Take Or Pay Agreement Sample

The precise definition of the buyer`s request (z.B what facilities? what area? what period? maximum request?) can be a bit complex in a demand order. Moreover, the seller`s loss is the buyer`s profit on the buyer`s share of the merchandise he would otherwise have sold (decreased by the proceeds from the resale of goods that the seller receives from a sale in accordance with the discount) and, therefore, the damages available to the seller if he had breached his obligation. and the seller`s obligation to reduce the loss is similar to that which applies to a breach of a „take and pay“ obligation. Unlike take-or-pay, a take-and-pay contract requires the buyer to take and pay the contract price for a minimum amount of goods per year. This type of contract is commonly referred to as a „fixed termination contract.“ If the buyer does not take the minimum amount of the contract within a specified time frame, he violates or deducts the contract every time such a failure occurs and is liable to the seller for the damage suffered by such a violation or delay. The buyer does not have the right to refuse the agreed quantity and pay an end-of-year payment, nor is the buyer entitled to obtain makeup at a later date for an amount he has not taken. Unlike take-or-pay, a „demand contract“ does not have a minimum amount of contract. Instead, a requirement contract requires the buyer to withdraw all the demand for a commodity from the seller. Indeed, the seller takes the buyer`s market risk, but usually for a higher commodity price, in order to reflect the increased risk. While, from a situational point of view, this type of contract would be very favourable in an uncertain market (no overbought that is not necessary), this type of contract is relatively unusual for large infrastructure projects, as it is difficult for the seller to obtain financing through borrowing without the guaranteed source of income of a HIGHER quantity. Then come the benefits of the take-or-pay contract: As futures or pay contracts are generally valid for long-term contracts, they are vulnerable to future events that are not covered by the contract. These events could be political, geological, commercial or more.

It may happen that after the event, the contract will no longer be applicable to one or both parties. Thus, the buyer or seller can terminate the contract. Company A agrees to purchase 100 million cubic feet of natural gas from Company B. If at the time of delivery, Company A takes only 80 million cubic feet, then it will pay a fine. The fine is based on pre-agreed terms. The damage to the seller, if the buyer does not withdraw the goods, may be in the nature of unspecified general damage, or may be contractual liquidation damages, but in most cases they do not constitute the total contract price for the unspecified quantity.