A massive contract dispute has emerged between Marathon Oil and Noble Corporation. Noble is the second-largest offshore oil rig contractor, and it is suing Marathon over the cancellation of a $752 million contract for an oil rig.

The contract was cancelled in January when Marathon decided that Noble failed to meet criteria necessary for Marathon to take possession of the rig, called the Jim Day, by the end of 2010. That was the deadline specified in the contract.

Noble has said that it believes the oil rig was ready on time, and should have been accepted by Marathon.

Interestingly, San Diego contract law attorneys note that Marathon has also tried to use a force majeure clause to argue that it is not liable for any failure to live up to its end of the contract. Also known as an “Act of God” clause, force majeure clauses relieve a party from liability when it cannot fulfill contractual obligations because of natural disasters that could not be anticipated.

Marathon is arguing for force majeure because of the lack of oil drilling permits available after the Deepwater Horizon spill last year.

Noble is seeking unspecified damages in its lawsuit, filed in March. The suit alleges breach of contract and a breach of the duty of good faith and fair dealing.

Marathon has filed a response, in which it says that Noble failed to comply with the contract requirements, and failed to mitigate its damages.

“Source: Thomson Reuters News & Insight “Noble sues Marathon over cancelled $752 mln deal” 5/6/2011