# Non-delivery Procedure

### Non-delivery can happen

Non-delivery is a reality when it comes to forward offtake agreements. Projects might fail to deliver the contracted amount based on a multitude of risks such as:

* Over-estimated and over-sold supply
* Natural disasters (forest fires, hurricanes, floods, etc)
* Political, regulatory, or other legal issues
* Bankruptcy
* Fraud (ie project proponents not following through on the project contrary to agreements)

In order to avoid the brunt of this, we have described steps to avoid the brunt of this happening in the sections covering [the de-risking process](../due-diligence-and-de-risking) and[ forward clip issuance](). This being said - this does not completely negate the possibility of non-delivery. It does however provide some framework in which these cases can be handled on a case-by-case basis.&#x20;

The following steps will be executed in order to recoup the value provided to proponents in these cases.&#x20;

### **Exercising the replacement clause**

* The process outlined in the [de-risking process ]()specified whether or not the Supply Partner would be financially capable of delivering replacement credits in the case of non-delivery. The Exper Council had to verify this Supply Partner as acceptable in order for the forwards to be tokenized.
* The Supply Partner is expected to fill the conditions of the replacement clause as contracted with the Foundation. If the Supply Partner has delivery insurance, the insurance provider is expected to cover it.&#x20;
* If the replacement clause can not be filled by any other party, Solid World will make an effort to recover structural stability.&#x20;

### **Restoring on-chain integrity**

* In a case of clear non-delivery, some circulating Collateralized Basket Tokens would become un-backed by realistic delivery.&#x20;
* At the moment when non-delivery is affirmed on-chain, the associated project's [Forward Clips]() will no longer be able to be re-priced and therefore will not generate additional incentives LPs. This will stop the expansion of un-backed tokens in circulation, stopping the expansion of risk exposure. &#x20;
* The Collateralized Basket Token has a burn facility for non-delivered Forward Clips. The supply required for this burn originates from the replacement clause. A treasury steward will manually manage this process. By the end of the 'burn', the commodity tokens will have returned to a completely backed state, restoring the system's equilibrium.&#x20;
