Case scenario ll - Question (3) (5 marks) Petrorex Ltd, an Australian energy corporation, is one of the world's largest oil and gas companies. Cylinder Pty Ltd is the world's largest manufacturer and supplier of pipelines in the oil and gas sector. Last year, Petrorex and Cylinder entered into a 20 year contract for the manufacturing, installation and maintenance of a 5-kilometre pipeline connecting Petrorex's new offshore platform with its onshore oil plant at Kwinana in Western Australia. The parties agreed on a price of $25,000,000. Also, the parties expressly agreed in the contract that: Cylinder shall not contract with any entity to perform in whole or in part the work without the express written approval of Petrorex. The pipeline was installed in January this year and entered into service on 1 February. Three weeks after the pipeline was operational, it exploded. As a direct consequence of the explosion, all Petrorex operations had to be stopped for 55 days. Ofcial investigations concluded that the gas explosion was caused by poor design and improper installation of the pipeline which, to the surprise of Petrorex, were not made by Cylinder. In fact, Cylinder had subcontracted the design and installation of the pipeline to a Chilean company, Easy Amigo Plumbers. You work at Petrorex. The CEO has entrusted the drafting of a report on the pipeline related losses to you. Specically, the report must address whether Petrorex can (a) terminate the contract and (b) seek compensation for the following: . $20,000,000 for the installation of a new pipeline . $10,000,000 for loss of prot corresponding to the 55 days that the premises had to remain shut . $5,000,000 in nes a) Advise whether Petrorex may terminate the contract with Cylinder. (5 marks) Case scenario ll - Question (b) (5 marks) Petrorex Ltd, an Australian energy corporation, is one of the world's largest oil and gas companies. Cylinder Pty Ltd is the world's largest manufacturer and supplier of pipelines in the oil and gas sector. Last year, Petrorex and Cylinder entered into a 20 year contract for the manufacturing, installation and maintenance of a 5-kilometre pipeline connecting Petrorex's new offshore platform with its onshore oil plant at Kwinana in Western Australia. The parties agreed on a price of $25,000,000. Also, the parties expressly agreed in the contract that: Cylinder shall not contract with any entity to perform in whole or in part the work without the express written approval of Petrorex. The pipeline was installed in January this year and entered into service on 1 February. Three weeks after the pipeline was operational, it exploded. As a direct consequence of the explosion, all Petrorex operations had to be stopped for 55 days. Ofcial investigations concluded that the gas explosion was caused by poor design and improper installation of the pipeline which, to the surprise of Petrorex, were not made by Cylinder. In fact, Cylinder had subcontracted the design and installation of the pipeline to a Chilean company, Easy Amigo Plumbers. You work at Petrorex. The CEO has entrusted the drafting of a report on the pipeline related losses to you. Specically, the report must address whether Petrorex can (a) terminate the contract and (b) seek compensation for the following: . $20,000,000 for the installation of a new pipeline . $10,000,000 for loss of prot corresponding to the 55 days that the premises had to remain shut . $5,000,000 in nes b) Advise whether Petrorex is entitled to receive compensation for its losses (as detailed above) and, if so, how much.(5 marks) Note: Analyse this question without considering part (c) (below) of this question. Case scenario ll - Question (c) (10 marks) Petrorex Ltd, an Australian energy corporation, is one of the world's largest oil and gas companies Cylinder Pty Ltd is the world's largest manufacturer and supplier of pipelines in the oil and gas sector. Last year, Petrorex and Cylinder entered into a 20 year contract for the manufacturing, installation and maintenance of a 5-kilometre pipeline connecting Petrorex's new offshore platform with its onshore oil plant at Kwinana in Western Australia. The parties agreed on a price of $25,000,000. Also, the parties expressly agreed in the contract that: Cylinder shall not contract with any entity to perform in whole or in part the work without the express written approval of Petrorex. The pipeline was installed in January this year and entered into service on 1 February. Three weeks after the pipeline was operational, it exploded. As a direct consequence of the explosion, all Petrorex operations had to be stopped for 55 days. Ofcial investigations concluded that the gas explosion was caused by poor design and improper installation of the pipeline which, to the surprise of Petrorex, were not made by Cylinder. In fact, Cylinder had subcontracted the design and installation of the pipeline to a Chilean company, Easy Amigo Plumbers. You work at Petrorex. The CEO has entrusted the drafting of a report on the pipeline related losses to you. Specically, the report must address whether Petrorex can (a) terminate the contract and (b) seek compensation for the following: . $20,000,000 for the installation of a new pipeline . $10,000,000 for loss of prot corresponding to the 55 days that the premises had to remain shut . $5,000,000 in nes c) Assume for the purpose of this question only, that the following term was part of the contract signed by Petrorex and Cylinder: Exclusion clause. Under no circumstances shall Cylinder be responsible to Petrorex for any injury or property damage suffered by Petrorex in respect of: a) damage or destruction arising from any defect in or failure of the pipeline. Advise whether Cylinder can rely on the exclusion clause and, if so, to what extent. (1 0 marks)