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Subject:  Re: And the battle begins Date:  11/2/2011  8:36 AM
Author:  TMFGebinr Number:  570 of 1138

I think this is really going to be an interesting situation to watch.

Hi Kyle,

Definitely. The consequences for contract law are pretty serious, too, at least in my opinion. If a company can get out of indemnifying another when things go rotten, that abrogates the whole idea of indemnification. The result, I bet, would be either a lot fewer contracts signed between companies or increased costs to cover the risk taken on by the company who would otherwise be indemnified.

I worked, at one time, for a very small biotech company. That company signed a couple of contracts with Amgen at one point and there were indemnify clauses in those contracts. Puny little things of only a few thousand dollars, but those clauses were in there. End user license agreements for software also contain indemnify clauses. They're everywhere. The issue is what is going to happen to contract law if BP is allowed to get around the indemnify clauses in its contracts with Transocean? Nothing good, that I can see.

Was Transocean partly at fault? The US Coast Guard report (IIRC) said so, but it's BP's responsibility because of those contracts. At least that's Transocean's position.

This AP article (http://finance.yahoo.com/news/Transocean-Contract-shields-ap...) shows the two different viewpoints of the companies. Transocean is arguing based on the contract, BP is arguing based on PR. "BP countered that Transocean's court filing showed it was 'putting its own interests ahead of the people and communities of the Gulf.'" Of course Transocean is putting its own interests first. That's what companies do and BP does it just as much as any other. In fact, BP is doing so in this case, trying to end up paying less to those selfsame people and communities.

If I recall, the legal battles against Exxon for the Valdez spill took nearly a decade to work through. There's billions of dollars at stake here, so both sides should be more than willing to draw out the battle for a while.

Cheers,
Jim
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