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Turnkey Construction Contracts Agreements

The approach of adopting zero values for all intermediate payments for turnkey and energy contracts has yet to be tested. If it were to break the law, it could have a significant impact on these types of contracts and severely limit them (or even leave them to history). The objective of the law to improve the position of contractors (and in particular subcontractors) from a cash flow perspective should be welcomed, but it seems incompatible with the traditional turnkey approach to contracting. It is still early in terms of law enforcement, but it will be interesting to see how these issues are addressed in practice. A turnkey contract first contains provisions relating to the transfer of risks, the contractors` commissions and the rights and obligations of the promoter and contractor. In addition to technical and operational conditions, standard boiler platform clauses must be included, such as the names of the parties, the effective date, exceptions, remedies, amendments, communications, dispute resolution, choice of law and separation. This standard contract for turnkey projects is intended to be suitable for all industrial and builder projects, large and smaller, in particular E-M (Electrical and Mechanical) and other process installation projects implemented worldwide by all types of employers who wish to implement their turnkey projects and with a strict bipartisan approach. Under the usual turnkey contract approach, the contractor carries out all engineering, procurement and construction management (EPC – engineering, acquisition and construction) and provides a fully equipped and operational facility (“turnkey”). The objective of a turnkey contract is to transfer, as far as possible by contract, all the design, design and construction risks of the project company that owns the project to the EPC contractor who builds the same thing.

An EPC contract reduces and controls risks in the form of written terms and conditions. Indeed, the ePC contracts were specifically aimed at transferring risks to the contractor. They make the contractor responsible for all project activities, from the design phase to the construction phase. One way to comply with the provisions of the act, while maintaining the turnkey nature of these contracts, would be to explicitly provide that the value of all interim payments is “zero” or partial. While page 2, paragraph 5, under b) of the act prohibits the restriction or exclusion of law enforcement, nowhere is it stated that interim payments cannot be set at “zero.” It is questionable whether this approach would be considered a restriction on the application of the law, when it could well be said that this approach is inconsistent with the spirit and justification of the law. However, this could be the only way an employer can protect itself from a contractor who wishes to avail itself of the provisions of the law, despite the fact that the parties have entered into a contract in which all payments must be made to the supplier after the completion of the work.

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