Supply of Equipment for Marine, Offshore Oil and Gas (Part 2)

The Scope of Supply will generally include the specification, description of the equipment, quality and quantity of the equipment, spare parts and optional items, services to be provided, deliverables, documents, certificates, manuals to be supplied, training or technical advice to be provided on storage, operation and maintenance of the equipment, scope of the warranty, all items that are excluded from the scope of supply, installation supervision (if applicable) and commissioning (if applicable). For relatively small or off-the-shelf items, it is usual to indicate the brief description of the equipment, its quality, quantity and price per unit. For complex equipment, more details will be needed and this is usually set out in the Specification.

The Specification will where applicable include representations, capability, data, requirements and limitations relating to design, performance, functional guarantee and system integration, basic system hardware, system interfaces, peripheral equipments, basic system function, functional and performance criteria, means of ascertaining tests, spares and optional parts and services to be provided by the Seller. It will usually also include factory acceptance test and procedure,  precommissioning protocol and commissioning activities, other essential technical and performance information, installation procedure, extent of supervision (if required) and the free man-days allowable for commissioning. Apart from technical feasibility, clarity of specification, allocation of responsibilities, rates and commercial aspect of Seller’s engineers’ attendance at site should be addressed adequately to avoid future wrangling.  Also, it is prudent to ensure that the Specification should contain only technical terms and not legal or contractual terms. For example: If a Purchase Contract provides for a warranty period of 12 months and the Specification provides for a warranty period of 24 months, this is a contradiction and inconsistency, which will leave an area for dispute.

The description of the equipment must be clearly set out. It is usual to quote the model number or its name or technical reference. Where the contract is for the sale of goods by description, there is an implied condition that the goods will correspond with the description. This must be complied with strictly.The quality of the equipment must comply with the Specification. Apart from this, it will also be an implied term that the goods will be of satisfactory quality, where expressly or impliedly known by the Seller, the goods will be reasonably fit for the Buyer's purposes, where goods are sold by reference to a description, the goods will have to correspond with the description. 

The test of satisfactory quality is what a reasonable person would regard as satisfactory, taking account of any description of the goods, the price (if relevant) and all the other relevant circumstances. The quality of goods includes: Their state and condition, Fitness for all the purpose, Appearance and finish, Freedom from minor defects and Safety and durability. Fitness for Purpose: This requires that where goods are sold in the course of a business and the buyer expressly or impliedly makes known to the seller any particular purpose for which the goods are bought, the goods must be reasonably fit for that purpose, whether or not that is a purpose for which the goods are commonly supplied, except the circumstances show that the buyer does not rely on the seller, or that it is unreasonable for him to do so (s.14 (3)). The quantity will usually be in units, weights or volume. This must be set out with precision. For example, if the Parties are referring to metric tonne, they must indicate clearly that it is “metric tonne”. Where it is stated in approximate weight, the industry standard deficiencies tolerance of 5% to 10% may apply. If the shortfall in quantity delivered is beyond industry standard, the Buyer may reject the equipment. 

Section 15A (inserted by the Sale and Supply of Goods Act 1994) provides that a buyer who does not deal as a consumer will have to treat a breach of a term implied by Section 13, 14 or 15 of the Sale of Goods Act as a breach of warranty if the breach is so slight that it would be unreasonable for the buyer to reject the goods. The onus is upon the Seller to show that a breach fell within Section 15A (1) (b).

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