I have written elsewhere on standard forms, tendering and the abuse of contract practice for commercial and legal advantage.

Nobody is more serious about this or better at it than the major oil companies. They have entire contract departments dedicated to ensuring that all contractors sign up on their standard terms.

Major contracts in the upstream are put out to tender. The tender documentation includes the operator’s terms, and the instructions to tenderers make clear that these are the terms are the terms on which bids are invited, and that if a bidder requests any changes to the terms (“contract exceptions”) his bid may be rejected as non-compliant.

I was working for a US major which was operating a big oil development project in the UK North Sea. We went out to tender for the construction of a compression module to be installed on a platform. The terms were the length of a book and extremely one-sided. Inevitably the bidders had numerous contract exceptions, and a team from the preferred bidder came to the operator’s London office to negotiate the terms.

Our lead negotiator was Kevin, a bright and personable youngster with an Irishman’s gift for words. This was his first meeting as lead negotiator and understandably he was extremely nervous. But his performance was a triumph, at least from the operator’s point of view.

In two full days of negotiation, Kevin refused to accept a single one of the contractor’s 389 contract exceptions. The terms were sacrosanct and no changes whatever would be considered. He even refused to correct the typos in the draft, on the grounds that those were the terms of the tender and they had to be the same for all bidders.

Kevin was right of course to refuse to correct the typos. When a poor draft comes unzipped it starts with the typos. Once the operator has agreed to change the terms, the negotiation has started. A good draft has no typos.

The question I have, which is not merely academic, is this. If one party has the bargaining power to impose its terms on the other, and to refuse to consider any changes at all, is this a negotiation at all?



Chris Thorpe

Chris Thorpe is a respected independent lawyer in the upstream oil and gas industry, and an established lecturer and author. Chris has a LLB in law from Magdalene College, Cambridge and trained as a barrister in London. He worked for eight years' as an in-house lawyer for BP and Marathon. Since 1991, Chris has run his own upstream legal practice, CPTL, which has acted for many upstream clients. He has extensive experience of international upstream transactions, principally in the North Sea, the FSU, Africa and the Middle East. Chris has spoken at many UK and International Conferences and Seminars, both public and in-house. His most popular current lecture is Fundamental of Upstream Petroleum Agreements, a two-day course with accompanying book.