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What Is Change in Law Clause

The court also found that the contract was based on a fixed interest rate. The party concluded the contract before entering the tendering procedure after reducing the risk of such a price increase by HSD. The Court therefore considered that a prudent contractor would have taken such price fluctuations into account in the tender margin. Such price fluctuations could not be covered by the legislative amendment clause unless specific wording indicated inclusion. A statutory amendment clause usually sets out the conditions under which the party providing goods or services under a contract can recover its increased performance costs as a result of a change in the law. Financial relief resulting from a change in the law differs from performance obligations excused from a force majeure clause. However, like force majeure clauses, legislative amendments require the establishment of a direct causal link between the change in law and the negative financial impact on the party`s ability to fulfil its contractual obligations and define each element. Furthermore, in Uttar Haryana Bijli Vitran Nigam Ltd. v. Adani Power Ltd.2 and Jaipur Vidyut Vitaran Nigam Ltd. v. Adani Power Rajasthan Limited,3 the Supreme Court concluded, relying on the Energy Watchdog relationship, that the amendment clause is an integrated principle of restitution that compensates the party affected by such a change in the law.

that is, the party must receive compensation in the civil sense. The court also clarified that the adjustment of the monthly rate payment due to changes to the law under the long-term power purchase agreement will take place from the date of entry into force of the amendment to the law. A good amendment clause is essential for the smooth running of a works contract of significant size. Contractors who do not have the opportunity to negotiate the terms of their amending clause should carefully review the notification provisions and all other technical aspects of the clause so as not to unnecessarily cause a dispute due to accidental non-compliance. Owners who include strict notices and other harsh provisions in their amendment clause should consider whether strict enforcement will do more harm than good to their project in the long run. In National Highways Authority v. HCC Ltd., AIR 2014, the Honourable High Court of Delhi, taking into account the principle of “contra proferentum” (against the supplier), held that the price increase clause must be interpreted against the employer and covers all cases of price increases, unless otherwise stated. Again, the statutory amendment clause is essentially about contractual obligations for which there has been a delay in performance due to a price increase, but a force majeure clause deals with obligations that have been prevented or delayed by factors such as a price change. It can be seen that there is no straitjacket rule on the applicability of a legislative amendment clause and that it depends on the circumstances of each case. On the one hand, the Apex Court extended the scope and application of the law amendment clause under the Jaipur Vidyut judgment and, on the other hand, in the same year (2020), the Apex Court itself gave a narrow interpretation of the change in law under the Southeast Asia judgment. A change in law is risky because it is due to unexpected changes in applicable law that occur after the submission of the offer or after the conclusion of the contract.

Once the investment in a project is made, these changes will be to the detriment of the investor. Finally, these legislative changes may result in new rules, amendments, binding standards, codes, protocols, control plates, etc. The force majeure clause is a clause that covers unforeseen events and events beyond the control of the parties. These include events such as earthquakes, volcanoes, pandemics, wars, the imposition of sanctions, etc. India as a country was largely dependent on coal. However, as coal availability declined, several PPAs seeking to undertake major energy projects in various Indian states faced serious litigation. One of those landmark decisions is Energy Watchdog and Ors. c. Central Electricity Regulatory Commission and Ors. [(2017) 14 SCC 80], in which PT Adani Global Group entered into a Coal Supply Agreement (CSA) with an Indonesian mining company, PT Dua Samudera Perkasa. The agreement was signed between them on 14 December 2009.

It is important to note that on January 12, 2009, the Indonesian government made a remarkable change to its laws. The Indonesian government had drafted the mining law, known as the Coal and Mineral Mines Law No. 4 of 2009, which required Indonesian coal suppliers and miners to raise their coal prices in line with international market standards. Although it took about a year for the law to be properly enforced, it was clear by January 2009 that the Indonesian coal market would experience an increase in prices. Finally, on 23 September 2010, by officially promulgating Regulation No. 17 of the Ministry of Energy and Mineral Resources in accordance with Article 2, the Indonesian Minister of Energy and Mineral Resources called on all coal miners and suppliers to update their existing CSAs and increase coal prices. The amendment clause is one of the most important, perhaps the most important provisions of any construction contract. Project designs are rarely perfect.

An amendment clause provides a mechanism to address these imperfections and gives project owners the flexibility to update a project`s design as the project progresses. A good amendment clause determines when an owner can change the original scope of the contract, how the parties must dissolve the value of the amended scope, and when a payment to the contractor or credit to the owner must be made. A good amendment clause also provides the contractor with a mechanism to notify the owner if they believe an amendment order is due and to indicate the time frame within which that notice must be given. For the contractor, failure to comply with the requirements of the amendment clause may result in the loss of the right to request an adjustment to the value of the order or the date of conclusion of the contract. For an owner, failure to comply with and enforce the requirements of the amendment clause may result in unnecessary payments to the contractor. While it is true that both clauses offer some relief to the parties, there are important differences between the two. The force majeure and amendment clauses of the law are intended to protect the contracting parties.

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