Knock-for-Knock Indemnities and the Law: Contractual Limitation and Delictual Liability

Cover
Half Title
Series
Title
Copyright
Contents
Detailed Contents
List of contributors
Editors’ preface
Table of cases
Table of statutes and Model Form Contracts
Part I Selected Topics
	Chapter 1 The Development of Knock-For-Knock Clauses in the Last 15 Years
		1 Introduction
			1.1 Definition
			1.2 Essential meaning of a K4K clause
			1.3 Historical genesis of the K4K clause
		2 Issues in using, implementing and enforcing K4K clauses
		3 Various uses
			3.1 SUPPLYTIME 2005
			3.2 Insurance and P&I clubs
			3.3 Use in offshore contracts
		4 Modern use
			4.1 The BIMCO SUPPLYTIME 2017
		5 A historical encounter of the K4K clauses in the shipping and in the offshore oil and gas sectors
		6 The evolution of K4K clauses in standard contracts and in English case law
			6.1 The significance of the Piper Alpha litigation
		7 The contribution of other jurisprudence to the historical evolution of K4K clauses
			7.1 US jurisprudence
			7.2 Deepwater Horizon
			7.3 Brazil
			7.4 Germany
			7.5 Australia
			7.6 Nordic countries – the history and validity of K4K clauses from a comparative perspective
			7.7 Later judicial trends
			7.8 The way forward
		8 Conclusive critique
	Chapter 2 An Introduction to Risk Allocation in Oil and Gas Contracts From an English Law Perspective
		1 Introduction
		2 Indemnification and related concepts
			2.1 Introduction to the concept of indemnification
			2.2 Indemnity and hold harmless clauses
			2.3 Mutual indemnity and mutual indemnity and hold harmless clauses
		3 Indemnity and hold harmless provisions in the oil and gas context
			3.1 Introduction to simple indemnity and hold harmless clauses in oil and gas contracts
			3.2 Introduction to mutual indemnity and hold harmless clauses in oil and gas contracts
			3.3 The rationale for a mutual indemnity and hold harmless regime in the oil and gas context
			3.4 Back-to-back indemnity and hold harmless provisions in oil and gas contracts
			3.5 Qualified indemnity and hold harmless provisions
		4 Selected further issues in indemnification law and practice in the UKCS
			4.1 Statutory control of indemnity and hold harmless clauses
			4.2 The law’s default settings: the normal presumptions about the distribution of risk
			4.3 The position of third parties
		5 Interpreting indemnity and hold harmless clauses
			5.1 The traditional approach to interpretation
				The general rules
				Interpretation contra proferentem
				Towards contextualism (and back again)
		6 Some known problems of drafting and interpretation
			6.1 Contra proferentem and the problem of negligence and breach of statutory duty
			6.2 Words delimiting the circumstances in which the indemnity and hold harmless provision will take effect
			6.3 Multi-party issues
			6.4 “Full and primary”
			6.5 Definitional issues
				Company groups
				Employees and personnel
				Property
		7 The problem of multiple parties
			7.1 Introduction to the problem
			7.2 The Industry Mutual Hold Harmless Agreement (IMHH)
				The Deed’s core indemnity provisions
				Other important provisions
					Entry into force
					Geographical extent
					Order of precedence
					Extension of benefits to groups
					Waiver of rights of subrogation
					Right to defend
					Exceptions
					Transportation by air excluded
					Landward areas
					Operators
				Commentary and conclusions on the IMHH scheme
					The contractual nature of the scheme
					Potential dangers of the IMHH
		8 Liability for “consequential” loss
			8.1 What is “consequential loss”?
			8.2 Commentary and conclusions on consequential loss
		9 Overall limitation of liability
	Chapter 3 Contracting Around Tort Defaults: The Knock-For-Knock Principle and Accident Costs
		1 Introduction
		2 The knock-for-knock principle
			2.1 The industrial setting
			2.2 Illustrating the operation of knock for knock
		3 Knock for knock, social norms, and private ordering
		4 The effect of knock for knock on social welfare
			4.1 The perfect separating equilibrium
			4.2 The perfect pooling equilibrium
				4.2.1 Self-regulation
				4.2.2 Repeat interactions
				4.2.3 Health and safety regulation
				4.2.4 Insurance
		5 The hidden perils of knock for knock
			5.1 Risk interdependencies
			5.2 Litigation externalities
			5.3 Harm to environmental interests
			5.4 Deterrence versus compensation
		6 Conclusion
	Chapter 4 On Knock-For-Knock Clauses and Their Optimal Regulation
		1 Introduction
		2 On the literature
		3 When are knock-for-knock clauses useful?
			3.1 A model of the use of knock-for-knock contracts
		4 Should courts impose carve-outs for gross negligence?
			4.1 A framework
		5 Conclusion
	Chapter 5 Knock-For-Knock Indemnity Provisions and Liability Insurance: Potentially Strange but Always Complicated Bedfellows
		1 Introduction
		2 K4K provisions and general liability insurance
		3 Impact of blanket AI endorsements
		4 “Other insurance” clauses
		5 Incorporation of indemnity limitations in insurance policies
		6 Waiver of subrogation
		7 Conclusion
	Chapter 6 The Effect of Choice of Law on Knock-For-Knock Clauses
		1 Introduction
		2 Knock for knock and the full English legal treatment
			2.1 The knock-for-knock clause itself
			2.2 Simple knock for knock in contractual context
			2.3 Knock for knock in its English legal context
		3 Compare the United States
			3.1 The jurisdictional issue
			3.2 Federal maritime law – Deepwater Horizon
			3.3 The anti-indemnity statutes
				3.3.1 General observation
				3.3.2 Louisiana Oilfield Indemnity Act and other state provisions
				3.3.3 Texas Oilfield Anti-Indemnity Act and other state provisions
		4 Compare Brazil
			4.1 General observations
			4.2 Knock-for-knock and Brazilian law
		5 Conclusion
Part II Knock For Knock in Specific Jurisdictions
	Chapter 7 Indemnity Clauses in Fabrication and Construction Contracts in Norway
		Chapter 7A Limiting and Channeling Liability Under Offshore Construction Contracts in Norway
			1 The problem
			2 The contractor’s liability for breach under offshore construction contracts
				2.1 The liability
					2.1.1 The need for a balanced regime
					2.1.2 Types of sanctions against breach
					2.1.3 Specific features
					2.1.4 Breach of secondary obligations
					2.1.5 Obligation to notify – and the role of the variation mechanism
				2.2 The limitation of liability
			3 The knock-for-knock system
				3.1 The call for regulation
					3.1.1 The risks of damage
					3.1.2 Consequences of no regulation
					3.1.3 Potential regulation
					3.1.4 The insurance aspects
					3.1.5 A global view of risk, liability and insurance
				3.2 Provisions on liability
					3.2.1 Overview
					3.2.2 The family zones
					3.2.3 The third-party zone
				3.3 Insurance
					3.3.1 Considerations
					3.3.2 Main components
					3.3.3 Insurance arrangements
			4 Setting aside provisions limiting exposure resulting from default or damage?
				4.1 Authority for censoring provisions limiting exposure?
				4.2 Differences and similarities between the two types of liability situations
					4.2.1 Liability situations
					4.2.2 Liability regulations
			5 Are the agreed limitations of liability for breach of contract valid?
				5.1 Points of departure
				5.2 The contractor’s own gross negligence
				5.3 Who is “the contractor”?
				5.4 The role of the concept “willful misconduct”
			6 Censoring the knock-for-knock regime?
				6.1 The question
				6.2 “Organized financing of loss”
				6.3 Can the waiver of subrogation be maintained?
					6.3.1 Waiver of subrogation
					6.3.2 The co-insured
					6.3.3 Are the arrangements “reasonable”?
					6.3.4 The conclusion
			7 Do the NTK 15 provisions on exclusion and limitation of liability hold good?
		Chapter 7B The Obligation Under Norwegian Offshore Contracts to Insure the Contract Object as Part of a Knock-For-Knock Agreement
			1 Introduction and background
				1.1 Indemnification, liability and insurance
				1.2 Project all risk insurances
			2 The knock-for-knock arrangement
				2.1 Risk zones
				2.2 Waivers of liability, indemnification and waiver of subrogation
				2.3 Damage to the contract object
				2.4 Waivers and indemnities shall apply regardless of cause
			3 The offshore project insurances
				3.1 Introduction
				3.2 Insured perils
				3.3 Basis for recovery
			4 Summary
	Chapter 8 Liability and Insurance Clauses in Contracts for Vessel Services in the Norwegian Offshore Sector: The Knock-For-Knock Principle
		1 Introduction
		2 Overview of the relevant tort law and insurance legislation
			2.1 Tort law
			2.2 Insurance law
		3 The content and structure of the knock-for-knock principle
			3.1 Type of loss and basis for liability
			3.2 Who is included in the liability provisions – “the group concept”
			3.3 Freedom of liability, indemnity and subrogation
			3.4 The insurance regulation
		4 The rationale for the knock-for-knock principle
			4.1 The need for contractual control of the liability risk
			4.2 Efficient insurance coverage
			4.3 Loss prevention?
				4.3.1 Loss prevention and efficient liability rules
				4.3.2 The efficient basis for liability in contractual relationships
		5 The validity of the regulation
			5.1 Some starting points
			5.2 NL 5–1–2
			5.3 The Contract Act § 36
				5.3.1 Overview and some starting points
				5.3.2 The content of the agreement
				5.3.3 The insurance clauses
	Chapter 9 Statutory Liability Regulation Versus Contractual Risk Allocation in Upstream Oil and Gas: The Norwegian Case
		1 Introduction
		2 Statutory regulation of risk under Chapter 7 of the Norwegian Petroleum Act
			2.1 Introduction
			2.2 Liability for petroleum pollution damage
				2.2.1 Unlimited no-fault liability
				2.2.2 Pollution damage
				2.2.3 Channelling liability to the licensee and licensee’s recourse
		3 Contractual allocation of risk on oil and gas contracts in Norway
			3.1 Introduction
			3.2 Industry-negotiated model contracts
			3.3 The risk allocation clause
		4 Contractual allocation of risk breaches with Chapter 7
	Chapter 10 Applying Knock-For-Knock in Germany
		1 Introduction
		2 Use of knock-for-knock clauses in the German market
		3 Validity issues under German law
			3.1 Court review of general terms and conditions
				3.1.1 General principle
					3.1.1.1 Definition of general terms and conditions
					3.1.1.2 Content test
					3.1.1.3 What is “individually negotiated”?
						Negotiation of terms demands more than debating
						Additional security by a “caveat” clause?
			3.2 Are knock-for-knock clauses general terms and conditions?
			3.3 Applying the reasonableness test
				3.3.1 Commercial contracts versus consumer contracts
				3.3.2 Fairness test – what is market practice?
				3.3.3 The “risky” terms
			3.4 Invalid terms under German civil law – no exclusion of liability for intent
				3.4.1 General principle of liability under sec. 276 BGB
				3.4.2 No agreements to the detriment of third parties
				3.4.3 Consequences for knock-for-knock clauses under German law
			4 Available case law
			5 Practical consequences and advice for use of knock-for-knock clauses under German law
	Chapter 11 Knock for Knock Under Brazilian Law
		1 Introduction
		2 Overview of civil liability regime in Brazil
			2.1 Contractual liability and tort liability
			2.2 Fault-based liability and strict liability
			2.3 Indemnifiable losses
		3 Limitation of liability clause
		4 Knock-for-knock clauses in Brazil
		5 Conclusion
	Chapter 12 The Implications of Litigation Post Deepwater Horizon on Knock-For-Knock Clauses in Us Law
		1 Introduction
		2 Applicable law
			2.1 Federal court jurisdiction
				2.1.1 Federal question jurisdiction
				2.1.2 Diversity jurisdiction
				2.1.3 Admiralty jurisdiction
			2.2 Applicable law
				2.2.1 Outer Continental Shelf Lands Act
				2.2.2 State waters
				2.2.3 Maritime law
					2.2.3.1 Maritime contracts
					2.2.3.2 What is a vessel?
				2.2.4 Maritime law incomplete, supplemented with state law
				2.2.5 Tension between OCSLA and maritime law
		3 Indemnity in maritime
			3.1 Enforceability of indemnity provisions in a maritime contract
			3.2 Indemnity under the Longshore and Harbor Workers’ Compensation Act
			3.3 Insurance obligations and additional assured status
		4 Application of state law
			4.1 The Louisiana Oilfield Indemnity Act
			4.2 Texas Oilfield Anti-Indemnity Act
		5 Conclusion
			Appendix A
	Chapter 13 Mutual Hold Harmless Clauses in France and Francophone Civil Law Systems
		1 Introduction
			1.1 Francophone civil law systems
				1.1.1 The French Civil Code of 1804
					1.1.1.1 French law of obligations: contract law and civil liability
					1.1.1.2 Francophone African legal systems
				1.1.2 Recent developments
					1.1.2.1 French law
					1.1.2.2 Francophone African legal systems
			1.2 Mutual hold harmless clauses: a contractual re-allocation of liability
				1.2.1 Origins and growing prevalence in French law
				1.2.2 A note on English terminology
		2 The legal nature of mutual hold harmless clauses under French law
			2.1 The legal framework for mutual hold harmless clauses
				2.1.1 Principles of the law on civil liability under French law
				2.1.2 Contractual mechanisms for allocating risk between the parties
				2.1.3 Contractual mechanisms for allocating third-party liability
			2.2 Legal characterisation of mutual hold harmless clauses under French law
				2.2.1 Allocation of risk between the parties
				2.2.2 Allocation of third-party liability
					2.2.2.1 Related third parties
					2.2.2.2 Unrelated third parties
		3 The legal regime governing mutual hold harmless clauses under French law
			3.1 Exclusions of liability and waivers of recourse
				3.1.1 Validity and exceptions
					3.1.1.1 Exceptions linked to the law of obligations
						3.1.1.1.1 Limiting non-contractual liability
						3.1.1.1.2 Essential obligations
					3.1.1.2 Specific legislative exceptions
				3.1.2 Effects of waiver of recourse and exclusions of liability clauses under French law
					3.1.2.1 Strict interpretation
					3.1.2.2 Exceptions linked to the nature of the fault
					3.1.2.3 Exceptions linked to the nature of the loss
			3.2 Indemnification of third-party losses
				3.2.1 Validity of clauses indemnifying third-party losses
				3.2.2 Limitations
	Chapter 14 Lessons from the Application of Knock-For-Knock Clauses Under Malaysian Law
		1 Introduction
			1.1 General overview of the Malaysian legal system
			1.2 The law of contract in Malaysia
				1.2.1 Statutory and judicial approach on indemnity clauses in Malaysia
			1.3 Empirical study of oilfield service contracts in Malaysia
			1.4 Research design
				1.4.1 Research process
		2 Description of the case studies
			2.1 Findings
			2.2 Perception of the contractual formation process
			2.3 Perception of risk allocation and indemnity clauses
		3 Analysis of the indemnity and hold harmless clauses of Operators A, B and C
			3.1 Liability regarding personal injury or death of employees and loss of property of the parties
				3.1.1 Under LOGIC
				3.1.2 Under FIDIC
				3.1.3 Under Operator A’s contract
				3.1.4 Under Operator B’s contract
				3.1.5 Under Operator C’s contract
			3.2 Claims by a third party
				3.2.1 Third-party claims under LOGIC
				3.2.2 Third-party claims under FIDIC
				3.2.3 Third-party claims under Operator A’s contract
				3.2.4 Third-party claims under Operator B’s contract
				3.2.5 Third-party claims under Operator C’s contract
			3.3 Liability regarding pollution
				3.3.1 Pollution liability under LOGIC
				3.3.2 Pollution liability under FIDIC
				3.3.3 Pollution liability under Operator A’s contract
				3.3.4 Pollution liability under Operator B’s contract
				3.3.5 Pollution liability under Operator C’s contract
			3.4 Insurance coverage
		4 Conclusion
Index