Problem
TeeShirts is a clothing wholesaler that makes specialty T-shirts related to golfing. The CEO of TeeShirts has sent you a memo explaining that the company is not doing well. The CEO explains that she would like to find a way to increase sales and has been approached by Kirk, an entrepreneur, who is starting a novelty T-shirt business. Kirk wants to buy plain white T-shirts to print designs.
Kirk has proposed a requirement contract in which he agrees to buy 100 percent of the plain T-shirts he needs for the next year. He has offered to pay the going rate per shirt. The CEO wants you to advise her on each of the following questions.
A. Advise me as to whether we should enter into this contract with Kirk. (Discuss the advantages and disadvantages for our company to enter into this type of requirements contract?)
B. Explain why Kirk would be interested in this type of contract?
C. Suppose Kirk's demands are far higher than expected and we cannot meet them, can we just tell Kirk we cannot meet his demands and not be liable to Kirk for any damages he incurs?
D. Before deciding to accept Kirk's offer, what additional information should I get from Kirk?