BuildLaw Issue 31 March 2018 | Page 10

Memorandum of
(mis) understanding: pitfalls of a subsequent agreement on an underlying contract
Rob Wilson, Valerie Allan, Helen Fyfe & Eilidh Where problems arise in oil and gas contracts, it is not uncommon for the parties to seek to address those problems arising under the original contract with a subsequent, modifying agreement.
The Technology and Construction Court in HSM Offshore BV v Aker Offshore Partner Limited [2017] EWHC 2979 (TCC) has considered the interaction of one such modifying ‘Memorandum of Understanding’ (“MOU”) with the original contract. In the dispute that subsequently arose regarding final payment for the contract works, it emerged that neither party had achieved quite what they bargained for.Background
Aker Offshore Partner Limited (“Aker”) engaged HSM Offshore BV (“HSM”) to carry out the fabrication of two process modules, for use on the Clyde Platform in the FlyndreCawdor oilfield in the North Sea.
The contract between Aker and HSM (the “Contract”) incorporated LOGIC subcontract conditions, and contained a list of key milestone dates to be met by HSM, including “module ready for Sail Away” (the “RfSA date”). The RfSA date was to be 10 May 2015.
However, the project encountered problems and it became apparent that the RfSA date would not be met. To get the project back on track, HSM and Aker agreed the MOU, which was dated, and intended to have effect from, 18 March 2015. The MOU provided that “In return for HSM utilizing their fullest endeavours to complete Mechanical Completion for Process Modules M12 and M14 on or before July 1st 2015 HSM will receive the following concessions against the CONTRACT.” The various concessions included a change to the way in which HSM was remunerated. Under the MOU, HSM was also required to produce a revised programme for the project, which listed 19 July 2015 as the revised RfSA date.
Sail Away eventually occurred on 10 August 2015. Soon thereafter, a series of disputes relating to almost every aspect of the Contract arose, although only certain of these were eventually heard by the Court. In particular, HSM sought to recover sums it claimed were outstanding under the MOU, and argued that Aker had no entitlement to review invoices previously approved by them. Meanwhile, Aker disputed those claims and launched a counterclaim for liquidated damages due to the delayed RfSA.