what is a forward contract
DEFINITION of 'Forward Contract'. A customized contract between two parties to buy or sell an asset at a specified price on a future date. A forward contract can be used for hedging or speculation, although its non-standardized nature makes it particularly apt for hedging.Unlike standard futures contracts, a forward contract can be customized to any commodity, amount and delivery date.REAKING DOWN 'Forward Contract'. Consider the following example of a forward contract. Assume that an agricultural producer has 2 million bushels of corn to sell six months from now, and is concerned about a potential decline in the price of corn.