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A Requirements Contract binds a buyer to purchase all their needs for specific goods or services exclusively from one seller. Under Indian contract law, these agreements help businesses secure reliable supply chains while giving sellers predictable demand. Think of a hospital agreeing to buy all its medical supplies from a single distributor for the next year.

These contracts must specify clear quantities or formulas to calculate purchase volumes based on the buyer's actual needs. They're common in manufacturing, healthcare, and retail sectors across India. Courts enforce them when they have reasonable duration limits and don't create unfair market monopolies under the Competition Act, 2002.

Use a Requirements Contract when your business needs a guaranteed supply of specific goods or services over time. This agreement works especially well for Indian manufacturers who rely on consistent raw material deliveries, hospitals requiring steady medical supplies, or retailers maintaining inventory levels. It's particularly valuable when finding alternate suppliers quickly would disrupt operations.

These contracts make sense during periods of market volatility or when dealing with specialized items that few suppliers offer. They help lock in pricing, ensure supply chain stability, and create mutually beneficial long-term relationships. Just make sure the agreement complies with India's Competition Act and includes clear volume calculation methods.

• Fixed-Quantity Requirements: Most basic type requiring buyers to purchase specific minimum amounts at set intervals, ideal for predictable supply chains
• Output-Based Requirements: Links purchase obligations to the buyer's actual production or sales volume, common in manufacturing sectors
• Percentage Requirements: Buyer commits to sourcing a specific percentage of their needs from the seller, allowing flexibility with multiple suppliers
• Exclusive Requirements: Mandates all purchases of specified items come solely from one supplier, offering maximum security but requiring careful competition law review
• Maximum-Minimum Requirements: Sets both upper and lower purchase limits, balancing supplier certainty with buyer flexibility

• Manufacturing Companies: Often buyers in Requirements Contracts, securing steady supply of raw materials or components for production lines
• Wholesale Suppliers: Act as sellers, guaranteeing delivery of goods while gaining predictable revenue streams
• Corporate Legal Teams: Draft and review agreements to ensure compliance with Indian competition laws and protect company interests
• Industry Consultants: Help structure deals and negotiate terms, especially for complex supply chain arrangements
• Regulatory Bodies: Monitor these agreements to prevent market monopolies under the Competition Act, 2002

• Supply Details: Document exact product specifications, quality standards, and delivery schedules
• Volume Metrics: Calculate anticipated purchase quantities using historical data or projected needs
• Pricing Structure: Define base rates, volume discounts, and price adjustment mechanisms for market fluctuations
• Duration Terms: Set contract length and renewal conditions that comply with Indian competition laws
• Performance Metrics: Establish clear KPIs, quality benchmarks, and delivery timelines
• Contingency Plans: Include provisions for supply disruptions, force majeure events, and dispute resolution

• Identification Clause: Full legal names and addresses of buyer and seller with their authorized signatories
• Purchase Obligation: Clear commitment to buy all requirements exclusively from the specified seller
• Quantity Formula: Precise method for calculating purchase volumes based on buyer's actual needs
• Price Terms: Base rates, adjustment mechanisms, and payment schedules with GST implications
• Duration Clause: Contract period with renewal options, complying with Competition Act limits
• Performance Standards: Quality specifications, delivery terms, and acceptance criteria
• Termination Rights: Clear conditions for ending the agreement and post-termination obligations

A Requirements Contract differs significantly from a Sales Contract in several key aspects under Indian law. While both involve the purchase and sale of goods, their scope and commitments vary substantially.

• Duration and Commitment: Requirements Contracts establish long-term, exclusive supply relationships, while Sales Contracts typically cover one-time or discrete transactions
• Volume Flexibility: Requirements Contracts base quantities on the buyer's actual needs over time, whereas Sales Contracts specify fixed quantities upfront
• Pricing Structure: Requirements Contracts often include dynamic pricing mechanisms and volume-based adjustments, while Sales Contracts usually set fixed prices
• Competition Law Impact: Requirements Contracts face stricter scrutiny under Indian Competition Act due to their exclusive nature, unlike standard Sales Contracts
• Supply Chain Integration: Requirements Contracts create deeper business relationships and operational dependencies, while Sales Contracts maintain transactional independence