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Offshore Construction Contracting Principles

Termination by Contractor

Principles

It is recommended that the following contracting principles be applied in relation to contractor's right to terminate under offshore construction contracts:

In the event that Company

  • has failed any of its payment related obligations; or
  • has lost its creditworthiness; or
  • has committed a material breach of its contractual obligations,

and Company has not corrected its default within 28 days after Contractor's notice of suspension in accordance with the provisions of the article named "Suspension by Contractor",

Contractor shall have the right to terminate the Contract or part of the Scope of Work under the Contract,

and Company shall reimburse Contractor as if the Work had been terminated by Company for convenience.


Clarifications / Considerations

This clause will prevent that Contractor would be obliged to perform its duties under the Contract without Company's guarantee of payment and performance.


Example Clause for Termination by Contractor

The following is an example of an article covering the possibility for termination by Contractor.

X. CONTRACTOR'S RIGHT TO TERMINATE

In the event within twenty eight (28) calendar days after the date of Contractor's written notice to Company of its intention to suspend Company has not fully corrected the grounds upon which Contractor intends to suspend or has suspended, Contractor shall have the right to terminate the Contract or part of the Scope of Work under the Contract by written notice to Company.

Contractor shall, after such written notice, be entitled to terminate all or part of the Scope of Work under the Contract, and/or to terminate the Contract, and/or to demobilise all or part of Contractor's Marine Spread, and/or to exercise its rights to draw the bank guarantees, all without incurring any liability towards Company and without prejudice to any of Contractor's rights under the Contract.

In the event of termination by Contractor in accordance with the Contract, Company shall have the same obligations and liabilities and Contractor shall have the same rights as if the Contract had been terminated by Company under the provisions of Article [TBA].