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Assumption: Definition, Example and Related Terms

What is an Assumption ?

An assumption, in the context of commercial contracts, is a belief or statement accepted as true or as sure to happen, without proof. It's like a starting point in a contract that everyone agrees upon before they start discussing the details. When two businesses want to work together, they usually have a lot of assumptions. These could be about how the other business works, what the market conditions will be like, or what kind of results they expect from the partnership.


  • Scenario Description
    A software development company and a client enter into a contract for a custom software project. The company assumes that the client's requirements won't drastically change during the development process. However, if the client does change their requirements significantly, this could lead to a longer development time, increased costs, and potential disputes. As such, the contract might include a clause that allows the company to renegotiate the terms if the client's requirements change.
    Two companies enter into a contract for the supply of raw materials. The buyer assumes that the supplier will be able to provide a consistent supply of materials at a particular price. If, however, the supplier is unable to meet this obligation due to factors beyond their control, like a sudden surge in demand or a natural disaster, the buyer could face production delays and financial losses. To safeguard against this risk, the contract might include a clause that allows for price adjustments or alternative supply arrangements in such situations.