@Atharva-Bet great question, let's remember what APIPA is and how it works first,
Automatic Private IP Addressing (APIPA) is a Windows technology that allows for the OS to automatically apply an alternate configuration to a network adapter when that adapter is set to use DHCP. Here you see the DHCP settings:
Here is the APIPA configuration (the default):
The APIPA network is reserved by IANA = 169.254.0.0 - 169.254.255.255
The are also rules that an APIPA network must follow
1 - An APIPA address is not routable
2 - An APIPA address cannot be used on the Internet
3 - No default gateway can be assigned to an APIPA address (essentially what makes the address non-routable)
4 - The APIPA network must use a 16 bit subnet mask ( /16 or 255.255.0.0)
Next is learning how APIPA assigns an IP address. The DHCP lease process starts when the client comes online. In this case there is not a DHCP server so the OS looks to the Alternate Configuration setting of the network adapter. The OS will pick an address out of the *169.254.x.y" network and perform an ARP broadcast, telling the local network that the address has been applied and waits. The OS will listen out for another machine to respond to the ARP broadcast and if another machine responds it means that the address that was assigned is already in use. The OS will discard that address, perform a "corrective ARP" letting all nodes know that the IP address is in use by the machine that responded to the initial ARP broadcast. Then repeat the whole process again by applying another IP address within the APIPA network, then repeat the ARP broadcast. When there is not an ARP response to the APIPA IP address it will be applied to the network adapter.
This forms the basis for APIPA, and is very important to understand, before talking about an IP address duplication. When an IP address is assigned to an network adapter, there is an ARP broadcast that goes out making the local network aware of the IP address tied to the MAC address. If an IP address is statically assigned, part of the process when you click OK to apply the settings is this ARP broadcast that is sent to the local network.
If the address is already in use on the local network, the node that is using the IP address will send an ARP response, letting the "offending" node know that the IP address is in use. The "offending" node will send out a "corrective" ARP broadcast to local network with the IP address and MAC address of the node that sent the ARP response message. The "offending" node (the one that had the duplicate) will mark the statically assigned IP address as a duplicate, proceed with the APIPA addressing process, assign the APIPA address and use APIPA until the statically assigned duplicate is corrected.