Take-or-Pay Clauses: Should I Stay, or Should I Go?
Article from: OGEL 1 (2023), in Contract Management, International Petroleum Contracts
Abstract
Take-or-pay (ToP) provisions are widely used in long-term offtake and supply agreements. A ToP provision is a clause that provides that a buyer must pay for specified quantities of a good or service from a seller, even if the buyer is unwilling to take such quantities. In its most basic format, a ToP clause requires a buyer to either (1) purchase and take a minimum contract quantity (the ToP quantity of a good or service delivered) or (2) pay the applicable contract price for that portion of the ToP quantity of goods or services not taken. Despite their wide use, or perhaps as a ...