Offshore risks: managing contract risk and disputes – Purchase Order lessons from Viking Link
As part of our managing key risks and disputes series, we highlight some of the main points arising from a TCC decision1 concerning the Viking Link project.
Background to the Viking Link case
The Viking Link project is a major electricity interconnector between the UK and Denmark. The claimant, Pharos Offshore Group (“Pharos”) was contracted to provide jet trenching equipment and personnel to the defendant, Keynvor Morlift Limited (“KML”), a marine contractor.
The contract comprised two separate purchase orders (5 and 10 May 2022) and a revised purchase order (23 May 2022), all of which incorporated KML’s standard T&Cs (“Contract”). A dispute arose when the works suffered significant delays due to waiting on weather downtime. The parties’ attention turned to the purchase orders forming the Contract. While it is worth noting that this case is an example of where the TCC determined that time was at large, the relevant element of the dispute for the purposes of this article is who bore the contractual risk of downtime resulting from weather conditions.
Summary
Between the second original purchase order and the revised purchase order the parties exchanged both e-mail and WhatsApp communications to agree changes to the scope of work.
In relation to the purchase order (10 May) which was then revised (23 May), the original purchase order included the following wording:
(Original purchase order – 10 May 2022)
The revised purchase order then removed the wording on risk allocation for weather downtime. In its place, there was new wording to allow for additional equipment to be charged and a reference to e-mail communication was included. The judge also noted that the scope of works had reduced in font size:
(Revised purchase order – 23 May 2022)
KML’s position was that it had verbally agreed to remove such risk from itself and place that risk with Pharos. KML argued that such agreement was binding as the revised purchase order formed part of the Contract between the parties. A witness for KML signed a statement of truth confirming that such verbal agreement took place prior to the issue of the revised purchase order. Pharos denied such conversation ever took place.
The Judge, Mr Justice Constable, concluded that it was:
“…not remotely likely that there was in fact any conversation between anyone in KML and Pharos in which they discussed and agreed verbally that a change to the Purchase Order ‘was warranted’ in order to reverse the previously agreed risk allocation in relation to waiting on weather. It is inconceivable that if such an important point had been discussed in the context of revising the Purchase Order an explicit reference to that discussion would not have found its way into the email exchanges at the time.”2
Reducing the risk
How could this situation have been mitigated?
Use purchase orders carefully and scrutinise the wording to ensure it reflects the agreed intentions. In this case, the purchase orders formed the Contract—which is inadvisable for a complex offshore construction project where more appropriate and detailed terms should have been used. As a result, very significant points were being addressed in a matter of a few words and wording was being amended apparently without being expressly agreed between the parties. We wonder if the change in font size was significant, possibly a case of those drafting the revised purchase order trying to fit in wording within a limited space on a purchase order system. If so, and in any event, legal input / guidance is needed on the ramifications of changing contractual documents. Those drafting the purchase orders should be sufficiently informed / trained so as to protect their business and avoid costly disputes. For the want of a better contract it seems highly likely that this would have been a case where the legal fees far exceeded the sums in dispute.
Caution should also be exercised in using WhatsApp when negotiating contractual terms – see Jaevee Homes v Fincham3 where the TCC decided that a contract had been formed over WhatsApp.
The case also provides practical reminders on managing a dispute should there be escalation to court (or arbitration as is more common in offshore projects), such as:
The judge preferred evidence contained in contemporaneous documents as opposed to witness evidence with witnesses recalling conversations / events from years earlier.
As the judge said: “It is what actually happened that is relevant”4.
If a party cannot prove its position, this throws doubt on whether the particular event in fact happened and so preservation of documents is key to a successful claim. Where KML could not prove that a verbal agreement took place the judge was unable to find that the parties had verbally agreed to change risk allocation due to weather prior to reissue of the purchase order. The judge could not then conclude that the removal of the risk allocation was purposeful, instead concluding that the text had been written over unintentionally.
Therefore, documenting conversations / meetings and keeping records is key. A further point is a reminder to project teams that their documents (and indeed they themselves) could be before a court or tribunal one day –those sending project correspondence should step back and sense check before issuing a document that they would be comfortable justifying to a court / tribunal. In this particular case there were some unfortunate exchanges with the Department of International Trade which Pharos’ witness accepted during cross examination were not true.
While potentially a heavy upfront cost, having expert input early on is usually a good investment for long term case strategy and is likely to mitigate costs. Understanding the case early is critical. It is also clear from the judgment that both parties’ respective quantum positions were in great need of quantum expert input and evidence in support. Parties need to prove the damages they are claiming.
In his judgment, Mr Justice Constable found that KML’s witness did not answer the questions that could be unhelpful to KML’s case, therefore forming the opinion that the witness prioritised helping KML’s case rather than the Court. The judge also said that he didn’t consider the witness’ lack of recollection about the circumstances in which he came to sign a statement of truth to be genuine.
When signing a statement of truth a witness is confirming that they believe the facts stated are true and a witness may be found in contempt of court for signing it without an honest belief in its truth. Witnesses should also be reminded that their duty is to the court / tribunal and that it will be detrimental to appear too partisan or to be arguing the case rather than stating recollections of fact.
If you have any questions regarding offshore risks, please get in touch with Brittany Cox, Emily Leonard, Alex Johnson or another member of our Construction & Engineering team.
Footnotes
Pharos Offshore Group Limited v Keynvor Morlift Limited [2025] EWHC 1764 (TCC)
[1] Para 87
Jaevee Homes Limited v Mr Steve Fincham (trading as Fincham Demolition) [2025] EWHC 942 (TCC)
[1] Para 120
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The content of this page is a summary of the law in force at the date of publication and is not exhaustive, nor does it contain definitive advice. Specialist legal advice should be sought in relation to any queries that may arise.
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