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ARTICLE · 04 AUGUST 2014

Proceeding With Due Diligence

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SABIC UK Petrochemicals Ltdengaged Simon Carves Ltd to design, procure and construct a process plant for producing plastic for a contract sum of £135m.

United KingdomReal Estate and Construction
Tim Claremont
Tim Claremont

In the recent case of SABIC UK Petrochemicals Ltd v Punj Lloyd Ltd, the Technology and Construction Court ordered a contractor to pay £11.8 million for the costs of completing a project after its employment was terminated. Tim Claremont of Browne Jacobson LLP highlights some important issues arising from the case. 

Background

SABIC UK Petrochemicals Ltd (SABIC) engaged Simon Carves Ltd (SC) to design, procure and construct a process plant for producing plastic for a contract sum of £135m (the contract). SC procured in favour of SABIC a £13.5 million performance bond and a parent company guarantee (provided by Punj Lloyd Ltd). 

The contract gave SABIC the right to terminate SC 's employment if either (1) despite previous warnings in writing, SC was failing to proceed with the works with due diligence or (2) SC 's financial position deteriorated to the extent that its capability to adequately fulfil its obligations was placed in jeopardy. 

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