Customize Consent Preferences

We use cookies to help you navigate efficiently and perform certain functions. You will find detailed information about all cookies under each consent category below.

The cookies that are categorized as "Necessary" are stored on your browser as they are essential for enabling the basic functionalities of the site. ... 

Always Active

Necessary cookies are required to enable the basic features of this site, such as providing secure log-in or adjusting your consent preferences. These cookies do not store any personally identifiable data.

No cookies to display.

Functional cookies help perform certain functionalities like sharing the content of the website on social media platforms, collecting feedback, and other third-party features.

No cookies to display.

Analytical cookies are used to understand how visitors interact with the website. These cookies help provide information on metrics such as the number of visitors, bounce rate, traffic source, etc.

No cookies to display.

Performance cookies are used to understand and analyze the key performance indexes of the website which helps in delivering a better user experience for the visitors.

No cookies to display.

Advertisement cookies are used to provide visitors with customized advertisements based on the pages you visited previously and to analyze the effectiveness of the ad campaigns.

No cookies to display.

Connect with us

Hi, what are you looking for?

slide 3 of 2

Hell or High Water Contract: What it is, How it Works

File Photo: Hell or High Water Contract: What it is, How it Works
File Photo: Hell or High Water Contract: What it is, How it Works File Photo: Hell or High Water Contract: What it is, How it Works

What Is a Hell or High Water Contract?

A hell or high water contract (sometimes called a promise-to-pay contract) is non-cancelable. A hell or high water contract requires the buyer to pay the seller regardless of circumstances. Hell or high water provisions obligate the buyer or lessee to follow the contract until its expiration.

Understanding Hell or High Water Contracts

Hell or high water contracts compel payment regardless of performance. Hell or high water contracts are usual when a service or product supplier takes a significant risk for the customer. Risk can relate to capital commitments. This danger might also mean there is no alternative buyer because the product is very configurable.

The payer assumes all seller, lessor, or lender default risk in a hell or high water contract. This might incentivize the obligor to accept a transaction they might otherwise reject due to the obligee’s default risk.

The expression stems from the idiomatic phrase “come hell or high water,” which means to follow through regardless of conditions.

The term implies that the speaker or obligee will keep their promise despite tremendous difficulty or catastrophe, including demonic or diluvial powers. Biblical connections to hell and high water relate to earth-shattering cataclysms like Noah’s deluge and Biblical Hell.

Special Considerations

Hell or high-water contracts can be enforced even if the property is defective. A lessee who rents or leases equipment under hell or high water terms is still responsible for payments even if the equipment breaks. The vendor or lessor may manage finance and have a passive role in the equipment.

Such a lease generally lets the lessee choose the equipment. Customers lease items after the lessor acquires them. A hell or high water finance arrangement ensures the lessee will pay the lessor on precise conditions.

Lessees choose the equipment they hire; hence, the lessor is usually not responsible for issues. The manufacturer or supplier might transport the equipment straight to the lessee without involving the lessor. Manufacturing defects may create equipment flaws. Suppliers or manufacturers may fulfill equipment-functioning warranties.

Finance Hell or High Water Contracts

Hell or high water contracts are appropriate for project finance, acquisitions, and high-yield indentures.

A purchase pact with hell or high water wording might require the potential buyer to handle antitrust regulatory divestitures or litigation. Thus, the purchase agreement’s viability may depend on the buyer’s capacity to address such issues and complete the sale.

Conclusion

  • Hell or high water contracts require the obligee to perform regardless of the circumstances.
  • Despite damage or destruction, lessors or borrowers must maintain payments in lease or loan arrangements.
  • Hell or high-water contracts shift most of the risk of nonperformance or default on the obligee, which might entice lessors or lenders to accept riskier deals.

You May Also Like

File Photo: Hyperautomation

Hyperautomation

11 min read

What is hyperautomation? Hyperautomation: A word becoming more popular in the fast-paced and always-changing world of digital change is “hyper-automation.” Hyperautomation is being used to...  Read more

Notice: The Biznob uses cookies to provide necessary website functionality, improve your experience and analyze our traffic. By using our website, you agree to our Privacy Policy and our Cookie Policy.

Ok