Take or Pay

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DEFINITION of 'Take or Pay'

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

INVESTOPEDIA EXPLAINS '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.

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