In the construction industry, speed is often one of the most significant concerns for both Contractor and Company. As such, debates about which party is responsible for construction delays are frequently abandoned in favour of completing construction works as soon as possible. This is especially the case in the oil and gas industry. When faced with delays in construction which may lead to a “carry-over” of works at sea (at considerable additional cost), parties often agree to delay the Ready for Sail Away (“RfSA”) date so that these works can be completed at the yard.

However, the recent case of HSM Offshore BV v Aker Offshore Partner Limited [2017] EWHC 2979 (TCC) highlights the dangers of amending timelines under a construction contract in isolation, without due regard to the impact such amendments may have on other clauses in the contract.

In HSM Offshore, the Company and the Contractor agreed that the original RfSA date of 10 May 2015 for two Process Modules under an amended LOGIC Sub-Contract (“LOGIC Sub-Contract”) would not be met, due to problems at the yard. The parties then entered into a Memorandum of Understanding (“MOU”) where it was agreed that the Contractor would use its “fullest endeavours” to achieve Mechanical Completion (“MC”) of the Process Modules by 1 July 2015. There was no mention of a new RfSA date in this MOU, but RfSA eventually occurred on 10 August 2015.

The Company subsequently claimed that RfSA should have taken place earlier on 19 July 2015 and claimed for liquidated damages provided for in the LOGIC Sub-Contract. This alleged new RfSA date was derived from a programme prepared by the Contractor as part of its obligations under the MOU, which predicted that RfSA was likely to occur on 19 July 2015.

The High Court rejected the Company’s claim for liquidated damages on the following grounds:

a. The original RfSA date of 10 May 2015 was no longer operative. Since the parties had agreed that the date of MC would be pushed back to 1 July 2015, logically the parties must have meant that RfSA (which is dependent on MC) could only occur after 1 July 2015.

b. By providing in the MOU that the Contractor would use its “fullest endeavours” to achieve MC on 1 July 2015, the parties had agreed that the Contractor was not under an absolute obligation to achieve MC on 1 July 2015. An absolute obligation in the LOGIC Sub-Contract in relation to MC was thus overridden by the Contractor’s more general obligation under the MOU to achieve MC.

c. As such, as long as the Contractor used its “fullest endeavours”, it would not even be in breach of contract, let alone liable for liquidated damages, whatever the actual date of MC.

d. The alleged new RfSA date of 19 July 2015 had no contractual status as it was derived from a programme prepared by the Contractor to meet its obligations under the MOU (i.e. to produce a programme showing MC on 1 July 2015). It was a date at which the Contractor hoped to achieve RfSA if it was able to achieve MC on 1 July 2015.

e. Given that there was no express provision for a new RfSA date in the MOU and RfSA was dependent on MC first being achieved, it thus followed that the Contractor was not obliged to achieve RfSA on any specific date.

f. In the circumstances, the Company’s only recourse would be to bring a claim in damages for delay, based on an alleged failure by the Contractor to use its “fullest endeavours” to achieve MC.

Further, the High Court thought that even if it was wrong about its interpretation of the LOGIC Sub-Contract and MOU, it considered that the RfSA date was extended to 10 August 2015 by agreement. The Company’s conduct in failing to assert before the actual RfSA date of 10 August 2015 that the Contractor was in breach of contract or was liable for any delay beyond the alleged new RfSA date clearly showed that the Company did not consider that this was a claim open to the Company to make.

Conclusion

The decision in HSM Offshore serves as a reminder that the English courts will be careful not to let parties cherry-pick particular parts of the background to a dispute favourable to the case each party now seeks to run, particularly in circumstances where each party blames the other for slower-than-expected progress in construction.

Parties should thus take care to consider and preserve specific rights and obligations under the original construction contract when drafting supplemental agreements which amend key dates found in the construction contract.