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Expert determination clauses allow certain contract issues to be resolved by an appointed individual. Such clauses are commonly used to determine quality in commodities, resolve construction disputes, value shares, and review prices in oil and gas contracts. However, an expert can only be appointed if the contract allows it, and the effect of the clause depends entirely on the contract terms. While expert determination seems straightforward, it can cause serious disputes if the terms are unclear or incomplete. Courts will uphold expert determination clauses if the terms are clear and the process follows the contract, as shown in several cases where certificates were found not binding due to ambiguous wording or improper procedures. Parties must carefully draft these clauses to clearly define the expert's task and allowable information
Expert determination clauses allow certain contract issues to be resolved by an appointed individual. Such clauses are commonly used to determine quality in commodities, resolve construction disputes, value shares, and review prices in oil and gas contracts. However, an expert can only be appointed if the contract allows it, and the effect of the clause depends entirely on the contract terms. While expert determination seems straightforward, it can cause serious disputes if the terms are unclear or incomplete. Courts will uphold expert determination clauses if the terms are clear and the process follows the contract, as shown in several cases where certificates were found not binding due to ambiguous wording or improper procedures. Parties must carefully draft these clauses to clearly define the expert's task and allowable information
Expert determination clauses allow certain contract issues to be resolved by an appointed individual. Such clauses are commonly used to determine quality in commodities, resolve construction disputes, value shares, and review prices in oil and gas contracts. However, an expert can only be appointed if the contract allows it, and the effect of the clause depends entirely on the contract terms. While expert determination seems straightforward, it can cause serious disputes if the terms are unclear or incomplete. Courts will uphold expert determination clauses if the terms are clear and the process follows the contract, as shown in several cases where certificates were found not binding due to ambiguous wording or improper procedures. Parties must carefully draft these clauses to clearly define the expert's task and allowable information
Expert determination clauses provide for certain issues arising under a
contract to be resolved by an individual appointed as an expert. Such
clauses have been used for many years in connection with determining quality in commodity contracts, dispute resolution in construction contracts, share valuation under shareholder agreements and for redetermination disputes and price reviews in the oil and gas industry. It is important to note that an expert can only be appointed under the terms of the contract, and accordingly the effect of an expert determination clause is entirely dependent on the contractual provisions. The most important aspect of expert determination is that although it may appear straightforward, it can in practice give rise to serious dispute if the terms are not clear and comprehensive. Attitude of the Court The English Courts have consistently held that expert determination clauses will be upheld provided that the terms are clear, and the clause is operated strictly in accordance with its terms. In Kollerich v The State Trading Corporation of India, the contract provided for SGS to carry out pre-loading inspection of cement. SGS, however, appointed a subcontractor to carry out the inspection, and it was held by the Court that certificates issued were not final and binding because the wording provided expressly that the inspection should be carried out by SGS. A further illustration of this principle is provided by Rollimpex v Dossa where it was held that the contract did not expressly provide that the certificates issued would be final and binding, and the certificates were not in the correct form called for by the contract. A further illustration is provided by David Pratt v Gulf Oil where the contract contained the wording mutual acceptable independent inspectors to verify quantity and quality. It was held that the word verify was not sufficiently precise to have the effect of making the certificates which were issued final and binding. These cases illustrate that the wording of such clauses is vital, and the way in which the expert determination is conducted, and the form of the certificate or report, can also be of crucial importance in whether the determination is final and binding. Careful drafting is therefore essential if the parties want to achieve finality. These decisions demonstrate how careful parties need to be in drafting expert determination clauses to make sure that the task which the parties want carried out is clearly defined, and that the material the expert is allowed to consider is specified.
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