Matrix Corporation, a computer manufacturer, agrees to purchase from Chipmaster, Inc. all the computer chips that Chipmaster can produce during the next 12 months, at cost plus a twelve-percent markup. Matrix later does not purchase any computer chips during the 12-month year. Can Chipmaster enforce the agreement made with it?

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15 July, 02:39

Matrix Corporation, a computer manufacturer, agrees to purchase from Chipmaster, Inc. all the computer chips that Chipmaster can produce during the next 12 months, at cost plus a twelve-percent markup. Matrix later does not purchase any computer chips during the 12-month year. Can Chipmaster enforce the agreement made with it?

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Spencer Huang · Answer 1

Yes, this is an enforceable output contract.

Explanation:

An output contract is a contract where a manufacturer agrees to sell all its production output to one specific buyer. The buyer also commits itself to purchasing all the production output from the manufacturer.

In this case, Matrix and Chipmaster apparently have a valid output contract, so Chipmaster should be able to enforce it in a court.