take or pay contract

The presence of such. Its an agreement between the buyer and seller which binds the buyer to accept any product offered to him or pay a certain penalty sum if he chooses not to accept the product.

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A take-or-pay contract is a rule structuring negotiations between companies and their suppliers.

. The take or pay clause is an important contractual mechanism utilized by producers to secure their investments as its basic function is to ensure that the seller is paid a minimum amount within the framework of the long term contract. A contract of sale in which the buyer becomes legally obligated to pay for the goods or services purchased in the contract upon delivery or upon the buyers agreement to take delivery. FASB Accounting Standards Codification Manual. Take-or-pay contracts are frequently employed by electric utilities which use the agreements as collateral for loans to build.

A take-or-pay contract TOP is an agreement between two or more parties when the buyer must pay the seller a minimum amount against the purchased goodsservices. For any product the company takes they agree to pay the supplier a certain price say 50 per ton. Such contracts are beneficial for the economy as well because it shares the risk between buyers and suppliers. This is different to a liability in damages typically found in a take and pay clause because under a take and pay clause the buyers nonofftake is a breach of contract whereas under a take or pay provision the buyers nonofftake is an exercise of a contractual right to do so.

It is widely understood that this take or pay payment creates an obligation in debt in the sellers favor. Following are the benefits of the take or pay contract. A variant on the take-or-pay contract used in project finance where the buyer is only committed to purchasing output if produced. Many also call this the killing clause.

Previous Section Next Section. Take or Pay Contracts. These contracts are frequently used in the energy and oil-and-gas businesses. Take and Pay Contract.

Ad Legal Contracts at Your Fingertips. Back to previous Rate this term. Furthermore up to an agreed-upon ceiling the company is required to pay the supplier even for products they do not take. Take-or-pay clauses are common in long-term supply contracts in the energy sector the most typical example being the contracts for the sale of natural gas between a supplier and its customers.

Sometimes called a take-if-delivered agreement. Enter into any take-or-pay or other contract or arrangement for the purchase of goods or services which obligates it to pay for such goods or services regardless of whether they are delivered or furnished other than contracts for pipeline capacity or for services in either case reasonably anticipated to be utilized in the ordinary course of business. A take-or-pay contract requires the buyer to either purchase or receive a minimum amount of a product. These contracts include a clause that binds the buyer to either take and pay for the goodscommodities from the seller or forego the delivery and make a payment to the seller.

Buyer-seller agreement where unlike in a take or pay contract the buyers obligation to pay is not unconditional but is contingent either upon the delivery of purchased goods or services or upon the buyers consent to take the delivery. Take-or-Pay Contract are written agreements between a buyer and seller that obligate the buyer to pay regardless of whether or not the seller delivers the good or service. It contrasts with a take-or-pay contract. To Seller s knowledge Seller is not obligated under a take-or-pay or similar arrangement to allow its Hydrocarbons to be sold without receiving full payments at the time of delivery in an amount that corresponds to the net revenue interest in the Hydrocarbons attributable to any Lease or Well described in Exhibits A.

DART pending content manager is OFF. Generally this obligation to pay does not involve the full amount due for the product and protects the seller in the event that the buyer refuses to accept the good or service when delivery is attempted. This contract may require paying for this minimum without taking immediate delivery. A take-or-pay contract is an agreement that helps protect the seller in case the buyer refuses to buy or deliver the items.

It is a lesser guarantee than the take-or-pay agreement. Take or pay is a contract that obligates one party to either take possession of certain goods or pay a certain amount. Take-or-Pay Contract Law and Legal Definition. The goal is to protect the seller if the buyer refuses to accept delivery of the items.

This is a written agreement between the buyer and the seller. This penalty price is lower say 40 a ton. The buyer incurs a penalty if heshe does not pay for the goods or services at the time. Customized Legal Agreements for Any Situation.

Random Finance Terms for the Letter T. Such contracts lower the risk for the supplier in the form of money or capital spends to produce the good. Browse Our Free Legal Documents and Forms. With this kind of contract the company either takes the product from the supplier or pays the supplier a penalty.

Take-or-pay contracts are written agreements between a buyer and seller that obligate the buyer to pay regardless of whether or not the seller delivers the good or service. Generally this obligation to pay does not involve the full amount due for the product and protects the seller in the event that the buyer refuses to accept the good or service when delivery is. A contractual agreement in which one party agrees to purchase a specific amount of another partys goods or services or to pay the equivalent cost even if the goods or services are not needed.