The complex, heavily regulated, and often-volatile environment within which energy companies must operate can magnify the importance of contractual arrangements, and the severity of repercussions when those arrangements do not function as desired. When building energy contracts, whether repeat form agreements, employment agreements, or one-off deals or mergers, our energy litigation lawyers would not recommend blindly using boilerplate provisions.
We have featured a number of posts over the last year on our Power & Pipes blog, as part of the Not Just Boilerplate series. The authors, Morgan Lewis energy litigators, provide insight and real-world examples of how various contract clauses can have an impact on energy companies. With this experience, they pass on lessons learned where boilerplate clauses, which may have flown under the radar at the time of contract, led to or impacted disputes.
Here, we have compiled these experiences and observations from the Not Just Boilerplate series to date, organized by discussions of (1) substantive terms (such as earnout clauses and indemnities); (2) procedural issues (such as arbitrability and choice of law/forum); and (3) scope issues (such as merger and no-waiver provisions).
If there is one constant in the energy industry, it may be the certainty of change. Mergers, acquisitions, supply arrangements, and business combinations may well occur at a moment in time, but evolving pressures from market, regulatory, political, and other sources do not cease after the deal is closed.
Accordingly, special attention to clauses that are implicated by such evolving future pressures, such as earnout provisions and indemnity clauses, may yield substantial benefits down the line.
Real-World Litigation Impacts of Enforceability of Indemnification Provisions in Energy Contracts >>
When things go south, it is frequently only then that people look up the contract’s disputes provisions to see what they say. But at that point, the “rules of the game” are set, and strategic choices and options are likely constrained by contractual provisions that may have been agreed to long ago—potentially without a serious assessment of what impact they might have. (After all, who goes into a deal or other business arrangement expecting it to fail?)
Some careful upfront consideration of issues like choice of law, choice of forum, and identification of the decisionmaker, however, can position an energy company for ultimate success in a disputes scenario.
Real-World Litigation Impacts of Clauses in Energy Contracts: Defining the Prevailing Party >>
Even when a contractual arrangement by its terms should “cover” a dispute in which an energy company finds itself, one side or the other almost invariably tries to “escape” the contract. It is important to recognize that, and to assess how merger, no-waiver, and other such clauses can affect the actual role of the contract in downstream disputes.
Real-World Litigation Effects of Energy Contract Clauses: ‘No Waiver’ Clauses >>