What is a take-or-pay commitment?

What is a take-or-pay commitment?

Take or pay is a provision, written into a contract, whereby one party has the obligation of either taking delivery of goods or paying a specified amount. Take or pay provisions benefit both the buyer and the seller by sharing risk, and can benefit society by facilitating trade and reducing transactions costs.

What is a provision in a contract?

What Is a Contract Provision? A contract provision is a stipulation within a contract, legal document, or a law. A contract provision often requires action by a specific date or within a specified period of time. Contract provisions are intended to protect the interests of one or both parties in a contract.

What are Offtakers?

Related Content. As used in project financing, this is the party who buys the product being produced by the project or who uses the services being sold by the project (for example, electricity, mined copper or a pipeline).

What is a offtake agreement?

The offtake agreement is the agreement pursuant to which the off-taker buys all or a substantial portion of the output from the facility and provides the revenue stream supporting a project financing.

What is offtake agreement?

An offtake agreement is an arrangement between a producer and a buyer to purchase or sell portions of the producer’s upcoming goods. It is normally negotiated before the construction of a factory or facility to secure a market and revenue stream for its future output.

What form can an enforceable contract take?

The essential ingredients of an enforceable contract There are also additional considerations, eg, involving capacity and authority; and contracts can take many forms: oral only, written only, mixed oral-written; contracts on standard forms etc.

What do you mean by take or pay contract?

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

When do you need a take or pay provision?

Take or pay provisions are generally included between companies with their suppliers which require that the purchasing firm take a stipulated supply of goods from the supplier by a certain date, at the risk of paying a fine to the supplier if they don’t do so.

How are take or pay clauses used in energy contracts?

Take-or-pay provisions are a very familiar feature in gas and liquefied natural gas (LNG) sales contracts, power purchase contracts and many other common energy industry contracts, and provide an option for the buyer to take supply of gas, LNG or power, or to pay for it anyway.

What was the take or pay contract in Arkla V Roye?

The Oklahoma Supreme Court explained this rationale in Roye Realty & Developing, Inc. v. Arkla, Inc., 1993 OK 99, 863 P.2d 1150. In that case, Arkla, a gas purchaser, argued that the deficiency payment provision in a “take or pay” contract really was a liquidated damages provision.

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