Uniformly, courts have held that UCC §2-306 permits buyers in requirements contracts to order more goods than estimated unless the order is made in bad faith or is “unreasonably disproportionate” to a stated estimate. Courts, however, are split on whether the “unreasonably disproportionate” limitation applies to orders which are substantially lower than estimated.1 New York federal courts have held that the limitation does not apply to low orders, and, although the law is unsettled, commentators—relying on precedent which has been unchallenged for over 40 years—have observed that New York state courts may apply the limitation to low demands.2 This article examines the basis for the split, and questions whether New York state courts are indeed likely to apply the limitation to low demands.
Good Faith Standard
Fixed-price contracts typically specify the requisite quantity, and may measure quantity by the output of the seller (e.g., buyer agrees to buy all the oil that seller produces at $100 per barrel) or requirements of the buyer (e.g., seller agrees to sell to buyer all the oil that buyer requires at $100 per barrel). When quantity is measured by requirements,3 UCC §2-306 defines quantity as “actual output or requirements as may occur in good faith, except that no quantity unreasonably disproportionate to any stated estimate…may be… demanded.”4
