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(j) Article XI: Events of Default, Termination, Remedies

Article XI contains extensive remedies in an event of default. The remedy section is one of the centerpieces of OSCAR (as in any Offtake Agreement) and deserves to be described and analyzed in more detail:

a. Events of Default – what actually triggers "default"?​

The clause defines a closed list of Events of Default (EoDs). This is a trigger menu; nothing else is an EoD unless expressly stated. The list includes, in substance:

Buyer Payment Failure: Failure to pay undisputed amounts when due, with a 30-day cure after notice.

Purpose: Protects Supplier's cash flow while giving Buyer a fair cure window and the ability to withhold good-faith disputed sums.

Supplier COD Failure: Failure to achieve Commercial Operation by the Commercial Operations Target Date, with no automatic cure right (unless parties agree otherwise).

Purpose: Discipline on timely project delivery; recognizes that prolonged pre-COD delay can undermine Buyer's climate targets and budgets.

Supplier Contract Quantity Failure: Failure to Deliver the agreed Contract Quantity, if not cured through the shortfall mechanisms (Generation Shortfall or Delivery Shortfall make-ups).

Purpose: Links performance risk to the earlier shortfall provisions so the Supplier does not immediately default; default only arises if Supplier fails to use the agreed cure tools.

Generation Shortfall Failure: If cumulative Generation Shortfalls > [25]% of Total Contract Quantity and Supplier fails to Deliver the Generation Shortfall Makeup (and no further cure).

Purpose: Caps Buyer's exposure to structurally underperforming projects; past a certain underperformance threshold, Buyer gets a clean default/exit right.

Delivery Shortfall Failure (similar idea): If cumulative Delivery Shortfalls > [25]% of Total Contract Quantity and Supplier fails to Deliver the Delivery Shortfall Makeup (no cure beyond that).

Purpose: Disciplines Supplier on logistics/delivery performance, not only project generation.

Supplier Breach (other than COD/volume): Any material breach (other than the specifically carved-out failures) that is curable and not cured within 30 days after notice.

Purpose: Catch-all for serious issues (e.g., MRV, environmental obligations, exclusivity/double counting, confidentiality) so they are enforceable but with a standard cure concept.

Buyer Breach (non-payment): Parallel material breach standard for Buyer, with 30-day cure.

Purpose: Preserves neutrality; Supplier also gets protection for substantive Buyer defaults (e.g., misuse of Credits, confidentiality, sanctions, etc.).

Insolvency Event (either Party): Receivership, bankruptcy, assignment for creditors, etc., not dismissed within 60 days.

Purpose: Classic credit risk protection; allows the solvent party to close out rather than continue delivering or prepaying into an insolvency.

Why this structure matters​

  • It's tiered: not every hiccup is an EoD, and many are routed first through shortfall or cure mechanisms.
  • It splits performance risk (Supplier) and payment/credit risk (Buyer) in a way that's intelligible to financiers and internal risk teams.
  • By referencing the shortfall provisions, it ensures alignment between "underperformance mechanics" and "true default".

b. Financing Party Accommodation – cure rights for lenders​

OSCAR requires Supplier to identify any Supplier Lender and allows notice of default to be shared with that lender; the lender may exercise cure rights on Supplier's behalf.

Why it's important​

  • It supports project financeability: lenders expect a chance to step in or cure before a valuable offtake is terminated.
  • Neutral in tone: Buyer is not forced to wait indefinitely, but the mechanism reassures lenders and can improve bankability and pricing for both sides.

c. Termination Mechanism – how an EoD converts into an exit​

Once an Event of Default occurs and is continuing:

  • The non-defaulting party (NDP) may designate an Early Termination Date.
  • From that date, future obligations (i.e., those due on or after that date) are terminated, subject to the remedy / settlement mechanics that follow.

Why it's important​

  • Creates a clear, elective mechanism (not automatic) to end OSCAR.
  • This is especially relevant for:
    • Buyers facing persistent non-delivery or integrity issues.
    • Suppliers facing non-payment or Buyer insolvency.
  • The elective nature gives flexibility: the NDP can delay termination if there is a realistic cure or commercial resolution.

d. Remedies – calibrated responses for different defaults​

OSCAR then maps specific consequences to specific EoDs. These are framed as "exclusive rights and remedies" for that default type, which:

  • Enhances predictability.
  • Limits argument about additional or overlapping claims (subject to any carve-outs like fraud).

Key remedy buckets:​

(a) Payment Failure (Buyer)

  • If Supplier resells the unpurchased Credits: Buyer pays the price difference if the contract price > resale price.
  • If Supplier does not resell: Buyer pays the Unit Price × undelivered Credits.

This is basically a liquidated expectation damages construct that protects Supplier's benefit of the bargain while avoiding full-blown damages litigation over lost opportunities.

(b) Contract Quantity Failure / Generation & Delivery Shortfall Failures (Supplier)

Supplier must either:

  • Provide Replacement Credits acceptable to Buyer (same tech/standard; Buyer's discretion constrained by reasonableness), or
  • Pay Buyer the difference between Unit Price and prevailing spot price for equivalent Replacement Credits, where spot price > Unit Price.

Economic logic:

  • Buyer is "made whole" relative to what it would cost to source equivalent CDR elsewhere.
  • Supplier is incentivized to cure in-kind (Replacement Credits) where possible; monetary remedy kicks in if not.

(c) Breach of Validity / Integrity of Credits

If Credits are invalid, misrepresented, non-compliant, encumbered, or cause recapture-related issues:

Supplier must:

  • Offer acceptable Replacement Credits, or
  • Refund the Unit Price plus related fines/penalties.

This is the core integrity & reputational risk safeguard:

  • Protects Buyer if the Credits don't actually represent durable removals as promised.
  • Links to MRV and standard compliance, which is crucial in CDR, where scientific/regulatory scrutiny is intense.

(d) Residual Termination Payment

For breaches that are not covered by the specific buckets (excluding Insolvency Events), the Non-Defaulting Party:

Calculates a Termination Payment based on its net loss. If positive: payable by Defaulting Party; if negative: deemed zero.

This functions as a catch-all economic close-out: Ensures no "remedy gaps" while still limiting gamesmanship (one-way floor at zero).

e. No-Fault Termination Events – structural safety valves​

Separate from EoDs, OSCAR defines "No-Fault Termination Events" where performance becomes commercially or legally unsustainable without breach, e.g.:

  • Long-running Force Majeure or Change in Law (12+ months of inability to perform).
  • Significant Verification & Registry Cost increase (≥ 30% price impact).
  • Major Generation Shortfall > 25% Total Contract Quantity (structural underperformance).
  • Failure to reach COD by the Target Date due to circumstances outside both Parties' control.

On a No-Fault Termination:

  • Either Party may terminate on notice. Future obligations fall away. Accrued rights/obligations remain.

Why this is important​

  • Introduces an orderly off-ramp where neither side is "at fault" but the deal no longer works (economically, physically, or legally)
  • Distinguishes commercial frustration scenarios from wrongful non-performance—helpful for relationships, reputation, and internal governance.

f. Force Majeure & Change in Law – suspension, not instant breach​

The Force Majeure / Change in Law provisions: Require prompt notice, updates, and mitigation efforts. Suspend obligations of both the affected Party and the counterparty to the same extent.

Do not immediately create an EoD; they interact with:

  • No-Fault Termination Events (if long-lasting),
  • Or, if misused or not properly notified/mitigated, potentially with general breach concepts.

Why this layering matters​

  • Avoids knee-jerk defaults for genuine external shocks (policy shifts, regulatory bans, etc.).
  • Still ensures transparency and cooperation, plus a defined point (12 months) where Parties can walk away.