CA Rakesh T
In DBFOM contracts, particularly in the GCC region, the Termination Payment clause is crucial. It outlines what happens and who gets compensated if the project is terminated early. How well this clause is defined directly affects the bankability of the project for both sponsors and lenders.
If the DBFOM Contract is terminated early, the asset (usually at the Client's discretion) is either handed back to the Client or cleared by the DBFOM Contractor before handing it back.
The DBFOM Contractor receives a termination payment by the terms of the DBFOM Contract. The sizing of the payment depends on the cause of termination, as set out below:
Not to mention that some of these clauses may need to be modified (perhaps even eliminated) to fit the unique circumstances of each deal at work. These, of course, need to be detailed out and negotiated with the client.
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