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.
Farlex Financial Dictionary. © 2012 Farlex, Inc. All Rights Reserved

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.
Wall Street Words: An A to Z Guide to Investment Terms for Today's Investor by David L. Scott. Copyright © 2003 by Houghton Mifflin Company. Published by Houghton Mifflin Company. All rights reserved. All rights reserved.