This is the first in a series of blog posts regarding checklists for agreements commonly used by the oil and gas industry in acquisition, finance and commercial transactions. These materials are designed to assist internal counsel and business people to negotiate these forms by providing an overview of the key terms that may be relevant for the parties.

One of the most important parts of any contract review is assessing the ideas that are contained in an agreement to determine whether it addresses all of the potential issues that may arise. Unless a lawyer or business person is experienced with the negotiation of a particular kind of agreement, it can be a time-consuming and potentially risky process to accurately identify the deal points that matter.

Instead of reducing these ideas to a precedent or standard form agreement, each checklist contains a summary of the provisions that either side may wish to address in the form. Although the checklists will not address every transactional issue or style, our hope is that they will address most of the issues that commonly arise in each type of agreement we cover. Our intention is to produce checklists which offer more detail and ideas that common legal reference services and which are rooted in the culture and norms of the Canadian oil and gas industry.

These forms will be in a constant state of development, as we attempt to accommodate new ideas and lessons from practice accumulated in our business and those of our clients and friends. We hope that over time this collected work will become a valuable reference service for the legal and business community, allowing them to make more accurate legal decisions more quickly.

Oil & Gas Consulting Agreement Checklist

The Oil & Gas Consulting Agreement Checklist is seven pages long and contains 40 different checklist items with commentary as to whether they are market, egregious or otherwise.  It covers a range of essential considerations for each party, including:

  • Who should be party to the agreement? What is the appropriate standard of service?
  • Should there be any restrictions on activities of the consultant outside of the consulting arrangement?
  • How should consultants be paid? How do the parties address the tax risks of the arrangement?
  • What obligations of the confidentiality and loyalty should the consultant have?
  • How should the company be indemnified by the consultant?
  • How should the consultant be indemnified by the company?
  • How should the consulting agreement be terminated?

In our experience, taking into consideration the biases and bargaining positions of both companies and consultants, four high-value negotiating points for the parties to consider are:

Indemnification.  The consultant should limit its liability to the company by capping indemnity amounts and excluding its employees from claims. The company should reject these limitations which provide no incentive to the consultant’s employees to comply with the consulting agreement.

Insurance. The company typically wants its consultants to maintain insurance satisfactory to it for the term of the consulting agreement. The consultant, on the other hand, is in the position to determine what is actually appropriate for the services it will provide but should ensure that the company’s insurance covers the consultant in any third party claim related to providing those services.

Termination. Due to the temporary nature of consulting mandates, the consultant will want to be entitled to a longer termination notice period so that it can develop alternative mandates. The company will want the ability to terminate the services on short notice and keep the consultant on the hook for its other obligations, such as confidentiality and non-competition. The consultant should ensure these obligations time out within a defined time period after termination.

Confidentiality. The company should prohibit the consultant from being able to give advice to other clients on the same project for a period of six months following the end of the consultant’s mandate. Unless the company has the bargaining power and this is a competitive bid situation or sensitive intellectual property is involved, the consultant should reject this provision as aggressive and off-market.

To preview the Oil & Gas Consulting Agreement Checklist, please click here. To obtain a full copy, or to subscribe to the delivery of each oil & gas agreement checklist as it is produced, please contact rsvp@stikeman.com.