What is a term contract?

What is a term contract?

• A. A contract that requires open-ended delivery with no pricing
• B. An agreement that establishes a source of supply and pricing for specified items or services for a specified period of time
• C. A contract for one-time purchases
• D. A contract used to forecast future needs

Answer: (B)

A term contract is an agreement with a supplier that covers ongoing needs for specified items or services over a defined period. It locks in a source of supply and the pricing terms for that period, so you can place orders as needed without negotiating each time. This setup helps ensure continuity of supply and price stability for recurring requirements. It’s different from a one-time purchase contract, which addresses a single transaction, and it isn’t just a plan to forecast future needs without a binding commitment. Often, purchases are made against the contract through call orders as requirements arise during the term.

A term contract is an agreement with a supplier that covers ongoing needs for specified items or services over a defined period. It locks in a source of supply and the pricing terms for that period, so you can place orders as needed without negotiating each time. This setup helps ensure continuity of supply and price stability for recurring requirements. It’s different from a one-time purchase contract, which addresses a single transaction, and it isn’t just a plan to forecast future needs without a binding commitment. Often, purchases are made against the contract through call orders as requirements arise during the term.