Background
World Energy, a sustainable aviation fuel producer, acquired the Paramount, California-based refinery in 2018 and partnered with Air Products (a major industrial gases company) to optimize and expand its operations. In November 2023, the parties executed a Master Project Agreement under which Air Products would perform plant optimization and expansion work, while World Energy would make monthly payments—a monthly operating fee (MOF) covering Air Products’ actual costs and a monthly fixed fee (MFF) representing a 4.5% return on capitalized costs. Air Products also provided World Energy a $270 million credit facility at 15% interest. The Master Project Agreement expressly conditioned Air Products’ performance on World Energy’s timely payment of all undisputed MOF and MFF amounts.
World Energy defaulted immediately on its payment obligations. By July 2024, World Energy owed approximately $19 million. The parties executed a Forbearance Agreement on July 10, 2024, in which World Energy acknowledged its breaches since November 2023 and explicitly acknowledged that Air Products had “fully and timely performed all of [its] obligations and duties under the Agreements . . . and ha[d] acted reasonably and in good faith under the circumstances.” Air Products agreed to forbear from exercising remedies until September 30, 2024.
World Energy continued defaulting on payments after the forbearance period. On February 24, 2025, following new board leadership that shifted away from energy transition projects, Air Products terminated the Master Project Agreement citing World Energy’s Material Breach under Section 18.1(A)(i) for failing to pay the MFF. During a planned February 2025 facility turnaround, Air Products completed preliminary work on a “12-D Rack” (a support structure for utility lines) but did not complete the repair, leaving the structure inoperable. World Energy sought a mandatory injunction requiring Air Products to repair the 12-D Rack and perform remaining work.
The Court’s Holding
Vice Chancellor Zurn granted Air Products’ motion to dismiss and denied World Energy’s motion for preliminary injunction. The court held that World Energy failed to substantially perform its own contractual obligations, a prerequisite for obtaining specific performance or mandatory injunctive relief. World Energy’s primary obligation was to pay the MOF and MFF, which it repeatedly failed to do—by its own admission in the Forbearance Agreement and through continued monthly defaults from October 2024 through February 2025.
The court rejected World Energy’s invocation of the prevention doctrine (the principle that a party’s nonperformance may be excused if the other party wrongfully prevented performance). For defaults occurring before September 30, 2024, the Forbearance Agreement was fatal to World Energy’s argument: by explicitly acknowledging Air Products’ full and timely performance in good faith, World Energy foreclosed any claim that Air Products had wrongfully interfered with its ability to pay. For subsequent defaults, World Energy’s payment obligations were not tied to the operational fruits of Air Products’ work—they accrued from the moment Air Products began work, regardless of milestones or profitability. The Master Project Agreement explicitly stated Air Products was “not providing any schedule guarantee” for completion of work. World Energy offered no evidence that it had requested Air Products’ assistance with working capital financing, as would have been required to establish a breach of that obligation.
The court further held that Air Products properly exercised its contractual termination rights. Under Section 8.2(B), Air Products could suspend performance after a fifteen-day default with forty-five days’ notice; under Section 18.1(A)(i), a ninety-day unremedied default constituted “Material Breach”; and under Section 18.1(B)(i), Air Products could immediately terminate upon notice. World Energy’s claim that the disputed MFF payments were subject to a “good faith dispute” and thus not due was rejected: World Energy failed to follow the contract’s dispute procedures, which required it to “set forth the basis for its dispute” with supporting documentation.
Key Takeaways
- A party seeking specific performance or mandatory injunctive relief must have substantially performed all of its own contractual obligations; a breaching party cannot compel the other party’s performance.
- An explicit acknowledgment in a forbearance agreement that the other party performed in good faith precludes subsequent invocation of the prevention doctrine for defaults occurring during the covered period.
- Payment obligations stated as unconditional and monthly are enforceable as written, even if operational milestones have not been reached, unless the contract expressly conditions payment on such milestones.
- A party invoking a “good faith dispute” to avoid payment must follow the contract’s dispute procedures; failure to do so means the payment obligation remains due and undisputed.
Why It Matters
This decision reinforces fundamental principles of Delaware contract law: sophisticated commercial parties will be held to the contracts they negotiate, courts will enforce them as written, and changed business circumstances do not excuse performance. The court rejected World Energy’s attempt to rewrite the bargain after activist investors targeted Air Products and the company shifted strategy. Critically, the opinion makes clear that a forbearance agreement in which a party acknowledges the other’s good faith performance creates a powerful bar to later invocation of doctrines like prevention—the party has essentially admitted away its own defense.
The holding also clarifies that payment obligations independent of operational performance cannot be excused merely because the other party’s work is incomplete or delayed (absent an express contractual tie-in). World Energy sought to retrofit a causation narrative onto an unconditional payment obligation, arguing it could not pay because Air Products had not completed the expansion. The court rejected this as inconsistent with the contract’s terms and with World Energy’s own admission of Air Products’ good faith efforts. For commercial lenders and contractors, the decision offers protection: if payment obligations are clearly stated as unconditional, courts will enforce them regardless of the obligor’s subsequent financial struggles or the obligee’s operational challenges.