O.C.G.A.
O.C.G.A.

O.C.G.A. § 11-2-306 (2019)

Output, requirements, and exclusive dealings

✓ O.C.G.A. — 2019 edition (Public.Resource.Org Release 73)
Code text and O.C.G.A. statutory annotations on this page reflect the 2019 Official Code of Georgia Annotated (Public.Resource.Org Release 73, 2019-08-21; public domain per Georgia v. Public.Resource.Org, 2020). The Syfert case-law annotations in Notes of Decisions, below, are current.
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(1) A term which measures the quantity by the output of the seller or the requirements of the buyer means such actual output or requirements as may occur in good faith, except that no quantity unreasonably disproportionate to any stated estimate or in the absence of a stated estimate to any normal or otherwise comparable prior output or requirements may be tendered or demanded. (2) A lawful agreement by either the seller or the buyer for exclusive dealing in the kind of goods concerned imposes unless otherwise agreed an obligation by the seller to use best efforts to supply the goods and by the buyer to use best efforts to promote their sale.

History

Code 1933, § 109A-2-306, enacted by Ga. L. 1962, p. 156, § 1.

Annotations

JUDICIAL DECISIONS O.C.G.A. § 11-2-306 is applicable regardless of character of seller or buyer. Romine, Inc. v. Savannah Steel Co., 117 Ga. App. 353, 160 S.E.2d 659, 1968 Ga. App. LEXIS 1084 (1968). O.C.G.A. § 11-2-306(1) precludes a finding that a contract for requirements is too indefinite, since the quantity is determined by the actual good faith requirements of the particular party. O.N. Jonas Co. v. Badische Corp., 706 F.2d 1161, 1983 U.S. App. LEXIS 26921 (11th Cir. 1983). Contract established by memorandum, correspondence, and agreement despite indefinite quantity term. - Where the evidence demonstrated that both parties intended a requirements con-

tract based on purchaser’s good faith needs for the trademarked yarns and the existence of this contract was established by a memorandum, the correspondence between the parties, and a trademark licensing agreement which was to remain in effect subject to cancellation by either party on 90 days’ notice, the indefiniteness of the written quantity term did not invalidate the contract. O.N. Jonas Co. v. Badische Corp., 706 F.2d 1161, 1983 U.S. App. LEXIS 26921 (11th Cir. 1983). Actual requirements disproportionate to estimation. - Where quantity actually delivered and accepted to meet requirements of the buyer is unreasonably disproportionate to estimated requirements, the lot price for estimated

total requirements is not a lot price for actual requirements, although it may serve to establish a unit price therefor. Romine, Inc. v. Savannah Steel Co., 117 Ga. App. 353, 160 S.E.2d 659, 1968 Ga. App. LEXIS 1084 (1968). Good faith duty to perform. - Where plaintiffs entered into a three-year “Output and Requirements Contract and Security Agreement” with defendant, under which defendant was to furnish all the supplies, materials, labor, advice, etc., needed to produce and harvest pecans from pecan groves owned and leased by plaintiffs and to market all the pecans produced from the groves, regardless of whether this contract fell under O.C.G.A. §§ 11-2-306 or 13-4-20, defendant had a duty to perform in good faith. Flynn v. Gold Kist, Inc., 181 Ga. App. 637, 353 S.E.2d 537, 1987 Ga. App. LEXIS 1511 (1987). Where under a contract to produce, harvest and market pecans from plaintiffs’ groves, plaintiffs claimed that they were overcharged for oil and lubricants, while defendant was not required under the contract to purchase these products at the lowest possible price, it was required to exercise good faith in making these purchases. Flynn v. Gold Kist, Inc., 181 Ga. App. 637, 353 S.E.2d 537, 1987 Ga. App. LEXIS 1511 (1987).

Contract promising to purchase “seed which, from time to time, [buyer] reasonably requires” was not promise to purchase exclusively from seller and did not support seller’s reciprocal promise to supply all of buyer’s needs for seed; thus, no valid “requirements contract” was created. Billings Cottonseed, Inc. v. Albany Oil Mill, Inc., 173 Ga. App. 825, 328 S.E.2d 426, 1985 Ga. App. LEXIS 1701 (1985). Supply contract clause of a real estate sales contract providing that the parties would enter into a supply contract, whereby the buyer would purchase gasoline from the seller for 10 years at a cost of one cent per gallon above the seller’s cost, could not be considered a valid “requirements” contract because it did not provide that the buyer would obtain gasoline from the seller exclusively. Smith Serv. Oil Co. v. Parker, 250 Ga. App. 270, 549 S.E.2d 485, 2001 Ga. App. LEXIS 600 (2001). Contract in restraint of trade unenforceable. - Oral agreement between a manufacturer and distributor for the manufacture and sale of fertilizer was unenforceable because it did not contain any territorial limitations on the distributor’s exclusive sales rights. PCS Joint Venture, Ltd. v. Davis, 219 Ga. App. 519, 465 S.E.2d 713, 1995 Ga. App. LEXIS 1085 (1995), cert. denied, No. S96C0536, 1996 Ga. LEXIS 460 (Ga. Mar. 1, 1996).

RESEARCH REFERENCES Am. Jur. 2d. 67 Am. Jur. 2d, Sales, §§ 288, 289. Am. Jur. Pleading and Practice Forms. 6 Am. Jur. Pleading and Practice Forms, Commercial Code, § 2:143. C.J.S. 77A C.J.S., Sales, §§ 178, 179. U.L.A. Uniform Commercial Code (U.L.A.) § 2306. ALR. Divisibility of contract to furnish material for a specific construction, 2 A.L.R. 687. Rights and remedies upon cancelation

of sales agency, 32 A.L.R. 209; 52 A.L.R. 546; 89 A.L.R. 252. Duty of principal to fill orders under sales-agency contract, 52 A.L.R. 557. Restrictive agreements or covenants in respect of purchase or handling of petroleum products by operator of filling station, 26 A.L.R.2d 219. Construction and effect of contract for sale of commodity to fill buyer’s requirements, 26 A.L.R.2d 1099. Mutuality and enforceability of contract to furnish another with his needs, wants, desires, requirements and the like, of certain commodities, 26 A.L.R.2d 1139. Requirements contracts under § 2-

306(1) of Uniform Commercial Code, 96 A.L.R.3d 1275. Output contracts under § 2-306(1) of Uniform Commercial Code, 30 A.L.R.4th 396.

Establishment and construction of requirements contracts under § 2-306(1) of Uniform Commercial Code, 94 A.L.R.5th 247.

Notes of Decisions
Cited in 13 cases (1 in the last 5 years), 1985–2022 · leading case: Smith Serv. Oil Co., Inc. v. Parker, 549 S.E.2d 485 (Ga. Ct. App. 2001).
Sort: Relevance Newest Treatment
Smith Serv. Oil Co., Inc. v. Parker, 549 S.E.2d 485 (Ga. Ct. App. 2001). · cites it 2× “4 OCGA § 11-2-306. 5 Billings Cottonseed v.”
RTS Landfill, Inc. v. Appalachian Waste Sys., LLC, 598 S.E.2d 798 (Ga. Ct. App. 2004). · cites it 2× “See OCGA § 11-2-306 (2). See also PCS Joint Venture v.”
Roboserve, Ltd., Cross-Appellant v. Tom's Foods, Inc., a Delaware Corp., Cross-Appellee, 940 F.2d 1441 (11th Cir. 1991). “O.C.G.A. § 11-2-306(1). Such contracts do not automatically fail for their lack of a definite quantity term, but “no quantity unreasonably disproportionate to any stated estimate or in the absence of a stated estimate to any normal or otherwise comparable pri- or output or…”
PCS Jt. Venture, Ltd. v. Davis, 465 S.E.2d 713 (Ga. Ct. App. 1995). · cites it 2× “FFF argues that the absence of a territorial limit on the exclusive distribution agreement made it unenforceable.”
Billings Cottonseed, Inc. v. Albany Oil Mill, Inc., 328 S.E.2d 426 (Ga. Ct. App. 1985). · cites it 2× “Although numerous issues have been raised and discussed by the parties, the dispositive issue of this appeal is whether the agreement in question constituted a valid “requirements” contract as contemplated by the Uniform Commercial Code (OCGA § 11-2-306). We conclude that it…”
Flynn v. Gold Kist, Inc., 353 S.E.2d 537 (Ga. Ct. App. 1987). · cites it 2× “Appellants argue that OCGA § 11-2-306 which pertains to output, requirements, and exclusive dealings and is found in the sales provisions of the UCC is controlling and requires Gold Kist to use its “best efforts” in the performance of the contract to be controlling.”
Terrell Cnty. Bd. of Tax Assessors v. Goolsby, 751 S.E.2d 158 (Ga. Ct. App. 2013). · cites it 2× “If the Goolsbys entered into output or requirements contracts with their neighbors, see OCGA § 11-2-306, and purchased more feed than their cattle consumed, they would necessarily sell that surplus; similarly, if they underestimated their herd’s requirements or failed to grow…”
Seaside Petroleum Co. v. Steve E. Rawl, Inc., 339 S.E.2d 601 (Ga. Ct. App. 1985). · cites it 8× “Under OCGA § 11-2-306 (2), the buyer in an exclusive dealings contract promises to use best efforts to sell and distribute.”
Halley v. Harden Oil Co., 357 S.E.2d 138 (Ga. Ct. App. 1987). · cites it 2× “Moreover, the agreement between Edwards and Harden Oil Company, which more correctly would be classified as an “exclusive dealings” contract under OCGA § 11-2-306, was actually unenforceable for lack of mutuality, since there was no obligation whatsoever imposed upon Harden Oil…”
Sea Link Int'l, Inc. v. Osram Sylvania, Inc., 969 F. Supp. 781 (S.D. Ga. 1997). · cites it 7× “Osram is correct in that assertion. The laws of Georgia recognize “requirements” contracts, but impose certain duties upon the buyers and sellers who are parties to this specific type of contract.”
Hill & Mac Gunworks, LLC v. True Position, Inc. (N.D. Ga. 2022). · cites it 3× “” O.C.G.A. § 11-2-306(1). An exclusive dealings contract, however, “imposes[,] unless otherwise agreed[,] an obligation by the seller to use best efforts to supply the goods[,] and by the buyer to use the best efforts to promote their sale.”
Peach State Meat Co. v. Excel Corp., 860 F. Supp. 849 (M.D. Ga. 1994). · cites it 4× “Plaintiff argues that O.C.G.A. § 11-2-306 requires a conclusion that there was mutuality of obligation in this relationship.”
Show all 13 citing cases →
— 11-2-306(1) — 3 cases
Roboserve, Ltd., Cross-Appellant v. Tom's Foods, Inc., a Delaware Corp., Cross-Appellee, 940 F.2d 1441 (11th Cir. 1991). “O.C.G.A. § 11-2-306(1). Such contracts do not automatically fail for their lack of a definite quantity term, but “no quantity unreasonably disproportionate to any stated estimate or in the absence of a stated estimate to any normal or otherwise comparable pri- or output or…”
Hill & Mac Gunworks, LLC v. True Position, Inc. (N.D. Ga. 2022). “” O.C.G.A. § 11-2-306(1). An exclusive dealings contract, however, “imposes[,] unless otherwise agreed[,] an obligation by the seller to use best efforts to supply the goods[,] and by the buyer to use the best efforts to promote their sale.”
Sea Link Int'l, Inc. v. Osram Sylvania, Inc., 969 F. Supp. 781 (S.D. Ga. 1997). “Osram is correct in that assertion. The laws of Georgia recognize “requirements” contracts, but impose certain duties upon the buyers and sellers who are parties to this specific type of contract.”
— 11-2-306(2) — 1 case
Hill & Mac Gunworks, LLC v. True Position, Inc. (N.D. Ga. 2022). “” O.C.G.A. § 11-2-306(1). An exclusive dealings contract, however, “imposes[,] unless otherwise agreed[,] an obligation by the seller to use best efforts to supply the goods[,] and by the buyer to use the best efforts to promote their sale.”
Annotations are extracted automatically from the opinions in the Syfert caselaw corpus and ranked by authority, recency, and treatment. Dots show Syfertize treatment of the citing case itself.