Why the Doral conditions matter

Industrial Heat alleges that the Doral installation was set up fraudulently, but Rossi supporters argue that all that matters is whether or not the reactor worked. If it worked, they believe, IH should pay him $89 million, because that is how they read the Agreement.

However, what was contemplated in the Agreement did not happen. The Agreement was poorly drafted, from all points of view, but was tolerated by the parties, each for their own reasons.

The terms of the Agreement for a Guaranteed Performance Test were not followed; this was replaced by the Second Amendment with something more workable, but that, too, was not followed. 

The initial Agreement provided that a Validation Test would be undertaken within 120 business days of the Agreement, which was effective October 26, 2012. There are slightly less than 5 business days per week, so this would be, at most, 24 weeks (or 168 days). The time then was set to expire on April 12, 2013. The test was actually completed on May 2, 2013. It is obvious from the behavior of the parties that Industrial Heat accepted this delay, and paid the required $10 million into escrow. Then the Agreement provided that a further payment of $89 million would be due “contingent upon the Plant operating” at the Validation level (poorly specified), for 350 days out of 400, the time beginning with delivery. This was all sloppily defined, because setting up a test of a 1 MW reactor, if it is to be at full power, would take time. In all this, the “Plant” was vaguely defined; there was a possible selection of a “Hot Cat” unit. The specifications of the 1 MW Plant were attached to the Agreement, but the page with specifications of the Hot Cat was missing, as IH noted in one document.

The Agreement does not establish clear responsibility for the start of testing; Rossi claims that it was IH “failure” that created delay, but a Rossi email shows that Rossi apparently declined to support installation (and perhaps testing) under IH control. More details have not yet become publicly available.

Because the test did not begin, the parties executed the Second Amendment to replace the fixed starting date with a date “agreed upon in writing between the parties.” While IH protested, in their Motion to Dismiss, that the 2nd amendment was never valid because it was not signed by Ampenergo, nor by Leonardo Corporation (Rossi left the Leonardo signature space blank), the behavior of the parties leads me to conclude that the 2nd amendment was accepted, de facto, that Industrial Heat is estopped from protesting that particular technical failure. (We do not know if Ampenergo ever signed. If they did not, a rebuttable claim might still stand that the Second Amendment was never accepted.)

Ampenergo is a crucial party because the Agreement with IH replaced the earlier License granted to Ampenergo, and IH took on payments to Ampenergo, and one document indicates that they paid millions of dollars to them.

All other issues, then, such as details of the test, what was to be tested, who would be the Engineer Responsible for Validation, fall into what would be covered by a written agreement setting the date.

It appears that there was no written agreement. Rossi has only claimed that certain actions or opinions existed, the main “action” being an alleged acceptance of the Penon test plan, as an example. However, those actions could represent something other than a GPT, such as supporting what was clearly represented by Rossi, a sale of power to an allegedly independent customer, and an available demonstration for potential investors. The Term Sheet, an agreement between Rossi and IH and JMP, does not mention any “test.”

The Validation Test took place under Rossi control, in Ferrara, Italy. The GPT was clearly contemplated to take place under IH control, but with a presumably neutral ERV.

For, instead, the GPT location to be moved and to be run under full Rossi control would be very much outside of the intention of the Agreement and the Second Amendment, and if the “customer” was actually a Rossi puppet, even worse. The Rossi exclusion of the IH Engineer, Murray, would have violated the concept of a GPT.

The requirement for a written agreement was crucial, not incidental or merely technical. If Ampenergo had not agreed, perhaps, as to relationships and responsibilities between IH and Rossi were concerned, this might be moot. At any time, it might have been possible to amend the Agreement between Rossi and IH to make further Ampenergo signature unnecessary. But that was not done.

The lack of written agreement of the parties indicates that no agreed-upon test took place; it would take strong evidence to establish otherwise.

That test could still take place, theoretically, all it would take is an agreement, as was the requirement from early on.

However, there is another major obstacle: IH claims that they were unable to measure excess heat (which means to measure reliable, not just as some anecdote or extreme result, because errors happen) using the Rossi technology, in spite of at least two years of effort, and their ability to create and demonstrate the Rossi Effect independently was crucial to the Agreement. The Agreement was not just setting up a prize for “winning a demonstration,” and raising the $89 million would probably be impossible if they could not assure investors of independent confirmation of results.

That J.M. Products was apparently set up on behalf of (and effectively run by) Rossi is fatal to any independence; allegedly JMP was going to measure heat and pay for what they measured, but JMP’s reports clearly came from Rossi, and were not actual measures of delivered thermal energy, and that is obvious from the numbers.

We may ask whether or not the Plant actually performed, but, in the end, for Rossi v. Darden, it’s moot. There were general requirements that may be assumed about this Agreement (such as the purpose being the delivery of functional technology), but the requirement for an agreement signed by all the parties was simple, clear, and necessary. (Necessary, that is, in the presence of conflict. Parties who can find agreement can largely do whatever they agree upon.)

The Judge recently dismissed the IH claims against Fulvio Fabiani, based on a lack of a required writing to extent the contract between Fabiani and IH. The contract has:

This Agreement shall commence as of September 1, 2013 and shall continue in effect for an initial term through and including August 31, 2014 (the “Initial Term”). This Agreement shall terminate upon expiration of the Initial Term unless the parties agree in writing to extend it.

The IH claim against Fabiani was founded on estoppel, that they continued to pay Fabiani and therefore the contract was, de-facto, in force. In dismissing that claim, the Judge revealed that she is likely to take explicit written requirements according to the plain language. IH paid Fabiani, all right, but failed to insure that there was a clear, still-standing agreement covering what was to be done. As I wrote before, this is not good news for Rossi. The Second Amendment’s language stands in the way.

There is discussion on lenr-forum, part of which inspired this post, to be reviewed at LF Discussion Review 2017-01-25

Author: Abd ulRahman Lomax

See http://coldfusioncommunity.net/biography-abd-ul-rahman-lomax/

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