A knock for knock agreement, also known as a mutual indemnity agreement, is a commonly used legal agreement in the United Kingdom among parties in the oil and gas industry.
The agreement is designed to protect each party from incurring financial losses in the event of an accident or incident. It works by allocating the risk and responsibility for any damage or loss between the parties involved.
Under a knock for knock agreement, both parties agree to indemnify each other against any loss or damage that may arise out of their respective operations. This means that if one party suffers a loss or damage, the other party agrees to bear the cost of that loss or damage.
The agreement is typically used between companies in the oil and gas industry, including drilling contractors, operators, and service providers. It is important for these companies to have a knock for knock agreement in place because they are often involved in high-risk activities that can lead to accidents or incidents.
For example, if a service provider is hired to provide drilling services but damages the drilling rig, the knock for knock agreement ensures that the drilling contractor will not be held liable for the damage. Instead, the service provider will bear the cost of repairing the damage.
Knock for knock agreements are also often used in the shipping industry. In this case, the agreement is used to allocate the risk and responsibility between the ship owner and the charterer. The ship owner agrees to indemnify the charterer against any loss or damage to the ship, while the charterer agrees to indemnify the ship owner against any loss or damage to the cargo.
Overall, knock for knock agreements are an important legal tool for managing risk and protecting parties from financial losses in high-risk sectors such as the oil and gas and shipping industries. They allow parties to focus on their core business activities without worrying about the potential financial consequences of accidents or incidents.