Offtake agreement, types of offtake agreements, economic public order
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Obstacles for Offtake agreements in Iran Law

  • There are different types of Offtake agreements:

  1. Take and Pay

  2. Take or Pay

  3. Long Term Sale

  4. Hedging Contract

  5. Throughput agreement

  • Each and every type of these contracts has their own special purposes and rules.

  • In general, through modernization of contracts law in Iran which can be described as departure of Islamic Jurisprudence, almost every type of new contacts can be justified as valid and legal contract but there is still the Zeitgeist of Islamic Law which can prevent unjust contracts.

  • In Offtake agreements like other types of financing agreements, it is safe to say that there is not any major obstacle to consider them as valid contracts.

  • Besides of above mentioned conclusion, some type of Offtake agreements might encounter obstacles.

  • In general, these obstacles can be categorized in two categories:

  1. Ambiguity of Unilateral obligations

  2. Economic public order

  • As for the first category, the validity and acceptability of a unilateral obligation is still unclear in Iran Legal System.

  • When there is no consideration or obligation for other party of contract, the obligation consider as a unilateral obligation. This situation could happen in Take or Pay contracts.

  • Long story short, remember that in Take or Pay contract, define a reciprocal obligation whether it is share in profits of Project Company or independent obligation in another contract.

  • The second category could happen in all types of Offtake agreements. The core notion of this obstacle relates to Just Competition in business activities. This obstacle can emerge in three situations:

    When:

  1. The price of products were not determine in contact

  2. The percentage of products financer obliged to buy, were not determined in contact

  3. The contract is a protecting tool against market undulations

  • In all these types of Offtake agreement, a conflict might occur between economic public order and the contract which in some cases can result in nullification of contract.

  • See Also General Rules on Iran Contract Law

 

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