Enforceability of Take-or-Pay Provisions in English Law Contracts - Revisited

Take-or-pay clauses are commonly found in international energy industry contracts, which are often governed by English law. For the second time in the last five years, the English High Court has raised the concern that a take-or-pay clause may - in principle - be an unenforceable penalty. It is disappointing that a view of such potential significance to the global energy industry has once again been delivered in a very short passage contained in a judgment that does not address the industry's commercial concerns. If take-or-pay clauses may in principle be void as a penalty under English law, this uncertainty is likely to result in unnecessary disputes concerning the enforceability of many such clauses in contracts around the world.