•These are agreements where 1 party agrees to buy
a commodity at a specific price on a specific future dateand the other party agrees to sell the
•Goods are actually delivered under forward
•Forward contract is a tailor made futures
contract that is not traded on a organized exchange.
•Unless both parties are morally and financially
strong, there is a danger that 1 party will default on the contract, especially
if the price of the commodity changes markedlyafter the agreement is reached.