REQUIREMENT CONTRACT Meaning and
Definition
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A requirement contract is a legally binding agreement between two parties, typically a buyer and a seller, that specifies the quantity and terms of goods or services to be provided over a specified period. This type of contract is primarily based on the buyer's requirements rather than setting a fixed quantity.
In a requirement contract, the buyer agrees to purchase all or a certain amount of a particular product or service from the seller. The seller, on the other hand, commits to supplying the goods or services as per the buyer's needs. The agreement typically defines the minimum and maximum quantity of goods or services required during the specified period, as well as other terms such as price, quality, delivery schedule, and payment conditions.
This type of contract is often used when the buyer's needs cannot be precisely determined in advance, making a regular purchase agreement impractical. Industries such as manufacturing, construction, and retail frequently use requirement contracts to ensure a steady supply of materials or products.
A requirement contract provides both parties with certain benefits. For the buyer, it helps in securing a dedicated source of supply, ensuring a reliable and efficient flow of goods or services. On the seller's side, it guarantees a consistent demand and enables better planning of production or service provision.
Etymology of REQUIREMENT CONTRACT
The word "requirement" comes from the Latin word "requirere", which means "to seek, ask, or request". It is formed by combining the prefix "re-" meaning "again" or "back" and "quirere" meaning "to seek".
The word "contract" comes from the Latin word "contractus", which means "drawn together" or "made smaller". It is formed by combining "con-" meaning "together" and "tractus" meaning "drawn".
When combined, the term "requirement contract" refers to a contract where one party agrees to supply or purchase goods or services based on the other party's requirements. The etymology of the term simply combines the origins of the individual words to form the concept of a contract based on requirements.
