| No. | Subject | Traditional contract | Alliance contract | Material difference and trade-off between traditional contract and alliance contract |
| 14 | Termination for default or insolvency | Default by the Contractor If the Contractor commits any substantial breach of the contract, the Principal may: give the Contractor a written notice to show cause why the Principal should not exercise its rights to take over the work under the Contract or terminate the contract; suspend payment to the Contractor until the Contractor has showed cause; and if the Contractor fails to show cause, then the Principal may take over the work under the contract or terminate the contract by written notice. If the Principal commits any substantial breach of the contract, the Contractor may: give the Principal a written notice to show cau1se why the Contractor should not exercise its rights to suspend the work under the contract or terminate the contract; and if the Principal fails to show cause, the Contractor may first suspend the work under the Contract and, if the Principal continues to fail to remedy the breach within 28 days of the suspension, terminate the contract by written notice and recover damages from the Principal. Insolvency If either party suffers an insolvency event, the other party may, without giving notice to show cause, exercise its rights to: if it is the Principal, take over the work under the Contract; and if it is the Contractor, suspend the work under the Contract. | If the Owner (whether as the client for the Works or Owner Participant) or a NOP: commits a Wilful Default; commits a material breach of an essential provision of the alliance contract; or is the subject of an insolvency event, and, in respect of any material breach, the ALT has in writing allocated responsibility for the relevant obligation to that Participant, then the non-defaulting Participants may: where the relevant breach is capable of remedy, give the defaulting Participant a notice to remedy the relevant breach; where the defaulting Participant fails to remedy the Default or show progress in rectifying the Default within the required timeframe, suspend payment to the defaulting Participant until the breach has been remedied; and terminate the alliance contract by written notice if the defaulting Participant fails to remedy the default within the remedy period. If the defaulting Participant is a NOP, then the non-defaulting Participants will require the approval of the Owner to terminate the alliance contract. In addition, if the defaulting Participant is a NOP, then the non-defaulting Participants may, with the approval of the Owner, exclude the defaulting NOP from further participation in the alliance contract. | Default by the Contractor/NOPs Under a traditional contract, if the Contractor commits any substantial breach of the contract which is not remedied, the Principal may take over the work under the contract or terminate the contract. Under an alliance contract, the events of default entitling the non-defaulting Participants to terminate or exclude a defaulting NOP are limited to Wilful Default and material breaches of provisions of the alliance contract which are fundamental to the operation of the alliance (i.e. access and audit, insurance, indemnities and intellectual property). This is the case because the Participants assume joint responsibility for the Works which makes it difficult to assign blame for any error or mistake arising under the alliance contract. In addition, the Participants agree to the no litigation principle. The purpose of this principle is to refocus the Participants from acting in a 'best-for-self' manner and incentivise acting in a best-for-project* manner. Default by the Principal/Owner As above, the material difference between a traditional contract and an alliance contract in respect of rights on default of the Principal/Owner is that the events of default entitling the NOPs to terminate are quite limited, comprising only Wilful Default of the Owner and material breaches by the Owner of provisions of the alliance contract which are fundamental to the operation of the alliance. Insolvency Under a traditional contract, if either party suffers an insolvency event, the other party may: • if it is the Principal, take over the work under the Contract; and • if it is the Contractor, suspend the work under the Contract. The other party does not have the right to terminate the contract. Under an alliance contract, if a Participant suffers an insolvency event, then the other Participants may terminate the alliance contract. Whilst this right is conferred on each of the Participants, an insolvency event is much more likely to be suffered by a NOP than the Owner (where it is a Government agency). In these circumstances, the Owner, together with the other NOPs, may elect to terminate the alliance contract or exclude the relevant NOP from the alliance contract. |