Thursday, October 16, 2008

Knock To Knock Arrangements in Oil/Gas Operastional Contracts

When you are negotiating and drafting legal contracts between parties in the oil and gas operations, you frequently are faced with a situation where the other party is asking for a knock to knock arrangements.

Interesting isn't it. Well what does it mean.

Let me share my experience on some interesting experience relating to this knock to knock arrangement.

These may occur when the other party is having the same strong position when they negotiate the terms related to shifting the risks relating to the liability and indemnifications issues.

For instance, you happen to be a lawyer representing one of the Oil and Gas Companies in establishing and incorporating such liability clauses, you are asking the Contractor to indemnify, release and hold harmless the Oil/Gas Company from and against any claims in whatsoever form and kind being filed by any person or party, who are employed or engaged by such Contractor, regardless of the cause.

In these case the Contractor which is represented by their lawyer, may ask for a knock to knock to knock arrangements relating to this liability issue.

In response to their request you as the lawyer of the Oil and Gas Company, shall then request such Contractor’s Lawyer to provide you with their revisions and versions.

After receiving such revisions, you then as the lawyer of the Oil and Gas Company will come again with your comments and inputs, for instance that you may agree, to also indemnify, hold harmless the Contractor from and against claims coming from any person under the Oil/Gas Company employment relation, however, to the extent such losses or damages are solely caused by the deliberate and major fault of the Company.

As you may see, the risks of liability, and the burden of proof elements, may be moved from one party to the other party, depending on the strength position of such respective parties who are negotiating such terms.

In practice, this may happen since under the Indonesian Law, we adopt the freedom of contract, Article 1338 of the Indonesia Civil Code, whereby the parties are free to enter and negotiate any kind of agreements in our case commercial agreement, which they want, provided however that such agreement does not violate the applicable compulsory law, public law or the public order.

Thus, in my experience and practices as a commercial lawyer, I have the perception that, whether an agreement is in more favor to a party compared to the other party, really depends on the situation and position of the parties during the negotiation, drafting and completion or signing the agreement.

Agung Supomo Suleiman

Senior Partner Law Firm Suleiman Agung & Co

Blog : http://www.agungssuleiman.blogspot.com

Email : agungsacolaw@telkom.net

HP : 0816830647

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