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.