GC-34 TITLE AND RISK OF LOSS for Cheniere

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LNG » Topics » GC-34 TITLE AND RISK OF LOSS

These excerpts taken from the LNG 10-Q filed Aug 4, 2006.

GC-34 TITLE AND RISK OF LOSS

34.1

Where SOIL CONTRACTOR or any Subcontractors or Sub-subcontractors fabricate or purchase equipment, materials or other tangible items (“Goods”) for incorporation into the Work or any of its separate parts, the title of such Goods shall pass to and be vested in PURCHASER when the first of the following events occurs:

(1)

The Goods or part thereof is first identifiable as being appropriated to the Soil Contract,

(2)

When PURCHASER pays for the Goods or part thereof in accordance with the Soil Contract, or

(3)

When the Goods or part thereof are dispatched to or from SOIL CONTRACTOR’s fabrication yard or to the Phase 2 Site.

Similarly, title to all other portions of the Work shall pass to and be vested in PURCHASER when PURCHASER pays for such Work or part thereof in accordance with the Soil Contract.

34.2	SOIL CONTRACTOR warrants and guarantees that legal title to and ownership of the Goods and all other Work shall be free and clear of any and all liens, claims, security interests or other encumbrances arising out of the Work when title thereto passes to

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PURCHASER, and if any such warranty or guarantee is breached, SOIL CONTRACTOR shall have the liability and obligations set forth in General Condition 39, titled INDEMNITY.

34.3	Such transfer of title in the Goods and other Work will be without prejudice of PURCHASER’s right to refuse the Goods and other Work to the extent of SOIL CONTRACTOR’s negligence in case of non-conformity with the Soil Contract Documents.

34.4

Irrespective of transfer of title in the Work (including Goods), SOIL CONTRACTOR shall remain responsible for all Work (including all Goods) located outside of the Phase 2 Site at the time of such damage or loss, regardless of cause, and SOIL CONTRACTOR shall remain responsible for risk of loss or damage to Work (including all Goods) in progress at the Phase 2 Site and all Goods at the Phase 2 Site to the extent of SOIL CONTRACTOR’s or any of its Subcontractor’s or Sub-subcontractor’s negligence until Tank S-105 Substantial Completion; provided, however, notwithstanding anything contrary to the foregoing, SOIL CONTRACTOR shall remain fully responsible and liable to PURCHASER for its warranty and guarantee obligations under the Soil Contract.

34.5	CONTRACTOR shall ensure that the above provisions are imposed upon all Subcontractors and Sub-subcontractors and shall execute all documents and take all steps necessary or required by PURCHASER to vest title as PURCHASER may direct.

34.6

Title to standard Goods of the type usually bought in bulk such as reinforcement bars, piping materials, non-tagged instruments and instrument installation material, cable and similar items which are not incorporated into the Work shall revert to SOIL CONTRACTOR upon agreement by PURCHASER that such Goods are not required for the Work.

GC-34 TITLE AND RISK OF LOSS

34.1

Where TANK CONTRACTOR or any Subcontractors or Subsubcontractors fabricate or purchase equipment, materials or other tangible items (“Goods”) for incorporation into the Work or any of its separate parts, the title of such Goods shall pass to and be vested in PURCHASER when the first of the following events occurs:

(1)

The Goods or part thereof is first identifiable as being appropriated to the Tank Contract,

(2)

When PURCHASER pays for the Goods or part thereof in accordance with the Tank Contract, or

(3)

When the Goods or part thereof are dispatched to or from TANK CONTRACTOR’s fabrication yard or to the Phase 2 Tank Site.

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Similarly, title to all other portions of the Work shall pass to and be vested in PURCHASER when PURCHASER pays for such Work or part thereof in accordance with the Tank Contract.

34.2

All Goods for incorporation into the Work or any of its separate parts, shall be segregated within TANK CONTRACTOR’s facilities (except during the fabrication process) and physically identified by tag or marker as property of PURCHASER and as Phase 2 Project materials that will be incorporated into the Work.

34.3

TANK CONTRACTOR warrants and guarantees that legal title to and ownership of the Goods and all other Work shall be free and clear of any and all liens, claims, security interests or other encumbrances arising out of the Work when title thereto passes to PURCHASER, and if any such warranty or guarantee is breached, TANK CONTRACTOR shall have the liability and obligations set forth in General Condition 39, titled INDEMNITY.

34.4	Such transfer of title in the Goods and other Work will be without prejudice of PURCHASER’s right to refuse the Goods and other Work to the extent of TANK CONTRACTOR’s negligence in case of non-conformity with the Tank Contract Documents.

34.5	Irrespective of transfer of title in the Work (including Goods), the responsibility and risk of loss with respect to all Work (including all Goods) shall be as follows:

(1)

PURCHASER shall add TANK CONTRACTOR as an additional insured on the builder’s “all risk” insurance policy obtained by or on behalf of PURCHASER with respect to the Phase 2 Project (“Builder’s Risk Insurance”);

(2)

TANK CONTRACTOR shall remain responsible for and have the risk of loss with respect to all Work (including Goods) at the Phase 2 Tank Site for the payment of the deductible on the Builder’s Risk Insurance, up to Five Hundred Thousand US Dollars (US$500,000) per occurrence (with no aggregate cap), regardless of fault, provided that for damage to or loss of the Work caused by wind or flood, as those terms are defined under the Builder’s Risk Insurance, TANK CONTRACTOR shall be liable for the deductible up to Two Million US Dollars (US$2,000,000) per occurrence (with no aggregate cap), regardless of fault. If an occurrence under the Builder’s Risk Insurance damages or causes a loss to the Work and to the work of PURCHASER or PURCHASER’s Contractors on the Phase 2 Site, TANK CONTRACTOR’s liability for payment of the deductible on the Builder’s Risk Insurance shall be computed on a pro rata basis, subject to the per occurrence caps set forth above.

(3)

Work (including Goods) that originates inside the continental United States while in transit within the continental United States and Work stored at off-site locations within the continental United States approved in writing by PURCHASER shall be covered by the Builder’s Risk Insurance and shall be subject to the same deductible allocations as set forth in GC-34.5(2).

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(4)

For Work (including Goods) that originates outside the continental United States, TANK CONTRACTOR shall bear full risk of damage and loss to such Work until such Work is delivered to the Phase 2 Site or to an off-site storage location within the continental United States approved in writing by PURCHASER. Notwithstanding any provision of GC-34.5(3) to the contrary, TANK CONTRACTOR’s risk of damage and loss under this Section GC-34.5(4) includes transit to the continental United States and transit within the continental United States until such Work first reaches the Phase 2 Site or a PURCHASER-approved off-site storage location within the continental United States.

(5)

After RFCD for a Phase 2 Tank, PURCHASER shall be responsible for and have all risk of loss with respect to such Phase 2 Tank, as between PURCHASER and TANK CONTRACTOR.

(6)

Notwithstanding anything to the contrary in the foregoing, TANK CONTRACTOR shall remain fully responsible and liable to PURCHASER for its warranty and guarantee obligations under the Tank Contract.

(7)

With respect to any damage or loss to the Work (including Goods), Contractor shall be entitled to a Change Order adjusting the applicable Target Milestone Date and Tank Contract Milestone Date if and to the extent permitted under GC-31.

34.6

TANK CONTRACTOR shall ensure that the above provisions are imposed upon all Major Subcontractors and Major Subsubcontractors, and shall make all commercially reasonable efforts to ensure that the above provisions are imposed upon all other Subcontractors and Subsubcontractors, and shall execute all documents and take all steps necessary or required by PURCHASER to vest title as PURCHASER may direct.

34.7

Title to standard Goods of the type usually bought in bulk such as reinforcement bars, piping materials, non-tagged instruments and instrument installation material, cable and similar items which are not incorporated into the Work shall revert to TANK CONTRACTOR upon agreement by PURCHASER that such Goods are not required for the Work.

34.8

With respect to any damage to the Phase 1 Facility, Phase 2 Facility (other than the Work) or any other property of PURCHASER (other than the Work) arising out of the performance of the Work under this Tank Contract, TANK CONTRACTOR shall be responsible and liable to PURCHASER for the deductible under PURCHASER’s or its Affiliates property insurance to the extent such damage results from the negligence of TANK CONTRACTOR or its Subcontractors or Subsubcontractors, up to Five Hundred Thousand US Dollars (US$500,000) per occurrence (with no aggregate cap).

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EXCERPTS ON THIS PAGE:

10-Q (2 sections)	Aug 4, 2006

Cheniere Energy (LNG)

LNG » Topics » GC-34 TITLE AND RISK OF LOSS

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