Price and Time Adjustments in Energy Construction and Services Agreements [Gaille Energy Blog Issue 96]
- Posted by scottgaille
- On May 17, 2021
- 0 Comments
I am pleased to announce my new article in this month’s edition of the Energy Law Journal:
REDUCING CONFLICT AND RISK: WHY PARTIES BENEFIT FROM USING ENUMERATED ADJUSTMENT CLAUSES IN ENERGY CONSTRUCTION AND SERVICES AGREEMENTS
Synopsis: As the United States transitions to more renewable energy sources, spending under energy construction and services agreements is expected to double over the next decade. Each of these agreements contains an adjustment clause, which determines under what circumstances contractors are entitled to be paid more or receive additional time to complete their work. There are two principal types of adjustment clauses: (a) discretionary adjustment clauses, which do not allocate specific risks at the time of contract execution, largely leaving the deter- mination to the parties (after a risk materializes) and (b) enumerated adjustment clauses, which expressly list certain risks and establish rules regarding when the contractor is entitled (or not) to adjustments for each such risk. Types of enumer- ated adjustments include: (i) owner changes; (ii) differing site conditions; (iii) owner-caused delay; (iv) owner’s suspension of work; (v) force majeure; (vi) ad- verse weather; (vii) protester-caused delays; and (viii) effects of widespread dis- ease. While contractors generally prefer discretionary clauses (and owners, enu- merated clauses), this article concludes that the perceived benefits for contractors of discretionary clauses are outweighed by their uncertainties, inefficiencies, and other costs. It is better to agree ex ante on the rules for adjustments in enumerated clauses, which results in more complete agreements.
About the Gaille Energy Blog. The Gaille Energy Blog (view counter = 218,937) discusses issues in the field of energy law, with periodic posts at www.gaillelaw.com. Scott Gaille is a Lecturer in Law at the University of Chicago Law School, an Adjunct Professor in Management at Rice University’s Graduate School of Business, the author of three books on energy law (Construction Energy Development, Shale Energy Development, and International Energy Development), and co-author of the award-winning travel compilation, Strange Tales of World Travel (Bronze Medalist, IPPY Awards for Best 2019 Travel Essay; ForeWord Magazine Finalist for Best Travel Book of 2019; North American Travel Journalists’ Honorable Mention for Best Travel Book of 2019).