Broader Maritime Contract Test Could Help Companies Reduce Risk

The test for determining whether a contract is maritime in nature now applies to more contracts. If you work in the marine and energy sector, this change could impact the contractual risk owed by or to your company.

For more than 25 years, the 5th Circuit applied the Davis factors to decide if a contract was maritime in nature. The 5th Circuit replaced the unwieldly, six-factor Davis test with the two-pronged Doiron test in 2017.

The Doiron test initially appeared to only apply to contracts for oil and gas development. But last year, the 5th Circuit expanded application of the test in the Barrios ruling. The test now governs any mixed services contract.

How does the test work?

To test if a contract is maritime, the court asks two questions:

• Is the contract one to provide services to facilitate activity on navigable waters?
• Does the contract provide or do the parties expect that a vessel will play a substantial role in the contract’s completion?

If the answer to both questions is “yes,” then the contract is maritime in nature. The 5th Circuit made clear that blanket service agreements must be read in concert with any related work orders, both written and oral.

Why does the test’s expansion matter?

The expansion of the Doiron/Barrios test is important to any company that provides services to the marine and energy industry. Because maritime contracts are governed by federal admiralty law, they are not subject to state statutes such as the Louisiana Oilfield Indemnity Act or the Texas Anti-Indemnity Act. As such, a contract’s maritime status could determine whether contractual indemnity and insurance obligations can be enforced.

Please contact Thomas Kent Morrison, Turk Clay or any other member of Phelps’ Marine and Energy team if you have questions or need advice and guidance.