Take-or-pay
A contractual payment obligation tied to reserved capacity or a minimum purchase, subject to the agreement's qualifications.
How it works
Under a take-or-pay contract the buyer pays for a reserved amount of capacity or output whether or not it uses it. It gives the seller a revenue floor, and it is common in energy, pipelines and other infrastructure.
In GPU and data centre deals
Take-or-pay capacity contracts are what make many GPU and data centre financings possible. A customer committing to pay for reserved GPU capacity or data centre space over several years creates a cash flow that lenders can size debt on. Lenders test how firm the commitment really is: whether payments can be reduced for service failures, deferred during delays or ended early.
What gets negotiated
- Whether the payment obligation survives service failures, or only service credits apply
- Treatment of delays in delivery or acceptance
- Early termination rights and the termination payment
- Set-off rights the customer may have against the provider
Why the distinction matters
Read performance conditions, credits, termination rights and force-majeure provisions. The label alone does not establish unconditional payment or an enforceable lender claim.
Read the structure
How a strong customer contract supports a project without guaranteeing its bonds.
Hyperscaler lease-backed project bonds ↗In the filed deals
Lambda Compute I's GPUs are contracted under take-or-pay arrangements with two highly rated counterparties.
For in-house counsel
Take-or-pay in the filed documents
Where the term turns up in filed contracts and what is market, for the lender’s or the borrower’s side. Previews are open; the full text is free with InfraCompute Weekly.
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- The legal desk for in-house counselContract library, issues lists, checklists and English law notes.
Related terms
Explanatory definition, not a statement that a particular transaction contains this term or a substitute for its contractual definition.
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