This is the current definition for Contract for Difference in the Energy Bill as published on the 9th May 2013. "Investment Instruments" defined later in the bill build upon this definition.
"(2) A contract for difference is a contract -
(a) certain payments under which are to be funded by electricity suppliers(see further section 9), and
(b) which a CFD counterparty is required to enter into by virtue of section 10;
and such a contract is referred to in this Chapter as a "CFD"."
So a "Contract for Difference" is now defined explicitly as a "contract", instead of being defined as an instrument as it was in the Draft Energy bill.
What does the word "contract" mean in legal terms. Let's look at a legal web site for help...
"A contract is an agreement between two or more people that is legally binding. It can be verbal or written."
There must be an offer made, that is a proposal to enter into a contract.
The offer must be accepted and must always be communicated to the person who has made the offer.
Consideration must have been given, for example there must be a price paid, or promise made in return or something else that proves that both parties give some value to each other. Gifts are not legally enforceable, since the recipient of a gift gives nothing in return.
The parties must have intended to create a legal relationship."
So are CfD's contracts like normal contracts we meet every day or are they somehow different...
The Contracts for Difference (CfD) definition depends on the meaning of:
1) "certain payments" - does this mean a particular category of payments, if so which category?
2) "funded" - which is a term not further defined in the Energy Bill
3) "electricity suppliers" - which is a term not further defined in the Energy Bill.
4) the detailed content of Section 9 and what it in turn makes reference to
5) CFD counterparty
6) the detailed content of Section 10 and what it in turn makes reference to
7) [CFD counterparty] "required to enter into" by virtue of [section 10]. Is the term "required to enter into" compatible with the usual accepted legal definition of the word "contract"?