In this video, you will learn some details about the take or pay contractual clause.
Chapters:
00:00 – Introduction
00:32 – Benefits
01:56 – Risks
02:33 – Negotiation of take or pay clause
03:38 – Conclusion
Benefits
If the buyer rejects the good, the seller gets paid, and they are free to sell the goods to other buyers. So, it’s a win for them.
The take or pay clause also makes it easier for sellers to get financing from banks to fulfill the order as they have payment guarantees.
On the other hand, the buyer also gets benefitted from the take or pay clause as they get the goods for long-term at a fixed rate.
(Explained in detail in the video)
Risks
The contracts that involve such clauses are often long-term contracts. So in case, there’s a drastic change in the future, like Brexit, a pandemic, or anything else, the contracts may not be beneficial to the parties.
In such scenarios, the parties may choose to terminate the contract, or they may renegotiate the terms.
The risk here is that this has to be done by both parties and not just by one.
Negotiation of take or pay clause
Here are some conditions under which renegotiations can happen:
Force Majeure Clause (Act of God)
Price Clause (Escalation Clause)
Review Clause (Renegotiations)
This was all about the topic of the take or pay clause. Subscribe to the channel so that you don’t miss out on our content, and don’t forget to give this video a like.
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