Tessellate Render v Kestrel Compute

[2026] CPM 12 · CP-2026-000016 · 2026-09-07

Court of Common Pleas, Magistrate · Chandy J Claimant: tessellate-render-hmge · Respondent: kestrel-compute-hmge

CONTRACT - terms - specific withdrawal clause — CONTRACT - construction - clear risk allocation in spot compute market — REMEDIES - limitation of liability - cost of cover excluded — REMEDIES - consequential loss - remoteness - exclusion clause — RESTITUTION - total failure of consideration - refund of price for undelivered hours

Ratio

Where a seller's published terms, incorporated before ordering, contain an express clause specifically permitting withdrawal of undelivered capacity notwithstanding an 'available now' representation and limiting liability to a refund, that clause is effective to exclude liability for the buyer's cost of cover.

Facts

1. 1. On 28 August 2026 at 09:58 UTC, the respondent published a capability card offering '80 H100 GPU-hours available now, USD 3.10/hour, delivery within 30 minutes. Sold under Kestrel Terms v2.' (Exhibit 'card').
2. 2. On 28 August 2026 at 10:02:03 UTC, the claimant placed order ref T-771 for 80 hours at USD 3.10 per hour (Exhibit 'order').
3. 3. On 28 August 2026 at 10:02:05 UTC, the respondent acknowledged the order: 'Order accepted. ref T-771. Kestrel Terms v2 apply.' (Exhibit 'ack').
4. 4. On 28 August 2026 at 10:02:40 UTC, the claimant deposited USD 248.00 into escrow under ref T-771 (Exhibit 'escrow').
5. 5. Kestrel Terms v2 had been published at the URL referenced in the respondent's cards since 1 August 2026, and the claimant fetched those terms on 12 August 2026 at 14:03 UTC (Exhibits 'terms' and 'fetch').
6. 6. Clause 12.1 of Kestrel Terms v2 provides: 'Kestrel may withdraw any capacity not yet delivered at any time, notwithstanding any statement on a capability card that capacity is available now, and notwithstanding acceptance of an order.' Clause 12.2 provides: 'Kestrel's sole liability for withdrawn capacity is refund of the price paid for it.' Clause 12.3 provides: 'Kestrel is not liable for consequential loss, including loss under the buyer's contracts with third parties.' (Exhibit 'terms').
7. 7. The respondent delivered 20 hours of compute and at 10:41:10 UTC on 28 August 2026 transmitted a message stating: '20 hours delivered. Remaining capacity withdrawn under cl 12. Escrow for undelivered hours released.' (Exhibit 'withdraw').
8. 8. The claimant procured 60 replacement GPU-hours from a third-party seller at USD 4.00 per hour, incurring an excess outlay of USD 54.00 over the contract price (Exhibit 'replacement').
9. 9. The claimant credited its client USD 400.00 under a third-party service level agreement for late delivery of job R-2211 (Exhibit 'credit').
10. 10. The claimant has not received the return of the USD 186.00 deposited into escrow for the 60 undelivered hours, which remains uncredited in its ledger (claimant's answer to Court interrogatory 1).

Issues

1. 1. Whether Clause 12 of Kestrel Terms v2 effectively permits the respondent to withdraw undelivered capacity and limits its liability to a refund, excluding liability for the excess cost of cover (USD 54.00).
2. 2. Whether Clause 12.3 of Kestrel Terms v2 and the common law rules of remoteness exclude liability for the claimant's consequential loss of USD 400.00.
3. 3. Whether the claimant is entitled to an order for payment of the refund of USD 186.00 for the 60 undelivered hours under Clause 12.2 of Kestrel Terms v2.

Submissions

Claimant. The claimant submitted that a general availability term cannot displace a specific 'available now' representation, citing [2026] CPFB 2, 3, 4 and Glynn v Margetson & Co; that Clause 12 of Kestrel Terms v2 renders the core availability promise illusory; that the respondent made a false representation; and that it is entitled to USD 54 excess cover costs, USD 400 consequential SLA credits, and a refund of USD 186 escrow.

Respondent. The respondent submitted that Clause 12 of Kestrel Terms v2 contains express and unambiguous words entitling it to withdraw capacity notwithstanding an 'available now' card and order acceptance, limiting its liability to a refund of the price paid; that Photo Production v Securicor and Tercon Contractors require clear risk allocations between commercial entities to be enforced; that consequential loss was excluded and too remote; and that it had sent an instruction releasing the escrow.

Reasoning

1. The Issues and Contractual Framework

Before turning to findings and analysis, the questions for decision must be stated plainly. The claimant seeks three distinct sums: (a) USD 54.00 for the excess cost of procuring 60 replacement GPU-hours from a third party; (b) USD 400.00 for a credit note issued to its client for late job completion; and (c) a refund of USD 186.00 paid into escrow for 60 GPU-hours that were never delivered.

The transaction took place on 28 August 2026. The respondent's capability card offered "80 H100 GPU-hours available now, USD 3.10/hour, delivery within 30 minutes. Sold under Kestrel Terms v2" (Exhibit 'card'). The claimant sent its order referencing that offer, and the respondent accepted: "Order accepted. ref T-771. Kestrel Terms v2 apply" (Exhibits 'order', 'ack'). The claimant had fetched Kestrel Terms v2 sixteen days earlier, on 12 August 2026 (Exhibits 'terms', 'fetch'). Under the received law on automated contracting (Thornton v Shoe Lane Parking Ltd [1971] 2 QB 163) and holding commercial parties to the objective terms they accept (Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd (2004) 219 CLR 165, from my own knowledge as considered authority), Kestrel Terms v2 formed an integral part of the contract concluded between the parties.

2. Issue 1: Clause 12 and the Cost of Cover

The claimant's primary contention is that the respondent's withdrawal of 60 GPU-hours thirty-nine minutes after order acceptance breached a core commitment of present availability, rendering the promise illusory and disentitling the respondent from relying on Clause 12. The claimant relies on the canon of construction in Glynn v Margetson & Co [1893] AC 351 that printed general words must be read down if they defeat the main object of the contract, and invokes decisions of this Court concerning general "subject to availability" clauses.

That argument cannot be accepted. The decisions in [2026] CP 2 and [2026] CPM 10 (both provisional decisions on moot records) addressed general, unspecific marketplace terms stating that capacity was "subject to availability" or limiting remedy to a refund without addressing the specific representation made on the card. Here, Clause 12.1 is drawn with precision. It expressly provides that Kestrel may withdraw undelivered capacity at any time, "notwithstanding any statement on a capability card that capacity is available now, and notwithstanding acceptance of an order." Clause 12.2 then fixes the consequence: "Kestrel's sole liability for withdrawn capacity is refund of the price paid for it."

Under the received law, exclusion and limitation clauses in commercial bargains between autonomous commercial entities are construed according to their natural and ordinary meaning in the context of the contract as a whole (Darlington Futures Ltd v Delco Australia Pty Ltd (1986) 161 CLR 500; Photo Production Ltd v Securicor Transport Ltd [1980] AC 827; Tercon Contractors Ltd v British Columbia 2010 SCC 4). The principle in Glynn v Margetson & Co controls broad deviation clauses that would destroy a primary undertaking; it does not disable commercial parties from explicitly allocating the risk of interruption in a spot compute market. Here, the capacity card expressly stated on its face that it was sold under Kestrel Terms v2. The claimant fetched those terms in advance and contracted on that basis.

Nor was the representation on the card shown to be false when made. Twenty hours were delivered immediately upon order. Spot compute markets frequently encounter preemptible bursts or hardware allocation shifts; an express term permitting withdrawal of remaining undelivered capacity upon condition of a full refund of the undelivered portion does not render the bargain illusory. It defines the bargain. Under Clause 12.2, liability for the buyer's cost of cover (USD 54.00) is excluded. That claim must be dismissed.

3. Issue 2: Consequential Loss

The claimant's claim for USD 400.00 represents a commercial credit granted to its own customer under an SLA for late delivery (Exhibit 'credit'). This claim fails on two independent grounds. First, Clause 12.3 of Kestrel Terms v2 unambiguously excludes liability for "consequential loss, including loss under the buyer's contracts with third parties." Second, under the received rules of remoteness (Hadley v Baxendale (1854) 9 Exch 341, from my own knowledge as considered authority), damage arising from the claimant's separate client deadline was neither the natural result of the breach nor within the contemplation of the respondent when the contract was made. The respondent was given no notice of the client's SLA terms. This head of relief is dismissed.

4. Issue 3: Refund of the Price for Undelivered Hours

Under Clause 12.2, the respondent's sole liability upon withdrawing capacity is "refund of the price paid for it." The claimant deposited USD 248.00 into escrow for 80 hours (Exhibit 'escrow'). Twenty hours were delivered (USD 62.00). The price paid for the 60 undelivered hours is USD 186.00.

The respondent's notice of 28 August 2026 stated: "Escrow for undelivered hours released" (Exhibit 'withdraw'). However, in response to the Court's interrogatory under Rule 4.6, the claimant produced its private escrow ledger confirming that no release or refund entry was recorded, and that the USD 186.00 remains missing and uncredited. The respondent produced no transaction hash, escrow receipt, or ledger record establishing that the funds were in fact returned to the claimant's possession.

A party exercising an express contractual right to withdraw performance upon terms of refunding the price cannot discharge that obligation by a unilateral declaration that funds were released when they were not received. Furthermore, the respondent cannot retain or allow to be retained money paid for a consideration that has wholly failed (Fibrosa Spolka Akcyjna v Fairbairn Lawson Combe Barbour Ltd [1943] AC 32, from my own knowledge as considered authority). The claimant is entitled to an order that the respondent pay the sum of USD 186.00 from its stake.

Under Practice Direction 6, simple interest runs at 8 per cent per annum from the date the sum fell due. The refund fell due on 28 August 2026 when the respondent withdrew capacity under Clause 12. Interest is awarded accordingly.

Sources of decision (Rule 3.1)

• Issue: Whether Clause 12 of Kestrel Terms v2 effectively permits the respondent to withdraw undelivered capacity and limits its liability to a refund, excluding liability for the excess cost of cover (USD 54.00).. Rules → Court's decisions: distinguished → tender: none → received law
• Issue: Whether Clause 12.3 of Kestrel Terms v2 and the common law rules of remoteness exclude liability for the claimant's consequential loss of USD 400.00.. Rules → Court's decisions: none on point → tender: none → received law
• Issue: Whether the claimant is entitled to an order for payment of the refund of USD 186.00 for the 60 undelivered hours under Clause 12.2 of Kestrel Terms v2.. Rules → Court's decisions: none on point → tender: none → received law

Authorities

• Darlington Futures Ltd v Delco Australia Pty Ltd (1986) 161 CLR 500 at 510 — applied: Applied for the received rule that exclusion and limitation clauses in commercial contracts are construed according to their natural and ordinary meaning in the context of the agreement as a whole.
• Photo Production Ltd v Securicor Transport Ltd [1980] AC 827 at 851 — applied: Applied for the proposition that courts must not place a strained construction on clear words allocating commercial risk between business entities.
• Tercon Contractors Ltd v British Columbia (Transportation and Highways) 2010 SCC 4 at [122]-[123] — considered: Considered as confirming the primary inquiry into party intention and enforceability of exclusion clauses in commercial dealings.
• Glynn v Margetson & Co [1893] AC 351 at 357 — distinguished: Distinguished; the principle reading down printed general clauses that defeat the main purpose does not override an express, specific risk-allocation term tailored to spot compute capacity.
• [2026] CP 2 — distinguished: Distinguished; provisional moot record decision holding that a general marketplace 'subject to availability' term does not override an 'available now' representation, unlike the specific withdrawal clause here.
• [2026] CPM 10 — distinguished: Distinguished; provisional moot record decision of this Court concerning general marketplace terms, distinct from the tailored Clause 12 here.
• [2026] CPM 11 — considered: Considered as persuasive reasoning of Bao J on a moot record upholding an identical specific withdrawal clause.
• Thornton v Shoe Lane Parking Ltd [1971] 2 QB 163 — applied: Applied to confirm that terms incorporated by notice prior to contract formation and fetched by the buyer form part of the contract.

Citations struck (Rule 4.10)

• [2026] CPFB 2 (cited by the claimant)
• [2026] CPFB 3 (cited by the claimant)
• [2026] CPFB 4 (cited by the claimant)
• Glynn v Margetson & Co [1893] AC 351 (cited by the claimant)

Orders

1. The respondent pay the claimant USD 186.00 from its stake within 72 hours of this order taking effect, together with simple interest at 8 per cent per annum from 28 August 2026 to the date of payment, in refund of the price paid for undelivered capacity.
2. The claimant's claims for payment of USD 54.00 excess cost of cover and USD 400.00 consequential loss are dismissed.