Contractual Clarity is Paramount in Offshore Construction Projects (Pharos v. KML)

The High Court (TCC) recently handed down a notable decision in Pharos Offshore Group Ltd v Keynvor Morlift Ltd [2025] EWHC 1764 (TCC), emphasising the importance of contractual clarity in offshore construction projects. This Legal Update summarises this decision and provides key takeaways for stakeholders in the construction sector.

Facts

The dispute arose out of the Viking Link project, which comprises a 765km subsea cable linking the United Kingdom and Denmark. Pharos Offshore Group Limited ("Pharos") had provided jet trenching equipment and personnel to Keynvor Morlift Limited ("KML"), which was itself engaged as a subcontractor to Prysmian Powerlink Srl, the main contractor. When delays and difficulties mounted, claims and counterclaims followed between the parties.

TCC Decision

KML argued that Pharos was limited to ten days of daily charges in relation to embedment works, pointing to a purchase order that listed ten "units" of work. The court rejected KML’s position and held that the fully-bespoke contract, a revised purchase order (the “Contract”), only established an "indicative programme" of the works and associated charges given its express use of the word “indicative”. Absent a fixed contractual period, the courts imply a term requiring completion of the works in a reasonable time (discussed further below).

Mr Justice Constable also rejected KML’s assertion that the Contract shifted the risk of adverse weather conditions onto Pharos as there was no evidence of a discussion or agreement in this respect. Rather, the contemporaneous documents suggested that the parties had only intended to reallocate certain equipment costs. Accordingly, the court held that risk for weather-related downtime, which is a foreseeable exposure, must be unambiguously allocated. 

Performance standards were also considered. The court reaffirmed the principle, rooted in the Supply of Goods and Services Act 1982, that suppliers are not guarantors of outcomes unless they are bound by express warranties. In practice, this means that contractors should not simply rely on supplier brochures or indicative data: they must instead undertake their own due diligence as to the suitability of supplied equipment for site conditions.

Key Takeaways

• The significance of clear contractual drafting - where provisions are expressly labelled as "indicative", they will not be treated as an absolute guarantee or obligation. Parties must take care to distinguish between such indicative schedules and binding obligations. For example, where a cap on costs or risk allocation for foreseeable issues is intended, it must be stated clearly.
• In assessing what had been contractually agreed, the court consistently preferred the record of daily logs, trackers, and project reports over retrospective oral evidence from witnesses. The contemporaneous records ultimately proved decisive.
• Reasonable time is context-specific, namely "a broad consideration, with the benefit of hindsight, of what would, in all the circumstances, have been a reasonable time for performance". Here, the court considered the "indicative programme", actual site conditions (weather, tides, etc), causes of the delay, and the extent to which the delays were within Pharos’s control.
• The case highlights the risks where critical contractual terms are left to be inferred from ancillary contractual documents (such as purchase orders). Such practice is best avoided – it is far less risky to set out key obligations expressly and unambiguously in the contract.

Ultimately, Pharos v KML reinforces the importance of investing in explicit risk allocation from the outset. Contractual clarity is, and remains, fundamental.

If you wish to discuss this decision, please contact any of the authors or your usual Mayer Brown contact.