20 October 2020 - Post by:Rhona Egerton
A party did not waive its right to rely on a “performance relief” provision by temporarily continuing to perform by alternative means: Delta Petroleum v BVI Electricity Corp.
BVI Electricity contracted to buy fuel from Delta. The agreement contained a “performance relief” provision, allowing Delta to claim relief from further performance should the refinery from which it sourced the fuel close. When the refinery closed, Delta continued to supply BVI Electricity with fuel from a different source, but tried to negotiate a price increase to reflect the costs of the new supplier.
Negotiations failed, and Delta sought to exercise its rights under the performance relief clause to cease supply of fuel. BVI Electricity claimed that Delta had waived this right when it continued to provide fuel from a different source, and obtained an interim injunction, followed by an order for specific performance, requiring Delta to continue to deliver fuel.
The Privy Council held that the principle of waiver by election did not apply to the performance relief clause. It was not equivalent to, say, a right to terminate. It did not present Delta with a binary, all-or-nothing choice between ending all obligations and treating those obligations as still binding. There were a range of options: it could withhold, reduce or suspend deliveries. Additionally the clause required Delta to prove it had taken all reasonable steps to minimise delay or damages. So there was no inconsistency in Delta continuing to supply for an interim period.
Further, the Privy Council found that BVI Electricity was liable for any damages that Delta had suffered by reason of the interim injunction granted at first instance, and exercised its inherent jurisdiction to make a restitutionary award requiring BVI Electricity to pay Delta the difference between the contract price of the fuel, and the value of the fuel transferred to Delta to BVI Electricity under the lower court’s order for specific performance.
The decision is a reminder that not all provisions are susceptible to being waived by election.