Aside from the commercial terms, one of the most critical aspects of these service contracts is the issue of liability and the proper allocation of risk and reward. Insurance is not always sufficient coverage and so this topic often leads to extended negotiations. An appropriate understanding of the underlying principles can usually provide the impetus to focus on the key issues, thus saving both time and money.
One of the most critical aspects of these service contracts is the issue of liability and the proper allocation of risk and reward.
The key consideration in these service contracts is to appreciate the context and inter-relationship of any particular contract and the arrangements in place with other contractors and sub-contractors. This should ensure that each party’s relevant share of risk is properly allocated and priced. Ultimately, it is the desire of all parties to achieve a fair and balanced contract, taking into account the then prevailing economic climate, and for longer term contracts, the anticipated economic climate.
We are familiar with various industry standards and model form service contracts including those published by Association of International Petroleum Negotiators (AIPN) and International Association of Drilling Contractors (IADC), which form the contractual basis of most international service providers and operators.