take or pay contract

Popular Terms
Buyer-seller agreement where (unlike in a take and pay contract) the buyer's obligation to pay is unconditional whether or not the purchased goods or services are delivered or taken. Such arrangements are often used as indirect guaranties for project financing, and protect the buyers from price increases and the sellers from price decreases. Force majeure cannot be used as a defense in these 'hell or high water' type contracts. See also throughput contract and tolling contract.


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