Advance payments protect the supplier but expose the buyer if the supplier defaults, delays or delivers non-conforming equipment. Cross-border cold-chain projects add bank, sanctions and currency-transfer risk.
Mitigations
- ■Structure milestone payments against verifiable deliverables (drawings, FAT, shipment, SAT).
- ■Use a confirmed, irrevocable Letter of Credit against document sets — not against arrival.
- ■Cap the down payment at 10–20 % and back it with an on-demand advance-payment bond.
- ■Retain 5–10 % against defects liability period (DLP), released after 12–24 months of clean operation.
Contract clauses to insist on
- ■Payment schedule with objective milestone triggers.
- ■Advance Payment Guarantee (APG) equal to the down payment.
- ■Retention money or Retention Bond during DLP.
- ■Governing law and enforceable jurisdiction (avoid supplier home-court in high-risk regimes).
Cold-chain equipment often sits on the critical path — refrigeration packs, MV switchgear, IQF/blast tunnels, controls. Delays cascade into idle civils, lost commissioning windows and missed harvest / campaign dates.
Mitigations
- ■Contract Incoterms 2020 explicitly (DAP or CIP at site is safer for buyers than EXW).
- ■Require a Level-3 baseline programme with logistics, customs and OSD windows shown.
- ■Bind Liquidated Damages (LDs) to delivery and to takeover, not just to substantial completion.
- ■Hold monthly progress meetings with photo-evidenced % completion of each sub-package.
Contract clauses to insist on
- ■LDs typically 0.5 % per week of contract value, capped at 5–10 %.
- ■Bonus/malus clause if the buyer's business case is time-sensitive.
- ■Force-majeure list — closed, not open — with defined relief and no cost recovery.
- ■Right to third-party manufacturing surveillance during fabrication.
A cold store or refrigeration plant that reaches capacity but not efficiency, pull-down time or uptime is a defective asset commercially even if it 'works'. Warranties that only cover parts are effectively worthless.
Mitigations
- ■Specify guaranteed performance figures: temperature envelope, pull-down time, kWh/m³·yr or SEPR, availability %.
- ■Tie SAT and takeover to a documented 72-hour or 7-day performance test with owner witness.
- ■Require a 24-month defects liability period from takeover, extended for replaced components.
- ■Require an on-demand performance bond of 5–10 % of contract value valid through DLP + 6 months.
Contract clauses to insist on
- ■Performance Guarantees with liquidated performance damages (LPDs) if figures are missed.
- ■Parts + labour + refrigerant charge covered under warranty — not parts-only.
- ■Response-time SLA for warranty callouts (e.g., 24h remote, 72h on-site).
- ■Escrow of controls source code and PLC programs against supplier insolvency.
Most cold-chain disputes are scope-gap disputes between civil, refrigeration, electrical, controls, racking and dock trades. Whoever owns the interface owns the risk — and its cost.
Mitigations
- ■For projects >€10M CAPEX, prefer a single EPC or turnkey contract over multi-package procurement.
- ■For multi-package procurement, appoint an owner's engineer with formal interface authority.
- ■Freeze a P&ID, single-line and general-arrangement package before contract award.
- ■Use a written scope-of-supply matrix — every item marked 'By Supplier', 'By Owner' or 'By Others'.
Contract clauses to insist on
- ■Design responsibility assigned to a single party per system.
- ■Change-order procedure with pre-agreed unit rates for common variations.
- ■Site-management responsibility and welfare clearly assigned.
- ■Interface deliverables list (loads, penetrations, tie-ins, control signals).
A EUR-priced refrigeration plant procured against a USD- or local-currency revenue can lose its business case to FX drift alone. Add HS-code disputes, changing duty rates and sanctions exposure and the risk is material.
Mitigations
- ■Fix contract currency and hedge material FX exposure at award, not at delivery.
- ■Pre-clear HS classifications and duty rates with a local customs broker before PO.
- ■Screen supplier, sub-suppliers and financing counterparties against OFAC / EU / UK sanctions lists.
- ■Include a change-in-law clause covering new tariffs, sanctions and refrigerant quota changes.
Contract clauses to insist on
- ■Contract currency defined; FX responsibility explicit.
- ■Change-in-law and change-in-tax cost-recovery mechanism.
- ■Sanctions and anti-bribery representations from supplier and sub-tier.
- ■Termination-for-convenience with capped exit cost.
Uninsured or under-insured cold-chain assets, in transit and in operation, are one of the fastest ways to convert a project risk into a balance-sheet event — spoilage of a single blast batch or ammonia release can dwarf premium savings.
Mitigations
- ■CAR / EAR insurance from first delivery to takeover, with named beneficiaries including lenders.
- ■Marine cargo insurance on ICC(A) terms, warehouse-to-warehouse, with GA cover.
- ■Product-in-store cover for the operating phase, not only building & plant.
- ■Third-party liability aligned to refrigerant charge (especially NH₃ and CO₂ high-side installs).
Contract clauses to insist on
- ■Certificates of insurance required before mobilisation, not after.
- ■Waiver of subrogation between contract parties.
- ■Insurance-adequacy audit right for the owner.
- ■Clear passing-of-risk point (Incoterms + takeover certificate).
The contract is the last line of defence when a project goes wrong. Templates copied from unrelated industries, or supplier-friendly T&Cs accepted without amendment, remove the buyer's remedies exactly when they are needed.
Mitigations
- ■Start from an established framework (FIDIC Yellow/Silver Book or LOGIC/IChemE) — not a supplier template.
- ■Negotiate limitation-of-liability caps at 100 % of contract value minimum for the core obligations.
- ■Carve gross negligence, wilful misconduct, IP infringement and confidentiality out of the liability cap.
- ■Choose arbitration seat (ICC, LCIA, SIAC) neutral to both parties, with English as procedural language.
Contract clauses to insist on
- ■Dispute-resolution ladder: notification → senior escalation → mediation → arbitration.
- ■Step-in rights for lenders on lender-financed projects.
- ■Assignment and novation rights defined.
- ■Confidentiality and IP survive termination.
