Capacity In Contract Definition
A capacity in contract is the maximum number of products or services that a company can provide under the terms of a contract. The capacity may be specified in absolute terms, such as ‘10,000 widgets,’ or it may be specified as a percentage of the total demand for the product or service, such as ‘80% of all widget orders.’
There are two main reasons why a company would want to include a capacity in contract definition. First, it ensures that the company can meet its obligations under the contract. Second, it limits the company’s liability in case of a breach of contract.
If a company exceeds the capacity in its contract, it may be liable for damages. Conversely, if the company does not meet the minimum requirements set forth in the contract, it may also be liable for damages. As such, it is important for companies to carefully consider their capacities when entering into contracts.
