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Take Or Pay Offtake Agreement

It is also a “homicide clause.” These agreements are usually signed by companies when their suppliers ask them to purchase a certain amount of items until a specified date, and a fine is imposed if they do not. In this type of agreement, the seller is protected against a possible loss of money from the production of the item that the buyer should buy. d) According to the calculation above, the seller adjusted the price of the quantities to be paid based on the price to be paid which was ultimately paid to his supplier. c) In calculating the seller`s loss and collecting the corresponding debt, the seller took into account the more advantageous terms that the seller himself uses or grants to other buyers. There are three factors that explain the need for take-pay clauses in energy contracts: take-pay rules are now quite common in long-term price loss and supply contracts in the energy sector, a remarkable example are gas supply agreements. Since a take-or-pay buyer is free at any time to take the amount of TOP in any year (in many contracts, the buyer even has the right to plan the delivery and then refuse acceptance of the delivery when it is the subject of a tender) without violating a service obligation or the buyer not paying the corresponding payment at the end of the year — a careful seller must understand that, in the worst case, a take-or pay clause can lead to it lasting until a full year, without deliveries or payment from buyers. Therefore, the seller should ensure that he has at least a sufficient guarantee of payment from the buyer to cover a full compensation or payment obligation. It is also important to ensure that take-pay contracts are regulated by the United States. Under Section 2 of the Single Code of Commerce (“UCC”), the seller cannot, in most cases, use “reasonable assurances” to require an additional guarantee from the buyer in the event of a take-or-pay hiring, since these UCC fees are based on the seller`s “reasonable grounds of uncertainty,” which typically occur in the event of a real or imminent breach or delay. In particular, one of the fundamental principles of the 2009/73/EC Directive[8] is the possibility of allowing third parties to access the natural gas transmission network, i.e. that every supplier has the right to access it.

In this context, exemptions from this rule may be requested when another natural gas company that already has access to the grid proves that it is experiencing economic and financial difficulties because of the take-or pay clause it has entered into.