Legal Status of the Terms of Take-or-Pay in Long-Term Gas Sale Contracts

Since oil and natural gas are the most important sources of energy, they are strategically crucial for international trade and economic transactions. For this purpose, consumer countries strive to secure the supplement of oil and gas. This requires a stable market, capable of providing energy at a reasonable price. Given the natural characteristics and conditions of gas, such as the difficulties for its storage, more importance should be attached to the supplement of gas, hence, gas sellers always need to be assured about the demand and profit in the market.
This article examines one of the clauses employed in gas sale contracts so that the buyers and sellers can both make sure about the demand and supply rates in the market. It also defines the take-or-pay clause as a mechanism that can make gas contracts flexible and studies this clause from the perspective of the legal systems in different countries, especially in Iran. It eventually concludes that there is no prohibition in Iranian legal system for incorporation of take-or-pay clause in gas sale contracts. In contrast, the usage of this clause is permissive under the Iranian positive law and will remain binding for the parties.