cost of goods, a market price, a premium price, and so on. [ See U.C.C. § 2-305 (1951); 2 Hawkland UCC Series § 2-305:3, Westlaw (database updated June 2021).] 2. Output, Requirements, and Exclusive Dealings Oftentimes, the contractual quantity is measured by either the seller’s output or the buyer’s requirements. Here, these terms refer to whatever output or requirements occur in good faith . However, there may be a stated estimate of output or requirements. Even without a stated estimate, there may be normal or comparable prior output or requirements. In that case, neither party may tender or demand any quantity that is unreasonably disproportionate to the stated estimate or comparable prior output. [U.C.C. § 2-306(1) (1951).] a. Requirements Contracts Generally In a requirements contract, the buyer promises to buy, from the seller, as many of the goods as the buyer requires, or at least some stated percentage of the buyer’s requirements. Thus, the buyer loses the option to shop around for a better price. However, the seller then assumes the risk that the buyer will require more goods than the seller can deliver, or else that the buyer will require fewer goods than the seller anticipates. The aforementioned rules on good faith and stated estimates and prior normal or comparable output or requirements, though, mitigate this uncertainty somewhat. [2 Hawkland UCC Series § 2-306:1, Westlaw (database updated June 2021).] b. Output Contracts Generally In a typical output contract, the buyer agrees to buy as many of the goods as the seller produces, or at least some stated percentage of the seller’s output. The buyer thus loses the opportunity to shop around for a better price from another seller, and the buyer assumes the risk that the seller will produce too many or too few of the goods for the buyer’s needs. Here again, the rules on good faith and stated estimates and prior normal or comparable output or requirements, though, mitigate this uncertainty somewhat. [2 Hawkland UCC Series § 2-306:1, Westlaw (database updated June 2021).]
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