Glossary of Municipal Securities Terms

TAKE OR PAY CONTRACT

A sales agreement that requires the purchaser to pay the seller a minimum amount whether or not goods or services are available and, if available, whether or not the purchaser uses them. This type of contract is often used in financings for utilities. For example, in electric power sales contracts, payments will be made by the purchasers to the electricity wholesaler whether or not the power supply projects are complete or operational. Such payments are not conditioned upon the performance of the wholesaler, the completion or operation of the power project or the use of the goods or services.

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