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Take or Pay

Definition

A take-or-pay contract is a rule structuring negotiations between companies and their suppliers. With this kind of contract, the company either takes the product from the supplier or pays the supplier a. For any product the company takes, they agree to pay the supplier a certain price, say $50 a ton. Furthermore, up to an agreed-upon ceiling, the company has to pay the supplier even for products they do not take. This "penalty" price is lower, say $40 a ton.

Take or Pay

What is 'Take or Pay'

Take or pay is a provision, written into a contract, whereby one party has the obligation of either taking delivery of goods or paying a specified amount.

Explaining 'Take or Pay'

This is used in some contracts as a method to ensure that the transaction occurs. For example, a Banana farmer will enter into a take or pay contract with a fruit retailer so that the retailer will buy all the bananas from the farmer or pay a provision for not buying them.


Take Or Pay FAQ

What is a minimum volume commitment?

Minimum volume commitment contracts (MVCs), also referred to as throughput agreements, are agreements in which a shipper or producer—a counterparty— transports an agreed minimum volume of a commodity such as natural gas, NGL or crude oil through a third-party operator's assets, such as pipelines.

What is a payment provision?

Take or pay is a provision in a contract, in which a party has to either take the delivery of goods or pay a specified amount. Take or pay provisions is good for both the buyer and the seller because it shares risk, and can be good for the society by facilitating trade and reducing transactions costs.

What is economic impact payment?

The payment depends on adjusted gross income, the number of eligible individuals, and the number of qualifying children. The Economic Impact Payment is an advance credit against 2020 tax. Taxpayers will not include the payment in taxable income on their 2020 tax return or pay income tax on the payment.

When am I getting my stimulus check?

The U.S. Treasury mentioned that tens of millions of Americans will be paid via direct deposit by April 15. Most people can expect their stimulus checks delivered within the next two weeks.

Who qualify for the stimulus check?

To qualify, you must make less than $75,000 yearly ($150,000 for a married couple filing jointly) or less than $112,500 for the head of household (typically single parents). People with no income are eligible to receive a stimulus check.

How do you check if you will get a stimulus check?

The IRS has an online tool for checking the status of your stimulus check. It's called the "Get My Payment" portal, and you can find it on the IRS website at irs.gov/coronavirus/get-my-payment.

Is the economic impact payment the same as the stimulus check?

Yes, it is and the IRS is committed to helping you get them as soon as possible. The payments are automatic for most taxpayers. No further action is needed by taxpayers who filed tax returns in 2018 and 2019 and most seniors and retirees.

Further Reading

Valuation of path-dependent contingent claims with multiple exercise decisions over time: The case of take-or-payValuation of path-dependent contingent claims with multiple exercise decisions over time: The case of take-or-pay
www.jstor.org [PDF]
… However, the maximum daily purchase quantity in the contract is not increased to allow for make-up volume. B. The Economic Purpose of Take-or-Pay Purchase Contracts Since take-or-pay contracts are not commonly encountered in academic lit …

Risk mitigation in take or pay and take and pay contracts in project financing: the purchaser's perspectiveRisk mitigation in take or pay and take and pay contracts in project financing: the purchaser's perspective
www.inderscienceonline.com [PDF]
… However, the maximum daily purchase quantity in the contract is not increased to allow for make-up volume. B. The Economic Purpose of Take-or-Pay Purchase Contracts Since take-or-pay contracts are not commonly encountered in academic lit …

How long does it take to pay back rangeland improvement investments? A case study from Erzurum Province in TurkeyHow long does it take to pay back rangeland improvement investments? A case study from Erzurum Province in Turkey
www.publish.csiro.au [PDF]
… However, the maximum daily purchase quantity in the contract is not increased to allow for make-up volume. B. The Economic Purpose of Take-or-Pay Purchase Contracts Since take-or-pay contracts are not commonly encountered in academic lit …

Small business uniqueness and the theory of financial managementSmall business uniqueness and the theory of financial management
www.econstor.eu [PDF]
… However, the maximum daily purchase quantity in the contract is not increased to allow for make-up volume. B. The Economic Purpose of Take-or-Pay Purchase Contracts Since take-or-pay contracts are not commonly encountered in academic lit …

Some aspects of the pure theory of corporate finance: bankruptcies and take-oversSome aspects of the pure theory of corporate finance: bankruptcies and take-overs
www.jstor.org [PDF]
… However, the maximum daily purchase quantity in the contract is not increased to allow for make-up volume. B. The Economic Purpose of Take-or-Pay Purchase Contracts Since take-or-pay contracts are not commonly encountered in academic lit …

Discussion on “take or pay” contracts in gas businessDiscussion on “take or pay” contracts in gas business
en.cnki.com.cn [PDF]
… However, the maximum daily purchase quantity in the contract is not increased to allow for make-up volume. B. The Economic Purpose of Take-or-Pay Purchase Contracts Since take-or-pay contracts are not commonly encountered in academic lit …

Regulating bankers' payRegulating bankers' pay
heinonline.org [PDF]
… However, the maximum daily purchase quantity in the contract is not increased to allow for make-up volume. B. The Economic Purpose of Take-or-Pay Purchase Contracts Since take-or-pay contracts are not commonly encountered in academic lit …

Effectiveness of CEO pay-for-performanceEffectiveness of CEO pay-for-performance
www.sciencedirect.com [PDF]
… However, the maximum daily purchase quantity in the contract is not increased to allow for make-up volume. B. The Economic Purpose of Take-or-Pay Purchase Contracts Since take-or-pay contracts are not commonly encountered in academic lit …


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