Purchase Commitment Definition

A purchase commitment is an agreement to buy a product or service at a set price and quantity, usually within a specified timeframe. The main purpose of a purchase commitment is to provide certainty to both the buyer and the seller that the transaction will take place.

Purchase commitments are often used in situations where there is a risk of price fluctuation, such as when buying commodities or foreign currency. They can also be used to lock in supplies of raw materials needed for production. In some cases, purchase commitments may be legally binding, while in others they may be more informal agreements.