Orgalim SI 24 – clearer legal boundaries and what remains unaddressed

Since 1994, Orgalim’s supply and installation terms have provided a balanced framework that attempts to fairly allocate responsibility and risk, and ensures quality and financial predictability. With Orgalim SI 24, the standard conditions have been updated both linguistically and with the addition of new provisions, with the purpose of providing a clearer framework, adapting to contemporary society. The main change is an amendment of the division of risk for loss or damage to the work. 

Orgalim SI 24 – Supply and ­Installation Conditions

Orgalime (as it was previously called) Supply and Installation Conditions were first published in 1994, known as the SE (Supply & Erection) 94 Conditions. These conditions are largely based on what is now Orgalim’s Supply Conditions, which were last revised in 2022 and known as the S 2022 Conditions. 

The terms of the SI 24 are developed for product deliveries where the contractor’s scope includes on-site installation, typically at the purchaser’s premises, and represent a revised version of the previous Orgalime SI 14. 

Developed by Orgalim’s Legal Affairs Working Group, the SI 24 terms incorporate legal advancements and practical experiences from the field. However, key elements are still not regulated and must be assessed on a case to case basis. In the following, we will provide a brief overview of the most significant changes introduced in SI 24 and, finally, discuss key elements that should always be considered as additional terms.

Key changes

The key changes can be summarised as follows: 

• Modernised contract terms: The contractual terms and definitions are updated to reflect technological advancements and changes in the engineering industry.
• Definition of gross negligence: Clause 2 now specifies “gross negligence”. The definition now aligns with international standards as deliberate or reckless conduct. Additionally, Clause 80 now clearly states that gross negligence triggers liability for consequential losses.
• Loss or damage to works transferred to purchaser: Under SI 14, the risk of loss or damage to the product was transferred when delivery of the product took place, whilst the risk of loss or damage to the executed work was transferred to the purchaser only upon completion. The work would normally be the installation works at the premises of the purchaser, and risks related to installation is not fully controlled by the contractor. SI 24 Clause 29 has been amended to reflect that this risk for loss or damage to the executed work rests with the purchaser from the start of the contract execution.
• Clear IP infringement remedies: The SI 24 conditions now explicitly cover contractor liability for intellectual property infringements in Clauses 70–74. These specific clauses bring clarity and reassurance to both parties in managing IP risks.
• Deadlines introduced for accepting variations: Clause 28 now requires contractors to provide a quotation for each requested change, with a specific acceptance deadline for the purchaser. If the purchaser does not accept by the deadline, the contract continues as initially agreed.
• Repair by contractor upon request: It is an unchanged principle that the contractor is liable for loss or damage to the purchaser property if caused by the contractor or contractor’s subcontractor’s negligence. It is however a new regulation in the SI 24 that the contractor is obliged to repair any damage to works upon the purchaser’s request, even if the contractor is not at fault.
• Confidentiality protections: Confidentiality protection is now extended to include all forms of information, whether technical, commercial, or financial, and regardless of whether it is transmitted in writing or orally. In previous versions, only drawings, technical documents or other technical information received by one party had confidential protection. This comprehensive approach strengthens confidentiality, and reduces the risk of unintentional information disclosure.
• Permits and authorisations for installation work: SI 24 introduces a requirement for purchasers to secure all necessary permits and authorisations for installation work that only purchaser can obtain. This change, detailed in Clause 14, highlights the purchaser’s responsibility for ensuring compliance before installation begins. Additionally, contractors are now required to maintain a site register that documents significant events related to fulfilling contractual obligations, as described in Clause 19. This measure supports collaboration by creating a formal record of events that may impact contract performance, thereby enhancing transparency and accountability.
• Acceptance procedure: The defined acceptance procedures in SI 24 (Clause 36), should also be noted: When the contractor sends a completion notice, the purchaser now has seven days to document any deviations from contractual requirements; otherwise, the work is deemed accepted. Thus, the work is accepted if the purchaser takes no action. This is a change from the previous version which required that the work already meets the contractual requirements for taking-over upon receipt of the notice, without providing a specific timeframe for the purchaser to document any deficiencies.

Specific considerations on a case by case basis: what is missing?

In our experience there are certain key risk elements that the parties need to consider on a case-by-case basis to determine whether they are relevant and required for the specific contract at hand. Such adjustments are often more relevant where the supply is an integrated part of a turn-key delivery by the purchaser to an end customer. The specific issues we typically encounter that may require additional clauses can be summarised as follows: 

• Warranty period: The purchaser may have agreed to a warranty period that begins when the product is delivered to the end customer, rather than when it is delivered to the purchaser. An extended warranty period is normally negotiated and agreed for an additional cost, typically using a dual mechanism: the requested period begins at delivery to the end customer, but is subject to a maximum period starting from delivery to the purchaser – whichever occurs first.
• Knock-for-knock liability regime: The Orgalim contracts operate with a liability regime where the tortfeasor is liable for loss or damage caused at the installation site. In the worst-case scenario, this may expose a contractor to liability over and above its available insurances. Also, it may be that the installation takes place on a structure and property owned by a customer that applies a knock-for-knock liability regime. The liability regime should therefore be carefully assessed for each project, especially for rig and newbuild projects.
• Obligation to implement changes: Generally, except for changes required to comply with laws and regulations, there is no obligation on the contractor to implement changes unless the parties are in agreement. In offshore projects, there is often a commitment to perform the work regardless of any disagreement on cost and time, in order to ensure that a contractor cannot stop critical work streams in an extensive and complex project. We therefore often see additional clauses related to ­variations.  
• Risk of new customs, tariffs and sanctions: Clause 24 of SI 24 stipulates that any sanctions, tariffs, or other governmental measures introduced after the contract date shall be borne by the purchaser. Nevertheless, the Contractor remains responsible for carrying out any variation work required to ensure compliance with such changes. This principle remains unchanged from SI 14.