Take or Pay

What is 'Take or Pay'

Take or pay is a provision, written into a contract, whereby one party has the obligation of either taking delivery of goods or paying a specified amount.

BREAKING DOWN 'Take or Pay'

This is used in some contracts as a method to ensure that the transaction occurs. For example, a Banana farmer will enter into a take or pay contract with a fruit retailer so that the retailer will buy all the bananas from the farmer or pay a provision for not buying them.

RELATED TERMS
  1. Contract Month

    The month in which a futures contract expires. The contract can ...
  2. Cash Contract

    A financial arrangement that requires delivery of a particular ...
  3. Assignable Contract

    A futures contract with a provision permitting the contract holder ...
  4. Physical Delivery

    Term in an options or futures contract which requires the actual ...
  5. Continuous Contract

    A reinsurance contract that does not have a fixed contract end ...
  6. Contract Holder

    An individual or organization who owns the rights to a debt or ...
Related Articles
  1. Trading

    The Difference Between Forwards and Futures

    Both forward and futures contracts allow investors to buy or sell an asset at a specific time and price.
  2. Investing

    What is a Forward Contract?

    A forward contract is a customized contract between two parties to buy or sell an asset at a specified price on a future date.
  3. Markets

    Is it Time to Climb Out of The Gap? (GPS)

    Investors are remaining bearish on clothing giant Gap Inc. They might be right for now, but what about for the long haul?
  4. Investing

    Options on Futures

    Options on futures contracts offer another way for day traders to use options. These are traded on the same exchange as the underlying futures contract. Traders should take care to understand ...
  5. Trading

    What's The Difference Between Options And Futures?

    An option gives the buyer the right, but not the obligation, to buy or sell a certain asset at a set price during the life of the contract. A futures contract gives the buyer the obligation to ...
  6. Personal Finance

    10 Ways to Save Money at the Farmers' Market

    Strategic shopping can help your budget as well as your health.
  7. Trading

    Why Forward Contracts Are The Foundation Of All Derivatives

    This article expands on the complex structure of derivatives by explaining how an investor can assess interest rate parity and implement covered interest arbitrage by using a currency forward ...
  8. Financial Advisor

    Can J Crew and Banana Republic Compete With H&M Low Prices?

    Should J Crew and Banana Republic lower their product prices in response to competitors like H&M?
  9. ETFs & Mutual Funds

    Explaining Delivery Versus Payment

    Delivery versus payment is a common procedure for settling the exchange of securities.
  10. Financial Advisor

    How Do Futures Contracts Work?

    Futures contracts are one of the most important financial innovations in history, but they are often misunderstood. Find out this contract is used to transfer risk between different parties. ...
RELATED FAQS
  1. What's the difference between accrued expenses and provisions?

    Read about the differences between accrued expenses and provisions, and why a company might record one over the other in ... Read Answer >>
  2. What is the difference between forward and futures contracts?

    Fundamentally, forward and futures contracts have the same function: both types of contracts allow people to buy or sell ... Read Answer >>
  3. What does it mean to take delivery of a derivative contract?

    Find out more about derivative contracts and what it means when the holders of derivative contracts take delivery of the ... Read Answer >>
  4. How can a futures trader exit a position prior to expiration?

    A futures contract is an agreement to buy or sell a commodity at a pre-determined price and quantity at a future date in ... Read Answer >>
  5. What is a derivative?

    A derivative is a contract between two or more parties whose value is based on an agreed-upon underlying financial asset, ... Read Answer >>
  6. What's the difference between cash-on-delivery differ and delivery against payment?

    Find out more about cash on delivery and delivery versus payment transactions and the difference between these two types ... Read Answer >>
Trading Center