Negotiating Long-Term Requirements Contracts with Suppliers

Assigning Contractual Risks, Navigating Differing Court Interpretations of UCC Section 2-306

Recording of a 90-minute CLE webinar with Q&A


Conducted on Wednesday, April 13, 2016

Recorded event now available

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Program Materials

This CLE webinar will guide counsel in drafting, negotiating and enforcing long-term requirements contracts. The panel will review recent case law addressing long-term requirements clauses, discuss key clauses that should be included in the agreements to allocate risks and provide protections against market fluctuations, and outline steps counsel should take to minimize contractual pitfalls.

Description

Manufacturers along the supply chain use long-term requirements contracts to lock in middle-link buyers and other sub-tier component suppliers over the long term, ensure attractive supply volumes throughout the life of the contract, and obtain cost effective products designed according to specifications.

The Uniform Commercial Code (UCC) Section 2-306, which governs requirements contracts, requires buyers to place their orders for amounts determined in good faith or, depending on jurisdiction, in close proximity to a stated estimate if one exists in the requirements agreement. On its face, Section 2-306 seems relatively straightforward. However, courts around the country have applied the statute in different ways.

Given the varying court interpretations of Section 2-306, and nuances in supply chain contracting, there are a number of grey areas surrounding the drafting and enforcement of long-term requirements agreements. Counsel negotiating the contracts for suppliers must anticipate market fluctuations and clearly allocate contractual risk to protect their clients. International requirements contracts, governed by the Convention for the International Sale of Goods (CISG), are governed by still different rules.

Listen as our panel of attorneys experienced in negotiating and litigating requirements contracts discusses best practices for drafting, negotiating and enforcing these agreements. The panel will discuss specific clauses that should be included in agreements and provide strategies for avoiding contracting pitfalls.

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Outline

  1. Drafting risk allocation provisions that address common scenarios/challenges
    1. Schedule delays
    2. Escalation
    3. Minimum quantities
    4. Amendments and variations
    5. Expected and estimated purchase levels
    6. Changes to lead time
    7. “Notice of Requirements Reduction” provisions
  2. Avoiding and/or addressing contractual and enforcement pitfalls

Benefits

The panel will review these and other key issues:

  • What are the benefits and legal risks with long-term requirements contracts?
  • What is the role of the stated estimated and expected levels of purchases in a requirements contract?
  • How can businesses best mitigate risk when drafting and negotiating long-term requirements contracts?

Faculty

Nguyen, Huu
Huu Nguyen

Partner
Squire Patton Boggs

Mr. Nguyen is a deal lawyer, focusing his practice on commercial and corporate transactions in the technology and media...  |  Read More

Sarah K. Rathke
Sarah K. Rathke

Partner
Squire Patton Boggs

Ms. Rathke provides counseling to manufacturers concerning their supply chain contracts, the applicable law governing...  |  Read More

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