Zephyr Power Limited (Zephyr) is a company primarily engaged in developing wind power plants. It was employed (contracted) by Suzlon Energy Private Limited (Suzlon) to develop the second largest Wind Park in Jaisalmer, with a capacity of 1,864MW. Zephyr commissioned Apex Solutions Private Limited (Apex) to perform key stages in setting up Wind Park in Jaisalmer, such as site selection and preparation, foundation construction, tower installation, turbine assembly and installation, blade installation, and grid connection. A fully functional Wind Park was to be handed over to Zephyr.

The entire value of the contract between Zephyr and Apex for setting up Wind Park in Jaisalmer was Rs. 500 Crore. The contract provided a date by which a fully completed and functional Wind Park was to be handed over by Apex to Zephyr.

Twenty five days were passed the delivery date. Apex had not even started work on the project. Apex declared to Zephyr that it would not be able to perform the contract as it did not have the skill and resources to do the work. Zephyr accepted the anticipatory breach by Apex and terminated the contract. Zephyr awarded the contract to another party for a contract value of 550 crores.

Zephyr sought to recover the damages from Apex. The contract Zephyr had with Apex had the following clauses on damages:

Clause 201.1. Apex shall be liable to Zephyr for any damage suffered by Zephyr as a consequence of Apex’s breach of contract.

Clause 201.2. If Apex fails to deliver a fully functional Wind Park within the time specified, Apex shall be liable to pay damages at the rate of 0.1% of the total contract value per day of delay in delivery of a fully completed and functional Wind Park.

Zephyr calculated its damages under the two clauses as follows:

1. Under clause 201.1: Rs. 50 crores

2. Under clause 201.2: Rs. 500 crores x 0.1% x 25 days = Rs. 12.5 crores

Zephyr claimed both the amounts in damages from Apex. Apex contends that Clause 201.2 applies for ‘delay in delivery of a fully functional Wind Park.’ As there was no delivery, the question of paying under clause 201.2 did not arise. Will clause 201.2 apply to the undelivered functional Wind Park?

Question

Zephyr Power Limited (Zephyr) is a company primarily engaged in developing wind power plants. It was employed (contracted) by Suzlon Energy Private Limited (Suzlon) to develop the second largest Wind Park in Jaisalmer, with a capacity of 1,864MW. Zephyr commissioned Apex Solutions Private Limited (Apex) to perform key stages in setting up Wind Park in Jaisalmer, such as site selection and preparation, foundation construction, tower installation, turbine assembly and installation, blade installation, and grid connection. A fully functional Wind Park was to be handed over to Zephyr.  
   
 The entire value of the contract between Zephyr and Apex for  setting up Wind Park in Jaisalmer was  Rs. 500 Crore. The contract provided a date by which a fully completed and functional Wind Park was to be handed over by Apex to Zephyr.  
   
 Twenty five days were passed the delivery date. Apex had not even started work on the project. Apex declared to Zephyr that it would not be able to perform the contract as it did not have the skill and resources to do the work. Zephyr accepted the anticipatory breach by Apex and terminated the contract. Zephyr awarded the contract to another party for a contract value of 550 crores. 
   
 Zephyr  sought to recover the damages from Apex. The contract  Zephyr  had with Apex had the following clauses on damages: 
   
 Clause 201.1.  Apex shall be liable to Zephyr for any damage suffered by Zephyr as a consequence of Apex’s breach of contract. 
   
 Clause 201.2.  If Apex fails to deliver a fully functional Wind Park within the time specified, Apex shall be liable to pay damages at the rate of 0.1% of the total contract value per day of delay in delivery of a fully completed and functional Wind Park. 
   
 Zephyr calculated its damages under the two clauses as follows: 
   
 1. Under clause 201.1:    Rs. 50 crores 
   
 2. Under clause 201.2:     Rs. 500 crores x 0.1% x 25 days = Rs. 12.5 crores 
   
 Zephyr claimed both the amounts in damages from Apex. Apex contends that Clause 201.2 applies for ‘delay in delivery of a fully functional Wind Park.’ As there was no delivery, the question of paying under clause 201.2 did not arise. Will clause 201.2 apply to the undelivered functional Wind Park?

Accepted Answer

The parties have provided for the situation where the breach is in delay of delivery. Clause 201.2 will apply for the delay. The day Zephyr terminated the contract, both the parties got discharged from any further obligations or duties under the contract. Apex was no longer required to deliver. Thus, Apex would need to pay damages for the delay till the date of termination.

Answer

The parties have provided for the situation where the breach is in delay of delivery. Clause 201.2 will apply as Apex has breached in not delivering on the scheduled date. However, as there is no delivery, the number of days cannot be worked out. The damages to be paid under clause 201.2 become uncertain. Thus, no damages can be claimed under clause 201.2.

Answer

Clause 201.2 provides a formula for working out the damages for certain kinds of breaches. The formula applies only when there is delivery. The number of days is to be counted from the scheduled date of delivery to the actual date of delivery. As there was no delivery of a fully functional Wind Park, the clause cannot apply.

Answer

Zephyr can claim damages under Clause 201.1 as Apex is in breach. As a remedy is available to Zephyr, Clause 201.2, which is specific to delay in delivery, would not apply. If the remedy were not available, Zephyr could have availed Clause 201.2

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Zephyr Power Limited (Zephyr) is a company primarily engaged in developing wind ...

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