When milliseconds of downtime can price thousands and thousands, Laura Riddeck, Associate at Reed Smith LLP, particulars why nailing down legal responsibility caps earlier than the primary shovel hits the bottom is now the make-or-break clause in each knowledge centre contract.
Knowledge has swiftly turn into probably the most invaluable commodities within the trendy world, underpinning all elements of our economies, however our potential to retailer and course of this knowledge is struggling to maintain tempo. Naturally, this has meant that the development of latest knowledge centres is a excessive precedence – although this comes with its fair proportion of challenges, notably in regard to contractor legal responsibility when negotiating these advanced contracts. How can we navigate this key space, notably with world demand for digital infrastructure solely anticipated to extend?
A fancy process with excessive stakes
The layers of complexity that go into the development and operating of a knowledge centre solely provides to the issues for builders and contractors in negotiating a contract that should stability danger and legal responsibility for each events. Any important building challenge brings with it authorized points to be addressed, however these difficulties are amplified within the case of information centres: a tiny defect in any one of many working techniques might imply that your complete centre goes offline, doubtlessly costing stakeholders dearly. An applicable allocation of danger and legal responsibility is subsequently of the utmost significance for the events concerned in these initiatives.
Certainly, there’s extra to constructing a knowledge centre than merely constructing a facility. Intensive power necessities, intricate and costly cooling techniques, and different superior applied sciences are all required for them to perform. Along with this, many builders and finish customers have their very own proprietary applied sciences or designs that they may need the contractor to put in, making for a novel challenge. All of those components should work in live performance for the information centre to perform correctly and, ought to anybody break down, the results could possibly be important.
Allocating danger and legal responsibility
Whereas it might appear straightforward for a developer merely to carry the contractor answerable for all losses ensuing from any points, this isn’t a possible answer. It’s unlikely that any contractor would comply with bear the total burden of those prices: that is particularly the case when the size of the fee is doubtlessly disproportionate to the error made – even a minor downside might result in a big interval of downtime.
Because of this contract negotiations between builders and contractors over the extent of price publicity that the contractor ought to shoulder are notably important in these initiatives the place losses may be crippling. Until the events can discover frequent floor and are available to an settlement on legal responsibility – for instance, by capping contractor legal responsibility – the entire challenge dangers being caught earlier than spades break earth.
Imposing caps on legal responsibility
One possibility is to exclude the contractor’s legal responsibility for sure forms of losses, particularly losses which are designated as ‘oblique’ or ‘consequential’ – these are losses that happen not directly because of a fault. For instance, a failure would possibly happen within the cooling system that will necessitate shutting down the information centre, on this case the contractor could be accountable for the prices concerned in rectifying the fault, however crucially not for the (doubtless far more costly) income misplaced whereas the centre was offline.
An alternate is to think about monetary limitations on the prices {that a} contractor might need to pay – a follow that’s turning into more and more frequent. Within the instance above, the contractor might need to pay for a number of the misplaced income, however solely as much as the purpose of their agreed cap. That is usually the popular technique for builders, because the cap is often set as a proportion of the worth of the entire challenge – and in a challenge as invaluable as a knowledge centre, even a capped legal responsibility might signify a big sum of cash. This could make caps a gorgeous prospect for either side within the negotiation: the contractor’s legal responsibility is lowered, whereas the developer nonetheless recoups a few of their losses.
No silver bullet
These strategies definitely assist negotiations to run extra easily, however they don’t resolve the issue fully. Contractors might argue for low caps that successfully absolve them of all legal responsibility, whereas builders might search to impose caveats that restrict when such caps or exclusions apply.
In the end, the demand for knowledge centres will stay excessive, and certainly proceed to speed up, within the coming years, and so events on all sides of their building might want to hold a watchful eye on their contracts when enterprise such initiatives.
