How to Review a Turnkey Contract: a Clause-by-Clause Checklist

How do you review a turnkey contract? Review a turnkey (EPC) contract by checking that the risks a turnkey deal is meant to shift to the contractor actually sit there, and that the price, time and performance promises are tied to clear, testable obligations. A turnkey contract gives the owner a single party to hold accountable for a complete, working facility at a fixed price. The review is about making sure the words deliver that, and spotting the clauses that quietly give the risk back. Work through the contract and its schedules clause by clause. On a turnkey job the schedules (Employer's Requirements, performance guarantees, payment milestones, variations) carry as much risk as the main conditions, so read them with equal care. This article is general guidance, not legal advice. The law here varies by jurisdiction and changes over time, so have a qualified lawyer review any agreement before you rely on it. ## The clause-by-clause review checklist ### Scope and responsibility

• Is there a clear single point of responsibility, with the contractor responsible for design, procurement, construction, testing and commissioning?
• Do the Employer's Requirements describe the required output and performance, not the method?
• Is "fitness for the intended purpose" stated, and is that purpose defined precisely?
• Are the boundaries clear (what the owner provides: site, permits, utilities, interfaces)? ### Price and payment
• Is the price a genuine lump sum, with only narrow, listed exceptions?
• Are price-adjustment or cost-index clauses limited and defined, so a "fixed" price cannot drift?
• Are payment milestones tied to real, verifiable progress, not just time?
• Is retention set (commonly released part at Taking-Over, the rest at the end of the defects period)?
• Is there a performance guarantee or bond, and an advance-payment guarantee if an advance is paid? ### Time, tests and completion
• Is "Completion" defined and tied to passing the Tests on Completion?
• Are the Tests on Completion and the acceptance process clear and objective?
• Is there a Taking-Over Certificate mechanism?
• Are the performance guarantees (output, efficiency, capacity) measurable, with a defined consequence if they are not met? ### Risk allocation (the red-flag zone)
• Delay liquidated damages: is there a defined rate and a cap? Is it a genuine pre-estimate of loss?
• Performance liquidated damages: what happens if the plant underperforms, and is there a floor below which the owner can reject?
• Liability cap: what is the percentage, and are there carve-outs (fraud, injury, sometimes performance failure)?
• Is indirect and consequential loss excluded, and is that balanced for both sides?
• Force majeure: is the list fair, and are the relief and termination consequences clear?
• Change in law and site-condition risk: who carries it? ### Security and defects
• Performance security amount and validity period.
• Defects Liability Period length (commonly 12 to 24 months) and what it covers.
• Is there a right to step in or get work done by others if the contractor fails to remedy defects? ### Exit and disputes
• Termination rights for both sides, with notice and cure periods.
• What the owner gets on termination (completed work, designs, equipment, drawn-down guarantees).
• Dispute process: is there a dispute board or escalation before arbitration?
• Governing law and arbitration seat, and whether they suit a cross-border project. ## Turnkey contract red flags - Method-based scope. If the Employer's Requirements tell the contractor how to build rather than what to deliver, the owner has taken back design risk a turnkey contract is meant to shift.
• Soft completion. "Completion" defined by the contractor's own certificate, or not tied to objective tests, lets a contractor hand over an unfinished or underperforming facility.
• Uncapped or penal delay damages. No cap exposes the contractor; a figure that is a penalty rather than a pre-estimate of loss is vulnerable, and in India is read down under Section 74 of the Indian Contract Act, 1872, to reasonable compensation actually proven.
• No performance guarantees. For a plant whose value is its output, missing output, efficiency or capacity guarantees is a serious gap.
• A low liability cap with wide carve-outs against the owner. Check both the number and the exceptions; the exceptions often matter more.
• Price adjustment with open indices. A broad escalation clause can turn a fixed price into an open one.
• One-sided force majeure or change-in-law. Watch who carries site conditions, change in law, and delay relief. ## A note on jurisdiction Turnkey contracts follow a common commercial pattern worldwide, often adapted from the FIDIC Silver Book, but the law that governs them differs. In India, liability and delay damages are read under the Indian Contract Act, 1872, with Section 74 shaping how liquidated damages and penalties work; disputes usually go to arbitration under the Arbitration and Conciliation Act, 1996; and stamp duty varies by state. In the UK, Ireland, Singapore, Australia and the US, local construction law, security-of-payment statutes and insolvency rules change how clauses on payment, suspension and termination actually operate. Treat the liability cap, delay damages and "fit for purpose" wording as items to confirm against the governing law rather than assume one answer fits all. ## Where a contract workspace helps A checklist helps you review one turnkey contract well. The ongoing work starts after signing: keeping terms consistent across many versions and counterparties, checking each draft for weak or missing terms before you sign, and remembering the key dates, tests and defects periods as the deal runs its course. Drafting a turnkey or EPC contract, reviewing its price, completion and performance terms, tracking those dates, and governing the project through to handover can all live in one AI workspace tuned to how your company contracts. Adira is one tool built to hold all of that in one workspace.