The Supreme Court, in case Docket No. 19863-2024, upheld a cassation appeal on the merits and reversed the ruling of an arbitral tribunal that had ordered the Principal to pay US$1,000,000 to the Contractor for an early-generation bonus agreed in a wind-farm construction contract. The rule the Court set: whoever claims a contractual incentive tied to a concrete result bears the burden of proving that the result occurred. Without that proof, the obligation does not arise.
If your company has construction or energy contracts with bonuses tied to performance milestones, this ruling matters.
What happened
The Principal (the project's owner) and the Contractor entered into a contract to develop an electricity-generation project in the Los Lagos Region, which contemplated the construction and commissioning of a wind farm. Through amendments incorporated after the original contract, the parties agreed on an "early-generation bonus": an economic incentive calculated as a function of the revenues derived from the sale of energy, payable if the project reached certain milestones within the defined deadlines.
The Contractor maintained that it met the required conditions and that the Principal refused to recognize the bonus and to deliver the information necessary to calculate it, information that —it argued— was in the exclusive possession of the counterparty. It sued before an arbitral tribunal for the payment of US$1,000,000 as the guaranteed minimum amount, plus interest. The first-instance arbitrator upheld the claim: it interpreted that compliance with all the milestones was not necessary to generate the right to the bonus, but rather that compliance with some was enough, considering the context in which the benefit was incorporated into the agreement. The second-instance arbitral tribunal confirmed that criterion.
The Supreme Court reached a different conclusion. It examined the structure of the bonus, its name, and its calculation method, and concluded that the contract expressly tied the benefit to the effective generation of electricity in advance. That result was a prerequisite of the obligation, not an accessory or waivable element. Since it had not been proven, the claim could not succeed.
The rule is direct: without proof of the early generation —a burden that fell on the Contractor under the general rules— the payment obligation did not arise, nor did the obligation to deliver information for the calculation of the bonus.
What it may mean for your company
The ruling confirms something that in theory no one disputes, but that in practice gets lost under project pressure: contractual bonuses and incentives are not automatic. They are conditional. And whoever claims them must demonstrate that the conditions were met.
There is a second point that the Supreme Court worked out with precision, and that goes beyond the wind-energy dispute. The trial arbitrators interpreted that partial compliance with the milestones was enough to activate the bonus, relying on the context in which it was incorporated into the contract. The Court rejected that reasoning: the intention of the parties can prevail over the literal text of the contract only when that intention is clear, evident, and without ambiguities —under art. 1560 of the Civil Code. If it is not, the text rules. And the text tied the bonus to a concrete result that was not demonstrated.
This has three direct consequences for contracts with similar structures in the energy, construction, and infrastructure sectors.
The first is evidentiary. If your company has a right to a bonus or incentive and anticipates a controversy, the burden is yours. It is not enough to allege that you complied. You need documentation that proves compliance with each condition that activates the benefit, in the format and within the deadlines that the contract establishes. The absence of that documentation is not a good-faith problem: it is an evidentiary failure that can cost you the right.
The second is contractual. Incentive clauses drafted ambiguously —that do not specify which milestones must be met in full, how that compliance is proven, nor who delivers the verification information— are the origin of this type of dispute. The gray area in the text does not favor the beneficiary of the bonus: in the face of a lack of clarity, the Court will demand proof of the factual prerequisite, and if it does not exist, it will reject the claim.
The third is procedural. The ruling confirms that cassation on the merits can indeed correct arbitrators' contractual interpretations when those interpretations alter or distort what was agreed. The arbitral forum is not immune to that control.
Could you prove today, with documentation in order, each milestone that activates a bonus in your ongoing projects? Reviewing your evidentiary backing before claiming the incentive avoids reaching the dispute without proof of the prerequisite that makes it enforceable. Coordinate that review here.
What you can do
- Audit your contracts with bonuses or incentives tied to milestones. Identify which conditions must be met, whether compliance must be total or partial is enough, and who bears the burden of proving it. If the clause is ambiguous on any of those points, that ambiguity may be resolved against you when you claim the benefit.
- Establish documentation protocols from the start of the project. In energy, construction, or infrastructure projects where the fulfillment of milestones generates economic rights, documenting in real time —with technical records, progress reports, and communications that prove the status of each milestone— is as important as complying. An undocumented milestone is, in practice, an unproven milestone.
- Review the information-access clauses in ongoing contracts. The ruling also addressed the counterparty's obligation to deliver information necessary to calculate the bonus. If in your contracts that obligation is imprecisely drafted —without deadlines, without a format, without consequences for non-compliance— correcting it before a dispute arises is considerably cheaper than litigating it.
If any of these points raises questions about your project contracts, a 30-minute diagnostic session is enough to size up your contractual and evidentiary gaps. Schedule here.
If you need to review incentive or bonus clauses in construction, energy, or infrastructure contracts in light of this ruling, or assess the strength of your project documentation against a possible dispute, schedule a meeting with our team.
This content is informational and does not constitute legal advice.