A take or pay contract is an agreement between two parties under which the buyer agrees to pay for the supplier’s output whether or not the buyer needs the output at that time. This reduces the supplier’s risk, as they have guaranteed sales revenue irrespective of the buyer’s demand. Such an arrangement would occur where there is significant investment required by the supplier and the supplier has sufficient market power to persuade the buyer to share in the commercial risk. Such contracts are most commonplace in the supply of gas, electricity and some commodities.
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Discover the world’s largest Glossary of Procurement terms
With over 800 Procurement specific terms (and growing) you will find everything you need to know or thought you knew about the Procurement function. Our aim is to provide you with a comprehensive list collated from the Comprara Groups hub of training and consulting source materials.The Procurement Glossary has been compiled by industry expert Paul Rogers.
