Presented by: David S. Bland LeBlanc Bland, P.L.L.C St. James Pl., Suite 360 Houston, Texas (713) MANAGING RISKS THROUGH CONTRACTUAL MECHANISMS Presentation to the Royal Norwegian Consulate General MARCH 7, 2011

Managing Risk Through Contractual Mechanisms Contracts can and should be tailored to suit the particular risks inherent in a particular business transaction Not all risks are insurable – common contract clauses can avoid, reduce, shift or allocate risks

Insurance Require other party to contract to maintain various policies Support indemnity obligations Name as additional assured Waiver of subrogation Primary coverage

Indemnity Definition – a promise by one party to protect another party from a risk or unfavorable events that may occur in the future Narrow (“at law”/negligence based) or Broad (regardless of fault) “Knock for knock” is prevalent in many industries; typically covers personal injuries and property damage Eliminates costly effort to determine and apportion fault Should be coordinated with Insurance requirements

Indemnity (cont’d) Enforceability Issues: – Express Negligence/Fair Notice requirements – Anti-Indemnity Statutes applicable to some industries LA and TX – applicable to contracts that “pertain to” oilwell Enacted to protect parties with inferior bargaining power from being forced to hold the party with superior bargaining harmless from their own fault Note that even parties with equal bargaining power who mutually agree that K/K would be of benefit will be prohibited if Anti-Indemnity Statues are applicable Choice of law provisions may be able to avoid Other ways to avoid – Insurance; Marcel exception

Contractual Limitations of Liability Waivers of Consequential Damages Red Letter Clauses Liquidated Damages – sole and exclusive remedy for delay or other breach Express Warranty exclusive of implied or legal warranties; repair or replacement as sole and exclusive remedy for breach of warranty Force Majeure – no damages for delay Borrowed Servant/Statutory Employer clause Express exclusion of “at law” or “in equity” rights and remedies

Other Contractual Clauses that Can Reduce Risk Choice of Law Choice of Forum or ADR Clearly defined scope of work – Design responsibility Changes in writing Intellectual Property rights and indemnity from third party infringement claims Title and Risk of Loss Bonding requirements