Key Points for Entering into Quantity Clauses

1. Introduction

Quantity is an important term in most contractual relationships. When establishing a contract between two parties, quantity determines the amount of product or service to be provided by the other party.

When two parties agree to enter into a contract, they should consider the following points in determining a suitable quantity provision.

2. Specifying a Minimum Performance Level

When determining a quantity for the performance of the contract, the parties should agree on a minimum performance level. The minimum performance level can be either a set number or a percentage of an agreed-upon target.

This minimum performance level should be realistically attainable and should be reflected in other terms of the contract, such as payments and penalties for missing the stated performance level.

3. Specifying a Maximum Performance Level

The parties should also consider specifying a maximum performance level in the quantity provision. This maximum performance level should be attainable, but not so high that it could be considered unreasonably burdensome to the other party.

This maximum performance level should also be reflected in the other terms of the contract, such as payments and penalties for exceeding the stated performance level.

4. Establishing Payment Terms

The amount of payment to be received by the parties should also be established in the quantity provision. This could include a predetermined flat fee per unit of performance, or it could be based on the performance level of the contract by setting payment tiers or incentives for meeting or exceeding certain performance levels.

When determining payment terms, the parties should be careful to ensure that the payment arrangement is fair and equitable for both parties.

5. Establishing a Penalty for Non-performance

The parties should also consider establishing a penalty for non-performance in the quantity provision. This penalty should be commensurate with the level of performance not achieved.

For example, if the performance level is below the minimum level, the penalty could be a flat fee or a percentage of the payment due. Alternatively, if the performance level is over the maximum level, the penalty could be a reduction or disqualification of certain payment arrangements.

6. Specifying an Adjustment for Changes in Performance

The parties should also consider establishing a provision in the quantity provision for adjusting performance levels due to unforeseen changes in the market or due to changes in the contract. This could include a percentage increase or decrease to the minimum or maximum performance level, or a different payment structure based on the actual performance level achieved.

7. Conclusion

In conclusion, the establishment of a quantity provision in contracts should be carefully considered. A comprehensive and equitable quantity provision can set out the expectations for performance and the amount of payment to be received by the parties in a clear and concise manner.

The purpose of this agreement is to set out in detail the quantity of goods and services to be exchanged between the two parties.

1. The Right to Modify Quantities: Each party shall have the right to modify the quantity of goods and services to be exchanged, on condition that the other party is given prior written notification and the parties agree to provide for an appropriate adjustment of prices and delivery dates.

2. Delivery Schedule: The agreed quantities of goods and services shall be delivered in accordance with a delivery schedule as set out by both parties.

3. Minimum Order Quantities: The parties agree that they shall set minimum order quantities and that any quantities below such minimum order quantity may be subject to additional fees.

4. Quality: The parties shall ensure that all goods and services delivered under this agreement comply with the highest quality standards, which shall be mutually agreed upon by the parties and documented in writing.

5. New products: If either party wishes to introduce new products under this agreement, such products must meet the standards agreed upon by both parties upon introduction. The prices and delivery dates associated with the new products must also be agreed upon by both parties.

6. Right to Partial Delivery: Either party shall have the right to make partial deliveries of goods and services, provided that the other party is notified in advance and the parties agree to an appropriate adjustment of prices and delivery dates.

7. Variations in Quantities: The parties agree that any significant changes in the quantities of goods and services to be exchanged shall be agreed upon by both parties in writing before the commencement of any such changes.

8. Breach of Requirements: If any party fails to deliver goods and services in accordance with the quantity requirements agreed upon in writing, the other party may terminate this agreement upon the issue of a breach notice.

9. Rights of Third-Parties: This agreement shall not grant any third-party the right to claim any rights under this agreement or to receive any benefit from it.

In witness whereof, the parties have executed this agreement on _____ (date).

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Representative of Party 1

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Representative of Party 2