Take Or Pay Offtake Agreement

Indeed, says the explainable report, “rules will be introduced with regard to catch or payment clauses in order to prevent the costs arising from these clauses from being passed on to the aforementioned gas consumers if these costs are not borne by their suppliers. As a common practice, OTC or payment clauses in natural gas contracts are imposed and activated individually on each customer, i.e. imposing a fee on a customer who has not been able to absorb the minimum contractual quantity, even if his supplier is not required to pay the corresponding clause to a third party, because other customers have absorbed quantities of natural gas in excess of the minimum threshold. Today, take-or-pay rules are quite common in long-term purchase and supply contracts in the energy sector, a notable example being gas supply contracts. Arrangements made or paid for in a contract should facilitate financially predictable outcomes, particularly in the case of debt. If a supplier needs a loan to finance the production of a buyer`s order, the lender may not be willing to offer the necessary funds without a provision to take or pay in the contract. This provision ensures that the supplier will be able to pay the loan as intended. The provision of article 24 is a compelling right because it has the purpose it is intended to fulfil. Gas sales contracts should adopt the legal requirements to define the obligations arising from the otc or payment clauses and establish specific conditions for the exercise of claims under that clause. In any event, such agreements and claims shall not lead to a violation of the parameters set out in Article 24.

Indeed, in the early 1980s, over-the-counter or payment clauses led to the renegotiating of contracts in the early 1980s and were the subject of litigation, with buyers undertaking to purchase quantities well above demand, regardless of purchase, while prices had fallen to a level well below market value. In general, however, the validity of such clauses in the United States is not disputed, given that the courts theoretically validate such agreements [2]. It is important that the take-or-paying buyer is not in breach of the contract or in default if he does not name the top quantity in the corresponding year or does not do so. Often, a buyer has the right to name zero deliveries in a year, which would not be an offense or delay. Instead, the difference between the quantity actually taken by the buyer that year and the corresponding quantity of TOP forms the basis of a deficit quantity for which the buyer is required to make an agreed or payment payment to the seller at the end of that year. The same explanatory report, which deals specifically with the restrictions of the law[6], adds that “Article 25(3) of the proposed draft law contains provisions to protect electricity producers who conclude contracts for the supply of natural gas with suppliers of their choice.