Drafting take-or-pay clauses in energy contracts
Produced in partnership with Phillip Ashley, Judith Aldersey-Williams, David Rutherford, and Leontine Mathew of CMS Cameron McKenna Nabarro Olswang LLP

The following Energy practice note produced in partnership with Phillip Ashley, Judith Aldersey-Williams, David Rutherford, and Leontine Mathew of CMS Cameron McKenna Nabarro Olswang LLP provides comprehensive and up to date legal information covering:

  • Drafting take-or-pay clauses in energy contracts
  • Common features of take-or-pay clauses
  • Scheduling
  • Quantities
  • Valuation
  • Quality
  • Adjustments
  • Other related provisions
  • Example take-or-pay clauses
  • Take-or-pay vs take-and-pay

Drafting take-or-pay clauses in energy contracts

This Practice Note considers the common features of take-or-pay clauses and provides some example clauses. It also considers the distinction between take-or-pay clauses and take-and-pay clauses.

For an introduction to take-or-pay clause in the energy sector and the regulatory and competition law issues regularly encountered, see Practice Note: An introduction to take-or-pay clauses in energy contracts.

For more information on to English Court’s attitude to take-or-pay clauses and a thorough consideration of take-or-pay clauses and the rule on penalties, see Practice Note: Take-or-pay clauses in energy contracts: the rule on penalties.

Common features of take-or-pay clauses

This section focuses on take-or-pay clauses in gas and LNG SPAs. Similar features appear in take-or-pay clauses in other types of contracts in the energy sector.

For more information, see Practice Note: An Introduction to Oil & Gas Sales and Trading.

Scheduling

Take-or-pay commitments may be drafted to operate on an annual basis (as is more commonly the case in LNG SPAs) but they may also establish ‘take-or-pay’ for any day or month (often the case in pipeline arrangements).

LNG SPAs might be drafted on an annual basis, but pipeline arrangements might also have ‘take-or-pay’ for days and months. The AIPN Standard Form Gas sales Agreement is structured for annual minimum payment obligations. However, the accompanying guidance notes state that ‘in certain circumstances it may be appropriate for Seller to impose

Popular documents