OFFSHORE CONSTRUCTION : law and practice

Cover
Half Title
Series Page
Title Page
Copyright Page
Table of Contents
Acknowledgements
Table of Cases
Table of Legislation
Chapter 1 Introduction: understanding offshore construction
	A Introduction
		(i) Identifying the issue
		(ii) Terminology
	B The vessels
		(i) Offshore support vessels
		(ii) Construction and subsea support vessels
		(iii) Jackups and fixed platforms
		(iv) Semi-submersibles
		(v) Mobile production units
		(vi) LNG regasification units
		(vii) FLNG
		(viii) Floating Storage, Regasification and Power units (FSRP)
	C The contract
		(i) Design
		(ii) Fabrication
		(iii) Title
		(iv) Contractor’s default
		(v) Variations
		(vi) Standard form?
		(vii) Applicable law
	D Conversion contracts
	E Comparison of typical shipbuilding and construction contract terms
		(i) Shipbuilding contracts
		(ii) Construction contracts
		(iii) Comparison table
	F Understanding EPC/EPCI/EPIC contract terms
Chapter 2 Tendering and negotiating contracts
	A Introduction
	B The bidding process
		(i) Outline of the process
		(ii) Withdrawal of the bid
	C Conclusion of a binding contract
		(i) Conditional contracts
			(a) Subject to details
			(b) Other subjects
			(c) Subject to financing
			(d) Failure of condition?
		(ii) Provision of refund guarantees
	D Handover of design responsibility
	E Contract award
		(i) Letters of intent
			(a) Date of contract award?
			(b) Enforceability of contract award?
			(c) Obligation to agree?
		(ii) Duty of good faith
		(iii) Instructions to proceed
		(iv) Retrospective effect
	F Contract documents
		(i) Incorporation by appendices
		(ii) Incorporation by list
		(iii) Incorporation by reference
	G Order of priority of contract documents
	H Documents not incorporated into the contract
		(i) True and complete documents
		(ii) Collateral contracts
		(iii) Entire agreement clauses
		(iv) Side letters
		(v) Rectification
	I Construction phase financing
		(i) Introduction
		(ii) Structuring and title
		(iii) Cashflow
		(iv) Security
		(v) Leasing
		(vi) Control mechanisms
Chapter 3 Design risk
	A Introduction
	B The design process
	C The FEED package
	D Inadequate/inaccurate FEED
		(i) Does the Company warrant the accuracy of the FEED?
		(ii) Misrepresentation
		(iii) Non-disclosure
		(iv) General duty of good faith
		(v) Implied duty of care
		(vi) Design Responsibility
			(a) Development of FEED during negotiations
			(b) Schedule of work
			(c) Illustrations
	E Design verification
		(i) Patent/latent errors
		(ii) Constructability/suitability
		(iii) Fitness for purpose
		(iv) Time for verification process
		(v) Conversions
	F Late discovery of design defects
	G Alternative remedies
	H Regulatory and certification approval
		(i) Modification to basic design
		(ii) Changes to regulations
		(iii) Modification to work
	I Conclusion
Chapter 4 Scope of work and interpretation of contracts
	A Introduction
	B Contractual description
	C Description in technical documentation
	D Contract interpretation
		(i) Interpreting the words actually used
		(ii) Context
		(iii) Ambiguous wording
		(iv) Wrong wording
			(a) Absurdity
			(b) Rectification
			(c) Inconsistency
		(v) Use of English
Chapter 5 Subcontracting
	A Introduction
	B Nature of work to be subcontracted: Key principles
	C Restrictions on subcontracting
		(i) The starting position
		(ii) Illustrations
		(iii) ‘Substantially the whole’
		(iv) Company’s approval
		(v) Invalid subcontracting
	D Subcontractor as a third party
	E Subcontractor or supplier?
		(i) Why does the distinction matter?
		(ii) Contractual definitions
		(iii) When is a supplier a subcontractor?
		(iv) Problems with contractual definitions
		(v) Delay caused by subcontractor
		(vi) Renomination
		(vii) Illustration
	F Liability for subcontractors’ errors
	G Liability for nominated subcontractors
		(i) Exclusive nominees
		(ii) Illustrations
		(iii) Exclusion and limitation of liability for subcontractor’s work
		(iv) Illustration
	H Direct relationships
		(i) Collateral warranties
		(ii) Illustration
		(iii) Misrepresentation and collateral misstatements
		(iv) Illustration
		(v) Direct relationships: Conclusion
	I Independent acts or omissions
	J Introduction to exploration and production contracts: Contracting with energy companies, local content and subcontracting
		(i) Introduction
		(ii) Ownership of resources
		(iii) Licensing regimes
			(a) Licence
			(b) Concession
			(c) Service contract
			(d) Production sharing contract (PSC)
		(iv) Relevant terms in petroleum rights contracts
			(a) Parties
			(b) State participation
			(c) Liability
			(d) Term
			(e) Minimum work obligations
			(f) Relinquishment
			(g) Management
			(h) Work programme and budgets (WPB)
			(i) Local content and social welfare
			(j) Health, safety and environment (HSE)
			(k) Profit oil, cost oil and other fiscal components
		(v) Joint venture structures
			(a) Rationale for using joint ventures
			(b) Preliminary joint venture agreements
		(vi) JOAs
			(a) Operator-led structure
			(b) Operator appointment
			(c) Operator rights and responsibilities
			(d) Operator liability and the ‘no loss, no gain’ principle
			(e) Operator exclusion of contractual agency
			(f) Operating committee
			(g) OpCom: Conflict
			(h) OpCom: Procedure
			(i) OpCom: Voting
			(j) Joint venture payments
			(k) WBP
			(l) AFE
			(m) Overexpenditure
			(n) Cash calls
			(o) Defaults and forfeiture
			(p) Sole risk and non-consent
		(vii) Conclusion
Chapter 6 Changes to the work
	A Introduction
	B Scope of permitted change
		(i) Typical variation clause
			(a) Company requests
			(b) Contractor requests
		(ii) Implied limitations for variations
			(a) Example 1: Changes to the nature of the work
			(b) Example 2: Changes to the nature of the project
			(c) Example 3: Extent of variations to the work
			(d) Example 4: Late requests for variations
	C Refusal to perform variations
		(i) Consequences of changes not being agreed
	D Comprehensive variation clauses
		(i) Nature of change
		(ii) Extent of change
		(iii) Timing of change
	E Multiple variations
		(i) Suspension of estimates
		(ii) Revised estimates
		(iii) Withholding estimates
		(iv) Cumulative effects
		(v) Refusing multiple changes
	F Authorisation of changes
		(i) Introduction
		(ii) Authorisation of variations
		(iii) Contractor’s change order requests
	G Conditions precedent
	H Retrospective change order requests
	I Negative change orders
		(i) Express authorisation to omit
Chapter 7 Defects
	A Introduction
	B Defects defined
		(i) What is a defect?
		(ii) Defects and deficiencies
		(iii) Defects and unfinished work
		(iv) Subjective requirements
	C Defects during construction
		(i) Correction of defects during construction
		(ii) Instruction to perform rework
		(iii) Disputes over rework
Chapter 8 Delay
	A The obligation to complete on time
		(i) Introduction
		(ii) Terminology
		(iii) Consequences of delay
		(iv) Target delivery date
		(v) Limitation of liability for breach
			(a) Liquidated damages for delay
			(b) Penalty clauses
			(c) No occurrence of loss
			(d) Unlimited liquidated damages
			(e) Liquidated damages and termination
			(f) Delay beyond termination date
			(g) Due diligence obligations
			(h) Due diligence and liquidated damages
			(i) Time is of the essence
	B Costs of delay
		(i) Introduction
			(a) Delay and disruption claims
			(b) Contractor delay
		(ii) Legal issues – Illustrations
			(a) Delay analysis
			(b) Concurrent delay
			(c) Global claims
		(iii) Expert evidence
	C Delay caused by the Company: The prevention principle
		(i) Introduction
		(ii) Acts of prevention
		(iii) Consequences of prevention
		(iv) Illustrations
		(v) The cooperation principle?
		(vi) Illustrations
Chapter 9 Intellectual property rights
	A Introduction
	B The intellectual property rights
		(i) Patents
		(ii) Confidential information
		(iii) Designs
		(iv) Copyright
		(v) Trade marks
	C Why are intellectual property rights important?
		Illustration
	D Myths and legends
		(i) Worldwide patent
		(ii) Law of vessel’s flag state
		(iii) Commissioning the intellectual property rights
		(iv) Changes to original design
		(v) Intellectual property warranty
		(vi) No infringement due to patent
		(vii) Previous use of design
	E Intellectual property rights in the work
	F Ownership of intellectual property rights
	G Protection of intellectual property rights
		(i) What to register
		(ii) Where to register
		(iii) Reporting of third party infringement
		(iv) Protecting confidential information
	H Third party intellectual property rights
	I Allocation of intellectual property risk
	J Clearing the way
	K Licensing
	L Enforcement and jurisdictional differences
	M New projects
		(i) Modifications to existing works
		(ii) Creation of new works to an existing design
	N Practical tips
	O Case study
		(i) What intellectual property is likely to exist?
		(ii) What happens if a third party owns a patent over the TMS?
		(iii) What if the shipyard provides improvements?
		(iv) What if the shipyard wants to build a second vessel?
		(v) What happens after the project?
	P Illustration
Chapter 10 Acceptance and delivery
	A Introduction
		(i) Acceptance and delivery
		(ii) Acceptance tests
	B Technical acceptance
		(i) Sea trials programme
		(ii) Defects not justifying rejection
			(a) Minor or insubstantial defects
			(b) Multiple defects
			(c) Immaterial defects
		(iii) Termination following rejection
	C Illustrations of defects
		(i) Category 1: Punch items which are almost impossible to rectify
		(ii) Category 2: Minor items which may easily be rectified after delivery
		(iii) Category 3: Items which do not affect class or rules or relate to safety, but may be reasons to reject the unit
	D Acceptance test procedures
		(i) Performance tests by the Contractor
			(a) Sailaway
			(b) Arrival
			(c) Installation
			(d) Notice of readiness
			(e) Testing
			(f) Acceptance period
			(g) Acceptance certificates
			(h) Disputes over acceptance
			(i) Punch items
		(ii) Performance tests by the Company
			(a) System integration tests
			(b) Commissioning following handover but before acceptance
	E Place of acceptance
		(i) Company versus end user requirements
		(ii) Timing of acceptance
		(iii) Acceptance in two places
		(iv) Illustrations
			(a) Example 1: A series of semi-submersible drilling units
			(b) Example 2: Offshore support vessel built in China, with specialist equipment to be added in a European yard
			(c) Example 3: FPSO built in Singapore and Norway
Chapter 11 Indemnity and limitation of liability clauses
	A Introduction
	B Principles for interpretation of indemnity clauses
		(i) Contra proferentem
		(ii) Interpretation to be consistent with the main purpose of the contract
		(iii) Case study: Seadrill v Gazprom
	C Rejection of literalism
	D Degrees of culpability
		(i) Negligence
	E Gross negligence
	F Wilful misconduct
		(i) Definition of wilful misconduct
		(ii) Possible contractual definition
		(iii) Application to indemnity clauses
	G Deliberate breach/deliberate default
	H Fraud
	I Case study on conduct: The A Turtle
		(i) Background facts
		(ii) The court’s finding
		(iii) Implied limit of exclusion clauses
		(iv) Analysis
	J Repudiatory breach of contract
	K Summary on interpretation of indemnity clauses
	L Potential advantages of indemnity clauses
Chapter 12 Allocation of risk
	A Introduction
	B Risk of personal injury/loss of life
	C Property damage
	D Third party property damage and personal injury/loss of life
	E Pollution
		(i) Risk of pollution emanating from the reservoir
		(ii) Risk of pollution emanating from the Contractor’s property/vessel
	F Consequential losses
		(i) Millar’s Machinery Co Ltd v David Way and Son
		(ii) Croudace Construction Ltd v Cawoods Concrete Products Ltd
		(iii) British Sugar Plc v NEI Power Projects Ltd
		(iv) Bluewater Energy Services BV v Mercon Steel Structures BV and Others
		(v) Star Polaris LLC v HHIC-PHIL INC
		(vi) Transocean Drilling UK Ltd v Providence Resources PLC
	G Liability for wreck removal
	H The facility under construction
		(i) Subcontractors
		(ii) Post-completion
	I Relationship between the indemnity and limitation clauses
	J Indemnities in respect of each party’s group
	K Common qualifications and amendments to the ‘standard’ position
	L ‘[I]ndemnify, defend and hold harmless’
	M Indemnities against ‘claims, losses, liabilities and expenses’
	N Overall cap on Contractor’s liability
	O Convention on Limitation of Liability for Maritime Claims (LLMC)
	P Case study
Chapter 13 Termination and step-in rights
	A Introduction
		(i) Illustration
	B Terminology
		(i) Cancellation and similar terms
		(ii) Repudiation and similar terms
	C Anticipatory repudiatory breach
		(i) Clear and unequivocal evidence
		(ii) Impossibility
	D The act of termination
		(i) Early termination
		(ii) Qualified termination
		(iii) Damages for repudiation
		(iv) Affirmation
	E Taking possession of the work
		(i) Introduction
		(ii) Timing of legal process
		(iii) Place of enforcement
		(iv) Alternative remedies
		(v) Interim injunctions
			(a) General requirements
			(b) To whom should the Company apply?
		(vi) Contractual rights of possession
		(vii) Company’s obligations post-termination
	F Termination by the Contractor
Chapter 14 Insurance
	A Introduction
	B Principles of insurance law
		(i) Meaning of insurance
		(ii) Formalities of insurance contracts
		(iii) Insurable interest
		(iv) Duty of utmost good faith v duty of fair presentation
		(v) Warranties
	C Overview of relevant policy wordings
		(i) Operators’ extra expense/energy exploration and development/control of well insurance
		(ii) Business interruption/loss of production income
		(iii) Contingent business interruption
		(iv) Construction all risks
		(v) Hull and machinery insurance
		(vi) War risks insurance
		(vii) Strike insurance
		(viii) Loss of hire insurance
		(ix) Delay in start-up insurance
		(x) Protection and indemnity insurance, including specialist operations cover
		(xi) Freight, demurrage and defence insurance
		(xii) Kidnap and ransom
	D The WELCAR form: Construction all risks
		(i) Introduction
		(ii) The insureds
		(iii) Rights exercisable through the principal insured
		(iv) Does a breach of the policy by one insured prejudice the interests of all insureds?
		(v) Other insureds and QA/QC
		(vi) Period
		(vii) Maintenance coverage
		(viii) Activities
		(ix) Warranties and warranty surveyors
		(x) Coverage
		(xi) Claims: Property
		(xii) Claims notification and limitation periods
		(xiii) Design and defective parts
		(xiv) Loss adjusters
		(xv) Damages for late payment
		(xvi) Subrogation
		(xvii) Law and jurisdiction
Chapter 15 Force majeure
	A Introduction
	B What is force majeure?
	C Unspecified causes
	D Burden of proof
		(i) Proof that the force majeure event caused delay
		(ii) Compliance with notice provisions
		(iii) The event must be beyond the Contractor’s control
		(iv) Delay beyond the Subcontractor’s control
		(v) Mitigation
		(vi) The occurrence could not be foreseen when the contract terms were agreed
	E Extensions of time
		(i) Extension for period of force majeure delay
		(ii) Extension for proven delay to completion: Planned versus actual
		(iii) Extension for proven expected delay to completion: Planned versus re-planned
		(iv) Suspension of liability during the force majeure period
	F Duty of mitigation
Chapter 16 Financial guarantees
	A Introduction
	B Conventional guarantees
		(i) Nature of obligation
		(ii) Requirements for enforceable guarantees
		(iii) Issue: Variations to underlying contract
	C On demand guarantees
		(i) Nature of obligation
		(ii) Requirements for enforcement of on demand guarantees
		(iii) Issue: Ensuring guarantee validly enforced
	D Interpretation
	E On demand performance guarantees
		(i) Nature of obligation
		(ii) Issues to consider
	F Corporate guarantees
Chapter 17 Carry over agreements
	A Introduction
	B Content of carry over agreement
	C Form of carry over agreement
	D Illustrations of carry over agreements
		(i) Post-delivery guarantee obligations
		(ii) Completion of outstanding work
		(iii) Additional costs of completion
		(iv) Back-to-back terms
		(v) Title of the agreement
		(vi) Consequences of future default
		(vii) Performance criteria
Chapter 18 Warranty claims and correction of defects
	A Introduction
	B Warranty: Statutory conditions
	C Express contractual warranties
		(i) Illustration
	D Scope of warranty
		(i) Giving notice of defects
		(ii) Downtime due to post-delivery defects
		(iii) Repairs undertaken by the Company
		(iv) Defects discovered outside the guarantee period
		(v) Recurring breakdowns
		(vi) Fundamental design defects
Chapter 19 Transportation and installation
	A Introduction
	B Transportation
		(i) Introduction
		(ii) Delay under the construction contract
			(a) Contractor’s claims (assuming that the transportation contractor is engaged by the Contractor)
			(b) Company’s claims (assuming that the transportation contractor is engaged by the Company)
		(iii) Delays during transportation
			(a) Delays caused by transportation contractor
			(b) Delays caused by force majeure events
	C Installation
		(i) Introduction
		(ii) Installation window
			(a) Liability for liquidated damages for delay
			(b) Acceleration
			(c) Termination
		(iii) Site conditions
		(iv) Installation delays
			(a) Installation delays due to Contractor fault
			(b) Installation delays due to Company fault
Chapter 20 Dispute resolution procedures
	A Introduction
	B The period leading up to commencement of legal proceedings
	C Dispute resolution procedures
		(i) Why arbitrate?
		(ii) Expert determination
		(iii) Mediation
	D Disclosure
	E Witness evidence
	F Conclusion
Appendix A: Vessels and units constructed for use offshore
Appendix B: Offshore construction and Project Controls
Index