What Are Take Or Pay Agreements

Damages available to the seller if the buyer does not use the goods may be unspecified general damages or may consist of agreed lump sum damages, but in most cases they do not constitute the total contract price for the unused quantity. When recovering general damages, the seller is often obliged to take steps to reduce its losses, which may require a seller to resell the goods not taken by the buyer and to offset the proceeds of the resale with the seller`s claim for damages. In a take-or-pay contract, the seller is not bound by such an obligation to reduce or resell, and if he succeeds in reselling the quantity not deducted to the buyer, the seller is entitled to retain the total proceeds of the sale and is not required to account to the buyer for that product. Therefore, the initial concept and purpose of the clause is to weigh the interests of both parties, i.e. the supplier and the seller (seller or consumer). The take-or-pay clause is activated if the buyer does not purchase the entire quantity of natural gas ordered. In many cases, the latter is required to pay the purchase price for a predetermined minimum quantity of natural gas (renovation quantity), even if he did not purchase this quantity during the year concerned. As a rule, the buyer can take care of the amount of makeup in future contract years, either by paying a newly fixed special price or without the obligation to make a second payment. Profit and loss compensation includes all profits made by the seller during the performance of the contract and the parallel contract with its supplier from arbitration, i.e. speculative buying and selling on the basis of the criterion of the price difference between pipeline gas and liquefied natural gas (LNG). In the course of performance of the contract, the Seller may have purchased amounts less than its own obligation to the Supplier to purchase LNG at more advantageous prices. If proven, the benefits of this practice should be deducted from the amounts charged by its customers for the seller`s loss resulting from the activation of the take or payment clauses.

Lex forums often cannot be the same as the law that governs the contract. For example, a Chinese company could enter into contracts with an Australian company for raw materials mined in Australia. .