take-or-pay agreement

Take or Pay

An agreement between two parties where one agrees to either buy certain goods or services from the other on a certain date or to pay for them even if that party does not need them on that date. A take-or-pay agreement provides guaranteed revenue for the seller even if the buyer decides against actually purchasing the goods or services. It is common in transactions involving electric utilities.

take-or-pay agreement

A contractual agreement in which one party agrees to purchase a specific amount of another party's goods or services or to pay the equivalent cost even if the goods or services are not needed. Take-or-pay contracts are frequently employed by electric utilities, which use the agreements as collateral for loans to build electric generating plants.