It is tempting to say that the liability ceiling should be distributed in this way beyond contracts: land liability is limited to 100% of the land price; Similarly, liability at sea is limited to 100% of the offshore price and total liability under the framework contract is limited to 100% of the total amount of offshore/onshore prices. Instead of preparing a single contract covering the entire scope of the contractor, an “offshore” contract and an “onshore” contract are prepared. Although they have different construction obligations, the two contracts are closely reflected, with parallel provisions for liquidated damages, dispute settlement, etc. These two contracts are then bound by a coordination agreement signed by the employer, the land contractor, the offshore contractor and, in certain circumstances, the contractor`s parent company as guarantor. This agreement provides that the two contracts are jointly managed and operated as if they were one, and they can also offer a wraparound guarantee in favour of the employer. Despite the allocation, the contracts must cooperate smoothly, with all the contractor`s work under either contract. There is no single coordination project that can be used for each land/alien contract. However, some common provisions that should normally be introduced are: when the contract is split, the technical specifications and drawings must be carefully drawn so that the technical specifications and drawings can work independently of each other. The risk of gaps between shared technical specifications and drawings should be assigned to a given party in order to preserve a single area of responsibility.
This party, which assumes the risk of “gaps,” could be the land contractor who completed the project as the last contractor; the parent who provides a mother guarantee or onshore and extraterrestrial contractors in the framework contract. In our experience, one of the most important documents (and often receives the least attention) is the coordination agreement. These can be as short as a few pages, even for very complex and high-quality projects, although more detailed agreements are common. The main task of the coordination agreement is to place the employer, from a contractual point of view, in the same position as it would be if there had been only one contract, a contractor having been responsible for all the work. This result is achieved through provisions relating to the management and interpretation of the two contracts, the distribution of liability and, in some cases, a guarantee from the parent company. Umbrella agreements can take the form of complex agreements or be as simple as an expanded parent company guarantee. The challenge, of course, is to do so without adverse tax consequences, especially when the framework agreement does not need to be registered fiscally, since it does not receive monetary or fiscal counterparties. The reason was that the land contract, the offshore contract and the coordination contract each contained their own ceiling for liquidated damage, the ceiling of the coordination agreement being the sum of the ceilings in the onshore and offshore contracts.
The court held that, since the contractor`s onshore`s application and the employer`s counter-action are covered only by the onshore contract, the lower ceiling of the onshore contract should apply. As a result, the land contractor received a total of $1.1 million. If the higher cap on liquidated damages had been set in the coordination agreement, the employer would have received $1.1 million. In addition, demerger contracts face the risk of delays between contractors, such as delays in offshore transfer. B delays in transfers at sea, insanity caused by delays in land receiving operations and storage costs for delivery by offshore contractors outside of scheduled periods.