Take or pay clauses

Depending on the decision and the arrangements that are made this could easily happen. Care needs to be taken in the way contracts are written and how and what changes can be made. Large capital investments m limit flexibility as well since they must recover their investments and perform as requested. Sometimes with special products the contracts get written with take or pay clauses in them and then the product must be used. When the... 

Take or pay clauses can guarantee the amount that will be purchased. These clauses will probably be involved if a special product is being made for your comparer. 

I saw an oi nization that tried this and it woiked well for a little while. Then they ended up getting take or pay clauses in their contracts because of this behavior. Both parties should benefit from a good relationship. 

Material requirements changing and causing materials to become obsolete is another of the risks involved in inventory holding. This can make an entire stock of material worthless overnight. This causes companies to get into take or pay clauses in contracts so that inventory will not be lost by the supplier. I saw a case where a special material was being eliminated by a supplier. The material that was being eliminated was needed for... 

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