What type of contract should a buyer recommend for a stable market price for pipe and fittings?

What type of contract should a buyer recommend for a stable market price for pipe and fittings?

• A. Definite quantity term contract
• B. Spot purchase
• C. Time and materials contract
• D. Term contract

Answer: (A)

Recommending a definite quantity term contract is ideal for securing a stable market price for pipe and fittings in a predictable or stable market. This type of contract enables buyers to define a specific quantity of goods that they need over a designated time period, often at a predetermined price. By locking in this price and quantity, the buyer mitigates the risk of price fluctuations that could occur in a volatile market. In contrast, a spot purchase involves buying goods at the current market price, which means there's no long-term price stability; instead, the buyer is subject to the vagaries of the market on the day of purchase. A time and materials contract doesn't fit this scenario either, as it is more suited for projects where the scope is uncertain, potentially resulting in changing costs. A general term contract could offer some flexibility but may not guarantee the specific pricing stability that a definite quantity term contract ensures, making it less effective in this context.

Recommending a definite quantity term contract is ideal for securing a stable market price for pipe and fittings in a predictable or stable market. This type of contract enables buyers to define a specific quantity of goods that they need over a designated time period, often at a predetermined price. By locking in this price and quantity, the buyer mitigates the risk of price fluctuations that could occur in a volatile market.

In contrast, a spot purchase involves buying goods at the current market price, which means there's no long-term price stability; instead, the buyer is subject to the vagaries of the market on the day of purchase. A time and materials contract doesn't fit this scenario either, as it is more suited for projects where the scope is uncertain, potentially resulting in changing costs. A general term contract could offer some flexibility but may not guarantee the specific pricing stability that a definite quantity term contract ensures, making it less effective in this context.