Construction Contracts - An Overview

T H E I N G E N I E U R

By Ir. Harbans Singh K.S. 1

ConstructionContracts:An Overview

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An engineering/constructionproject in its lifetime frominitial inception toeventual realization (and

subsequently within the limitationperiod 2) touches on a whole spectrumof legal disciplines ranging fromcontractual, commercial, civil and thelikes. This may be so despite the factthat in its nascent and active stages,it may be basically contractual inessence. Hence, for a properappreciation of the encompassinglegalities when addressing the issueof construction law, it is prudent toconsider all relevant fields of law suchas the law of contract, law of tort,civil law, commercial law and publiclaw 3.

The law of contract forms the coreof the field of construction law andin due recognition of its significance,this article has been penned toelucidate the basic considerations vis-à-vis the species of contracts goingunder the label of ‘constructioncontracts’. The discussion is confinedmerely to the essential matters so thatthe reader can grasp a ‘macro’ viewof this important subject withoutgetting bogged down in the intricatedetails. With brevity and relevancein mind, the principal considerationshave been addressed and the readeris encouraged to make reference toother legal treatises if a deeperappreciation of the topic is desired.

CONTRACTS GENERALLY

Nature Of Construction Contracts

A construction contract, for thepurposes of this article, is a contractunder which one party 4 (commonlycalled the Contractor) agrees forvaluable consideration to undertaketo carry out works for another party(commonly called the Employer 5)involving design (where applicable),fabrication, erection, alteration, repairor demolition of structures and/orinstallations on a site 6 made availableby the latter. It covers a whole rangeof contracts i.e. from a simple oralagreement to repair a house roof to amega highway contract. Such contractsare usually termed ‘building contracts’

1. B.E. (S’pore), P.E., C. Eng., LLB (Hons) London, CLP, DipICArb, Director HSH ConsultSdn. Bhd.

2. As statutorily prescribed e.g. Limitation Act 1953 (Rev. 1981), etc.3. For international contracts, private international law may be also relevant.4. This includes a corporation.5. Also called ‘the client’ or ‘the purchaser’ or ‘the authority’.6. Land or place which may be allotted or used for the purposes of carrying out the

work.7. Such as highways, airports, harbours, etc.8. Inclusive of utilities.9. Such as mechanical, electrical, telecommunication, heavy engineering, etc.10. In a sub-contract, the main contractor is in effect the employer and the sub-

contractor is in effect the contractor.11. or, Jabatan Kerja Raya (JKR).

undertaken by the contractor and themeans by which those obligationsmay be varied from time to time; thetime for completion and interimcontrol of the progress of the works;the machinery for payment of thecontractor; supervision of the workson behalf of the employer; insuranceagainst a range of risks; and theremedies available to the parties inrespect of default.

The Malaysian constructionindustry relies essentially on anumber of types of forms of contract;these being notably the standardforms of contract, modified standardforms of contract and ‘ad hoc’ or‘bespoke’ forms of contract. Theprincipal standard forms in commonuse include those published by thevarious institutions e.g. the Institutionof Engineers, Malaysia and thePertubuhan Akitek Malaysia. Forpublic sector contracts, the PublicWorks Department 11 has drafted andpublished an employer’s specific‘standard’ set of forms of contract.

when they relate to buildings and‘engineering contracts’ when they relateto infrastructure 7, systems 8 andequipment installations 9. Thedistinction between these terms is ofno legal significance, and indeedconstruction contracts as a class areregarded by Malaysian law, not as aseparate category of contracts but apart of the general law of contract.

In most cases, the only parties toa construction contract are theEmployer and the Contractor 10.However, in actual practice, in alllikelihood, a construction projectfrequently involves a large numberof contributors or participants whoare contractually interlinked by amatrix of contractual arrangements.The roles of such contributors arediscussed below.

Forms of Construction Contracts

The main matters for which aconstruction contract normally makesprovision are the extent of obligations

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Lately, the Construction IndustryDevelopment Board (CIDB) has issueda standard form of contract forbuilding works 12. These forms ofcontract may be used as published,but they are frequently amended. Atrue standard form i.e. one which isproduced by a body which isrepresentative of the industry e.g. theConstruction Industry DevelopmentBoard (CIDB), is in principle unlikelyto attract the operation of the ‘contraproferantum’ principle 13. However,the position may well be differentwhere an employer or contractorrepeatedly contracts on the basis ofstandard form contract containing hisown amendments 14 or one that is self-styled as a standard form 15.

Other standard forms of contractin used in the construction industryinclude those published by particularemployers e.g. Tenaga NasionalBerhad, Putrajaya Holdings, TelekomMalaysia Berhad and the like for theirspecific projects and a sprinkling offoreign forms. The latter includethose standard forms generated bybodies such as the Joint ContractsTribunal (JCT), the Institution of CivilEngineers (ICE), the InternationalFederation of Consulting Engineers(FIDIC) and various internationalbodies for use in relation to specialistworks 16.

Roles of the parties

In addition to the employer andthe contractor, the operation of aconstruction contract commonlyinvolves a number of other personsnot party to the contract itself 17.Except where the contractorundertakes to design as well as toconstruct the works 18, the employerwill usually either undertake thedesign departmentally 19 orcommission the design from aprofessionally qualified person e.g.architect or engineer whose rightsand obligations will be governed bythe contract under which he isengaged 20.

Most sizeable constructioncontracts make provision for theemployer to be represented during theprogress of the works by one or morecontract administrators 21. Such

person or persons may be givenauthority to act as the employer’sagent in supervising the works andtransmitting information andinstructions to the contractor; theymay also be empowered by theconstruction contract itself to exercisecertification and other decision-making powers which are bindingupon both the employer and thecontractor.

The principal contractadministrator has traditionally beenthe engineer or architect responsiblefor designing the works, although thisis by no means necessarily so. Arecent trend especially in ‘Design andBuild’ and ‘Management’ types ofcontracts has been for non-professionals such as projectmanagers, construction managers andthe like to undertake the said role. Inaddition, many contracts provide forthe appointment of a quantitysurveyor to carry out some of theadministrative functions. A sub-contractor is one who carries out partof the contract, and who works undera contract with the main contractorwho is for all intents and purposes ofthe sub-contract, the former’semployer. A sub-contractor whosupplies only materials but undertakesno work or other services under thesub-contract is commonly called a‘supplier’. Sub-contractors andsuppliers are referred to as ‘domestic’where they are selected by and theresponsibility of the main contractor;

they are often referred to as‘nominated’ where they are selectedby the employer, who then instructsthe main contractor to enter into therelevant sub-contract 22.

TYPES OF CONTRACTPROCUREMENT

� Traditional General Contracts

Appearing under various labelssuch as ‘General’ contracts,‘Employer-design’ contracts and‘Design-bid-build’ contracts, thesecontracts are basically characterizedby the separation of the design fromthe production or manufacture 23

elements of the contract. Under thiscontract procurement route, theemployer causes the design of the

12. Which includes a Main Contract Form and one for the Nominated Sub-Contract.13. Union Workshop (Construction) Co. v Ng Chow Ho Construction Co. Sdn. Bhd.

[1978] 2 MLJ 229.14. Chester Grosvenor Hotel Co Ltd v Alfred McAlpine Management Ltd (1991) 56

BLR 115. See also Barnard Pipeline Technology Ltd. v Marston Construction Co Ltd[1992] CILL 743.

15. E.g. the JKR or PWD Standard Forms.16. Notably the Institution of Electrical Engineers, the Institution of Mechanical

Engineers and the Institution of Chemical Engineers to name a few.17. See Ir. Harbans Singh K.S. ‘Engineering and Construction Contracts Management:

Law and Principles’ at P10-19.18. See Design and Build Contracts.19. Example, the Public Works Department by ‘in-house’ designers.20. e.g. BEM Standard Form of Agreement (BEM Form 2000 Edn)21. Called S.O., Engineer, Architect, Employer’s Representative, etc. depending on the

form of contract employed.22. Other common categories of sub-contractors include ‘designated (or named) sub-

contractors, ‘selected’ sub-contractors, ‘specified’ sub-contractors, etc.23. i.e. construction or installation.

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works to be prepared by hisprofessional designers 24 and theninvites the contractor to tender onthe basis of the completed design 25.The contractor builds ormanufactures what the designershave specified. Since the designelement is within the ambit of theemployer’s obligations, heaccordingly assumes allresponsibility for all design workundertaken. The contractor is onlyanswerable for the building orconstruction aspects of the works i.e.the quality of materials used andworkmanship involved in thecontract.

Another significant characteristicof this form of procurement is that asingle main contractor 26 undertakestotal responsibility to the employerfor all the work under the contract.In so far as parts of the work are infact carried out by otherorganisations, these operate as sub-contractors to the main contractorand do not enter into directcontractual relations with theemployer 27. However, where sub-contractors are selected by theemployer 28, the main contractor’sresponsibility is frequentlycircumscribed and a limited form ofcontract is entered between theemployer and the chosen sub-contractor.

� Design and Build Contracts

A design-and-build contract 29,also known as a ‘package deal’ or‘turnkey contract’ 30, is one underwhich the contractor undertakes bothdesigning and constructing thecontract works, which are to becompleted in such a way as to meetthe requirements of the employer 31.The defining characteristic of this typeof contract is the combination of most(if not all) of the essential tasks of aproject e.g. design procurement,manufacture, fabrication, production,construction and management into asingle package. Taken to the extreme,the arrangement also places the taskof financing, procuring approvals,complete fitting out, technology-transfer and the like on thecontractor.

Accordingly, the contractorshoulders full responsibility and soleliability for the design andconstruction elements of the worksin so far as these are included withinthe ambit of his obligations. Ininstances of default or breach by thecontractor, the onus is not on theemployer to distinguish the particularelement involved be this design,quality of materials or workmanshipor the party actually culpable. Hisredress is solely at the contractor’sexpense 32.

Selection of the contractor isnormally based on competitivetendering or negotiations andpayment effected on either an interim,milestone or lump sum basis. It iscommon under such an arrangementto find that the supervisory powersof the employer’s representative aremore limited than those of a contractadministrator under a traditionalgeneral contract 33. Hence, unliketraditional general contracting, theemployer’s representative plays alimited administrative role which maybe confined to conductingindependent checks and auditing thecontractor’s works. The contractor,his sub-contractors 34 and professionaladvisors are responsible for all aspectsof the works inclusive of managingthe contract up to its final realization.

� Management contracts

A comparatively recentdevelopment on large and complexprojects has been the emergence ofthe ‘management contractor’, whoseonly role is to manage, co-ordinateand supervise the work of numerousspecialists by whom the whole of theconstruction work is carried out.Under a modern managementcontract, these specialists areemployed as sub-contractors 35 to themain or management contractor 36,but the latter is relieved of anyresponsibility to the employer for sub-contractor defaults 37. The underlyingphilosophy of this species of contractprocurement is that the managementof the construction process constitutesa particular expertise which can bedistinctly identified and accordinglyaddressed through the employment ofthe management contractor. Thelatter is for all intents and purposesnot a builder in the strict sense butan independent professionalproviding essentially a managementservice. This common thread runs,in addition through the constructionmanagement route of contractprocurement 38.

Compared to traditional generalcontracting or design and build typesof contracts, management contracting

24. either, in-house or external consultants.25. See JKR 203 and 203A Forms PAM ‘98 With Quantities and Without Quantities

Edns etc.26. Sometimes called a ‘General Contractor’ or ‘Contractor’ (in short).27. Hence avoiding any privity of contract between the parties.28. Where this is so (as frequently in respect of specialist work) the employer may

dictate the terms of the sub-contract as well as the sub-contractor’s identity.29. or ‘Design and Construct’ Contract.30. ‘Turnkey Contract’ was defined in High Mark (M) Sdn. Bhd. v Patco Malaysia Sdn.

Bhd. [1984] 28 BLR 12931. Such contracts are normally entered into on a lump sum basis.32. See Greaves (Contractors) Ltd. v Baynham Meikle and Partners [1975] 4 BLR 56;

[1975] 1 WLR 1095, CA.33. See PWD Form DB/T 2002 Edn.34. Who should ideally of the ‘domestic’ type although there is a tendency to include

‘nominated’ ones.35. Popularly called ‘Works Contractors’ or ‘Trade Contractors’.36. The management contractor is normally entitled to be reimbursed for all payments

made to sub-contractors in addition to his own fee for the management servicesprovided.

37. See JCT Management Contract - JCT MC 87.38. See below.

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is unfortunately deficient in theavailability of standard forms ofconditions of contract. On the locallevel, no particular authority,institution or body has published anysuch form. Hence, there is a tendencyto use either ‘bespoke’ forms ormodified foreign forms such as JCTMC 87 39 or the ICE New EngineeringContract 40.

� Construction management

As aptly named, constructionmanagement contracts are a sub-setof the general corpus of managementtype of contracts and as such sharecommon characteristics withmanagement contracts. These havemetamorphosed recently into analternative to the latter type ofcontracts and are being employedmainly on large and complex projectshaving a multiplicity of trades, usersand designers 41. In essence, aconstruction management contract isan arrangement under which theemployer enters into a directcontractual relationship with each ofthe specialist contractors 42, while atthe same time employing a‘construction manager’ to providemanagerial and supervisory servicesfor the project.

The obligations undertaken by theconstruction manager in such a casedepend upon the terms of the contractby which he is employed 43.

Owing to the novelty of thismethod of contract procurement,there is a paucity of standard formsof conditions of contract available foruse by the local construction industry.The tendency is to either employ a‘bespoke’ form or to use the JCT CM94 Form 44, albeit in a modified form.A further alternative is to draw up aseries of contracts i.e. between theemployers and firstly the constructionmanager, secondly each member ofthe design team and thirdly eachspecialist trade contractor.

� Hybrids

In addition to the main types ofcontract strategy described above,there have also developed hybridssuch as 45:

(i) ‘Develop and construct’ contract:this is similar to a design andbuild contract, but a conceptdesign is prepared byindependent professionalsengaged by the employer beforethe design and build contractoris selected 46;

(ii) ‘Design and manage’ contract:This is similar to a managementcontract, but the contractor isalso responsible for detaileddesign or for managing thedesign process;

(iii) ‘Design and constructionmanagement’ contract: This issimilar to constructionmanagement but the constructionmanager is also responsible fordetailed design or for managingthe design process.

There are no published standardform contracts governing any of theabove hybrids and the practice is toemploy ‘ad hoc’ or ‘bespoke’ formscustomized for the particular projector application.

� Term contracts

A ‘term contract’ is one by whichan employer seeks to make provisionfor the carrying out of certaincategories of work (usually minorworks of alteration or repair and/ormaintenance) during a specifiedperiod of time 47. Depending upon theterms on which tenders are invitedand accepted, the resulting legalrelationship may be a contract whichbinds the contractor to carry outwhatever work of the specifieddescription the employer chooses toorder during the period stated 48.

39. JCT Standard Form of Management Contract (1987 Edn).40. ICE New Engineering Contract Option F - Management Contract.41. See ‘Construction Management Form - Report and Guidance’ the Centre for

Strategic Studies in Construction, University of Reading [1991].42. Also called ‘Trade Contractors’ or ‘Works Contractors’.43. See Rosehaugh Stanhope (Broadgate phase 6) plc v Redpath Dorman Long Ltd.

[1990] 50 BLR 69, CA; Beaufort House Development Ltd v Zimmcor (International)Inc [1990] 50 BLR 91, CA.

44. The JCT Standard Form of Construction Management (1994 Edition).45. See Piyush Joshi ‘Law Relating to Infrastructure Projects’ at P22-25.46. This being basically to avoid the purported shortcomings of the other forms of

‘Package Deal’ types of contracts.47. The period is usually 1 year but there are instances in local practice where a

longer period of up to 5 years has been employed.48. Percival Ltd. v LCC Asylums and Mental Deficiency Committee (1918) 87 LJKB

677. The JCT Measured Term Contract (1989) permits either party to determinethe contract by giving notice, but requires the contractor to carry out all orderswhich can be completed before the expiry of such notice.

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Alternatively, the acceptance of atender may result in a ‘standing offer’by the contractor, which ripens intoa contract on each occasion that anorder is placed but which may berevoked at any time 49.

At the moment, there is no localstandard form of conditions ofcontract for a term contract thoughthere is a tendency to either modifythe JCT Standard Form of MeasuredTerm Contract (1989 Edition) or togenerate ‘bespoke’ forms.

� Miscellaneous Contracts

Over and above the commonmethods of contract procurementdescribed above, there exist othertypes of contracts that are beingutilized by the local constructionindustry. These are essentiallyvariations of the conventionalmethods and have been developedto address specific uses. Suchcontracts include, inter alia, thefollowing:

(i) ‘Build, operate and transfer 50

contract’: This is a type of aprivately financed contractwhereby the contractor financesthe project, designs it ,undertakes the construction,owns and operates it over theconcession period and on itsexpiry transfers the beneficialownership of the project back tothe employer 51.

(ii) ‘Serial contract’: This is a contractresulting from a procedure called‘serial tendering’. Fundamentally,a serial tender is a standing offerto carry out work for more thanone project in accordance withthe tender submitted for theinitial project, or based onhypothetical bills of quantitiesrepresenting the average projectof a series 52.

(iii) ‘Continuation contract’: This is an‘ad hoc’ arrangement to extendthe scope of the initial or originalcontract beyond its originalambit i.e. there is no standingoffer to do more work than thatoriginally envisaged. The

original and continuationcontracts are dealt withseparately. If and when the latterarises, the original contract maybe used as a basis for realizingthe continuation contract 53

(iv) ‘Periodic contract’: This is similarto a term contract, but theexecution of work or supply ofgoods is required at intervals,regularly or on demand ratherthan being continuous for astated time 54.

(v) ‘Partnering contract’: Thiscontract is in essence anextension to the normal serialcontract whereby over a pre-determined period of time, thecontractor automatically receivesall new contracts from theemployer with payment to bemade by reference to an initiallyagreed formula 55.

(vi) ‘Independent contract’: This isessentially a ‘contract forservices’ whereby the partyundertaking a stipulated task foran agreed consideration is free toselect his own mode of doing it.He is neither under the controlor direction of the other 56.

There are no published localstandard forms of conditions ofcontract governing the abovemiscellaneous contracts and use ismade of ‘ad hoc’ or ‘bespoke’ forms.

SPECIAL PARTIES

� The Government departments

The extent to which contracts canbe made on behalf of the FederalGovernment, and the Governments ofthe states is governed by theGovernment Contracts Act 1949 57.For the procedure pertaining to theenforcement of such contracts andmatters relating to proceedings by andagainst the Federal Government andthe Government of the states, theapplicable statutes are theGovernment Contracts Act 1949 andThe Government Proceedings Act1956 58.

In general, a construction contractentered into on behalf of theGovernment 59 is enforceable by andagainst the Government.Accordingly, the Government isbound by a contract made by a properagent acting within the scope of hisauthority but not otherwise 60. AGovernment Officer who enters intoa contract within the scope of his

49. Great Northern Rly Co v Witham [1873] LR 9 CP 16.50. Also called ‘BOT’ Contract. See also Piyush Joshi ‘Law Relating to Infrastructure

Projects’ at P22-25.51. See Ir. Harbans Singh K.S. ‘Engineering and Construction Contracts Management:

Pre-Contract Award Practice’ at P132-138.52. See The Aqua Group ‘Tenders and Contracts for Building’ (2nd Edn.) at P 119.53. See Ir. Harbans Singh K.S ‘Engineering and Construction Contracts Management:

Law and Principles’ at P256.54. See Robinson, Lavers, Tan & Chan ‘Construction Law in Singapore and Malaysia’

[2nd Edn.] at P428.55. See ‘Dispute Avoidance and Resolution Task Force (DART) of the American

Arbitration Association Report on partnering at P86.56. E.g. Consultants, Suppliers, etc. See Stevenson Jordan & Harrison v MacDonald &

Evans [1952] 1 TLR 101 and Syed Mubarak bin Syed Ahmad v Majlis PeguamNegara [2001] 4 MLJ 167.

57. Rev. 1973 (Act 120)58. Rev. 1988 (Act 359). See generally also the Rules of the High Court 1980 Ord. 73

for proceeding by and against the Government.59. It does not include municipal councils and public corporations.60. Under the Government Contract Act 1949 (Act 120) SS 2 & 3, all contracts made

in Malaysia on behalf of the Government shall, if reduced in writing, be made inthe name of the Government and signed or authorized as provided for under theAct. Any authorization under S 2 or 3 shall be in the form set out in the scheduleto the Government Contracts Act 1949 (Act 120).

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authority is not liable to be suedpersonally upon any contractmade in that capac i ty 61.Act ions by or aga ins t theGovernment are instituted ordefended by the At torneyGeneral 62.

� Local authorities

A local authority 63 mayenter into contracts inclusive ofconst ruct ion contrac tsnecessary for the discharge ofany of its functions 64. A localauthority must make standingorders with regard to contractsfor the execution of works orthe supply of goods or materials65. However, a contractor is notbound to inquire whether therelevant standing orders havebeen complied with, and non-compliance by itself does notinvalidate any contract 66.

A local authority is bound byany contract entered into by acommittee to which the necessarypowers have been delegated 67, orby any officer acting within hisactual or ostensible authority 68.Protection is afforded to localauthorities or persons acting in theexecution of statutory or otherpublic duties in respect of any act,neg lec t or defaul t done orcommit ted by the Publ icAuthorities Protection Act 1948 69.

� Companies, corporations andpartnerships

Companies, corporations andpartnerships may enter intoconstruction contracts like anyother person. In fact the formalitiesrequired for the execution ofcontracts by companies ,corporations and partnerships areeffectively identical to those forindividuals, save for particularrequirements as stipulated in therespective statutory enactments 70.A company may choose to make acontract in writing, under itscommon seal or a contract may bemade on behalf of the person byany person under its express orimplied authority 71.

61. Government Contracts Act 1949 (Act 120) S 8 also provides that a public officershall be personally liable when he expressly pledges his personal credit or wherehe contracts otherwise than as an agent of the Government. According to S 6, nocontracts entered into except in accordance with the Act shall be deemed to havebeen made by the authority of the Government. See also Dunn v Macdonald[1897] 1 QB 401; affd [1897] 1 QB 555, CA; Sim Siok Eng v Government of Malaysia[1978] 1 MLJ 15.

62. For the Federal Government, the Attorney General. For the state of Sabah andSarawak, the Attorney General of such state and for all other states, the LegalAdvisor of such state.

63. Defined in Local Government Act 1976 (Act 171) to include any City Council,Municipal Council or District Council. S13 stipulates that every local authorityshall be a body corporate.

64. See Local Government Act 1976 (Act 171) S 36(1).65. See Local Government Act 1976 (Act 171) S 36(2).66. See North West Leicestershire District Council v East Midlands Housing Association

Ltd. [1981] 3 All ER 364, [1981] 1 WLR 1396, CA.67. See Local Government Act 1976 (Act 171) S 36(2).68. As to the ostensible authority of various officers see A Roberts & Co Ltd. v

Leicestershire County Council [1961] Ch 555, [1961] 2 All ER 545; CarltonContractors v Bexley Corpn [1962] 60 LGR 331. Cf North West Leicestershire DistrictCouncil v East Midlands Housing Association Ltd. [1981] 3 All ER 364, [1981] 1WLR 1396, CA.

69. Act 198, See also Local Government Act 1976 (Act 171) S124.70. See e.g. Companies Act 1965 (Act 125), Partnership Act 1961 (Act 135), etc.71. Companies Act 1965 (Act 125) S 35(4).72. For a definition of a partnership see Partnership Act 1961 (Act 135) S 3(1) and

Gulazam v Noorazman and Sobath [1957] 23 MLJ 45; Ratna Ammal & Anor v TanChow Soo [1964] 30 MLJ 399.

73. See Partnership Act 1961 (Act 135) S 7 & 8. See also Pembinaan Thin Chai SdnBhd v Citra Muda Sdn Bhd & Anor [2002] 3 MLJ 107.

74. See Chan King Yue v Lee @ Wong [1962] MLJ 379; Bannatyne v D&C Mac Iyer[1906] 1 K.B. 103.

Contracts made by or onbehalf of a corporation whichif made by private personswould be required to be inwriting, or which would bevalid although made by paroleonly, may be similarly made onbehalf of a corporation by anyperson acting under its expressor implied authority whetherby seal or not.

For partnerships 72, wheneither party is a member of thepartnership, the partnershipwill be liable under the contractif the contracting party wasacting within the scope of hisauthority 73. In general , amember of a partnership isregarded as an agent of thef i rm and b inds the o the rpa r tne r s in mak ing anycontract fa l l ing within thenormal course of business ofthe firm 74.

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FORMATION OF CONTRACT

� Negotiated contracts

The formation of constructioncontracts is governed by the ordinarycontractual rules of offer andacceptance 75. Where a contractorquotes a price for works in a documentheaded ‘estimate’ this may be treatedas an offer 76. Acceptance must beabsolute and unqualified 77 and in fullconformity with any requirements laiddown in the offer 78.

Any purported acceptance may, ifit alters the terms of the offer orintroduces new terms, be regarded asa counter-offer and thus a rejectionof the original offer 79. Where theparties ‘negotiate’ by deliveringinconsistent standard-form documentsto each other, the usual outcome isthat, when work commences ormaterials are supplied, this will bedeemed to constitute acceptance of thelast document delivered 80.

Where a contract is concluded afterthe contractor has commenced theworks, it may easily be concluded thatthe parties intended the contract togovern all the work, including whathas already been done 81.

� Tenders

In general, an invitation tocontractors to submit tenders to carryout construction works is not an offerbut merely an invitation to treat 82;the employer is in consequence underno obligation to accept the lowest orany of the tenders received 83.However, an express undertaking bythe employer to accept the lowesttender will be binding upon thesubmission of a tender which conformswith any conditions laid down 84.Moreover, the employer may in othercases be under an implied obligationto give reasonable consideration to anytender submitted in accordance withthe published conditions 85.

The unconditional acceptance of atender creates a binding contract. Untilsuch acceptance occurs, the contractoris free to withdraw his tender 86 bygiving notice of withdrawal to theemployer 87. This will be sonotwithstanding any undertaking by

the contractor to keep his offer open88, unless that undertaking is made bydeed or given for consideration 89.

An unsuccessful tenderer isnormally not entitled to recover thecost of preparing his tender from theemployer 90, except where theinvitation to tender was givenfraudulently and without any intentionof accepting it in any event 91.However, a promise by the employerto pay for such services may be impliedwhere the work involved far exceedswhat would normally be required ofthe contractor or where the employeris able to make profitable use of theinformation supplied 92.

Where an employer invites tendersfrom contractors to supply such work

75. See Ir. Harbans Singh K.S. ‘Engineering and Construction Contracts Management:Law and Principles’ at P61 to 81.

76. Croshaw v Pritchard and Renwick [1899] 16 TLR 45. An inaccurate estimatewhich is not an offer may give rise to liability in the tort of negligence: see J & J CAbrams Ltd v Ancliffe [1978] 2 NZLR 420.

77. Section 7(a) Contracts Act 1950 (Act 136).78. See Rajeswari Thedshana Murthy v Kin Nam Realty Development Sdn. Bhd. [1993]

1 MLJ 88.79. Hyde v Wrench [1840] 3 Beav. 334, 49 ER 132; Trollope & Colls Ltd. and Holland,

Hannen & Cubitts Ltd. v Atomic Power Construction Ltd. [1962] 3 All ER 1035.80. Chichester Joinery Ltd. v John Mowlem & Co plc. [1987] 42 BLR 100; Butler Machine

Tool Co. v Ex-Cell-O-Corp. [1979] 1 All ER 965.81. Trollope & Colls Ltd and Holland, Hannen & Cubitts Ltd v Atomic Power

Constructions Ltd [1962] 3 All ER 1035 [1963] 1 WLR 333.82. Defined by Lord Parker as ‘an offer to receive offers’ in Fisher v Bell [1961] QB 394.83. Spencer v Harding [1870] LR 5 CP 561.84. Harvela Investments Ltd v Royal Trust Co of Canada (CI) Ltd [1986] AC

207, [1985] 2 All ER 966, HL.85. Blackpool and Fylde Aero Club Ltd v Blackpool Borough Council [1990] 3

All ER 25, [1990] 1 WLR 1195, CA; cf Fairclough Building Ltd v Port TalbotBorough Council [1992] 62 BLR 82, CA; Hughes Aircraft SystemsInternational v Airservices Australia [1997] 146 ALR 1.

86. Section 5(1) Contracts Act 1950 (Act 136).87. Section 6 Contracts Act 1950 (Act 136). See also Cook Islands Shipping

Co Ltd v Colson Builders Ltd [1975] 1 NZLR 422.88. Routledge v Grant [1828] 4 Bing 653; Dickinson v Dodds [1876] 2 Ch D

463.89. The Canadian courts have upheld such undertakings despite the absence

of consideration: see R v Ron Engineering Ltd [1981] 119 DLR (3d) 267.Most local employers protect themselves against withdrawal by requiringthe contractor to furnish a ‘tender’ or ‘bid’ bond.

90. Harris v Nickerson [1873] LR 8 QB 286; William Lacey (Hounslow) Ltd vDavis [1957] 2 All ER 712 at 715.

91. Richardson v Silvester [1873] LR 9 QB 34.92. William Lacey (Hounslow) Ltd. v Davis [1957] 2 All ER 712, [1957] 1 WLR

132; Marston Construction Co. Ltd. v Kigass Ltd. [1989] 46 BLR 109.93. See Ir. Harbans Singh K.S. ‘Engineering and Construction Contract

Management: Pre-Contract Award Practice’ at P511 to 515.94. E.g. supply items, repair, renovation, maintenance, etc.

or goods as the employer may requireduring a specified period, the legalrelationship which is brought intoexistence by the acceptance of a tenderdepends upon the terms of theinvitation to tender.

� Purchase Orders

The purchase order system is oneof the methods of contractprocurement based essentially on thenature of the work and its valueutilized by employers as distinct fromthe tender system discussed above 93.Synonymous with the ‘quotation’system, the purchase order system isused principally for minor works 94.The calling of quotations by the

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employer is in the legal sensetantamount to an invitation to treat.The contractor’s submission of aquotation in response to theemployer’s request will legallyconstitute the making of an ‘offer’or ‘proposal’. The mere labelling ofthe submission as a quotation is notconclusive of its legal effect. Thecontents will have to be carefullyscrutinized to elicit the intention ofthe submitting party 95. The formalissue of the purchase order by theemployer constitutes an acceptanceof the quotation (or offer) in thecontractual sense and therebyperfects the contract.

� Letters of intent

A letter of intent is a documentwhich expresses an intention to enterinto a contract with the recipient atsome time in the future 96. Its legaleffects, if any, depend upon the trueconstruction of the words used 97 andthe relevant circumstances betweenthe parties 98. The document mayhave no legal effect at all 99; it mayconstitute an offer of payment whichthe recipient is free to accept byperformance of specified services 100;

or (exceptionally) it may create anancillary or interim contract whichwill entitle the recipient to recover hiswasted costs if the intended futurecontract does not materialize 101.

Where a letter of intent does notresult in any kind of contractualrelationship, a recipient who carriesout work in accordance with itsterms may nevertheless be entitledto payments on a restitutionarybasis 102 e.g. on a quantum meritbasis.

� Consideration

To be enforceable at law, apromise must be supported byvaluable consideration 103. Aunilateral declaration is not enoughto make a contract and that noquestion of contract under sealarises unless it falls within one ofthe exceptions in Section 26 of theContracts Act 1950 104. Anundertaking by a contractor tocarry out work where no price isagreed is generally enforceable,

since consideration exists in theform of an implied promise by theemployer to pay a reasonable sum.A promise by an employer to payan additional sum in return for thecontractor’s mere carrying out ofexisting contractual obligations isgiven without consideration and isthus unenforceable 105, unless thecourt is able to discern sufficientpractical benefit to the employerfrom the arrangement 106.Furthermore, a contractor may filea claim on an act done prior to apromise made by the employerprovided the contractor had doneor abstained from doing somethingpursuant to the desire of theemployer and not necessarily inpursuance of a promise to be madeby the latter 107.

� Formalities

The general legal position is thatthe formation of a constructioncontract requires no particularformalities. Such a contract may

95. Croshaw v Pritchard [1899] 16 TLR 45. See also Zain Azahari bin ZainalAbidin v Wearne Brothers (1983) Sdn Bhd [2002] 1 MLJ 254.

96. Its normal purpose is to reassure the recipient. Cf the ‘letter of comfort’sent by a parent company: Kleinwort Benson Ltd v Malaysia Mining CorpnBhd [1989] 1 All ER 785, CA.

97. British Steel Corpn v Cleveland Bridge and Engineering Co Ltd [1984] 1 AllER 504 at 509-510 per Robert Goff J.

98. Mashaha Navigation Sdn. Bhd. v Palm Oil Products (M) Bhd. & Anor [1989]1 CLJ 393, HC.

99. As in Ayer Hitam Tin Dredging Malaysia Bhd. v YC Chin Enterprises Sdn.Bhd. [1994] 2 MLJ 754, [1994] 2 SCR 90, SC.

100. Turriff Construction Ltd v Regalia Knitting Mills Ltd [1971] 9 BLR 20; cfMonk Construction Ltd v Norwich Union Life Assurance Society [1992] 62BLR 107, CA.

101. Such a contract might also render the recipient liable for defectiveperformance.

102. British Steel Corpn v Cleveland Bridge and Engineering Co Ltd [1984] 1 All ER504, in which the absence of a contract precluded a counter-claim by the employerfor alleged delays in performing the work in question. See also Contracts Act1950 (Act 136) S71 and Siow Weng Fatt v Susur Rotan Mining Ltd. [1967] 2 MLJ118, PC and Wilson Smithelt & Cape (Sugar) Ltd. v Bangladesh Sugar & FoodIndustries Corpn [1986] 1 Lloyd’s Rep 378.

103. See Section 2(d) Contracts Act 1950 (Act 136) for the definition of consideration.104. Per Gill FJ in Guthrie Waugh Bhd. v Malaippan Muthucumani [1972] 2 MLJ 62, FC.105. Stilk v Myrick [1809] 2 Camp 317; Sharpe v San Paulo Rly Co [1873] 8 Ch App

597.106. Williams v Roffey Bros & Nicholls (Contractors) Ltd [1991] 1 QB 1, [1990] 1 All ER

512, CA.107. Per Gunn Chit Tuan SCJ in South East Asia Insurance Bhd. v Nasir Ibrahim [1992]

2 MLJ 362, SC; cf Section 2(d) and 26(b) Contracts Act 1950 (Act 136).

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108. In practice most domestic sub-contracts and minor works are made orally. Theprincipal problem here is merely from the evidential point of view in the event ofa dispute.

109. Peter Lind & Co. Ltd. v Mersey Docks & Harbour Board [1972] 2 Lloyd’s Rep. 235;New Zealand Shipping Co. Ltd. v Satterthwaite & Co. Ltd. [1975] A.C. 154 (P.C.).

110. See Section 10(2) Contracts Act 1950 (Act 136).111. As required by a particular statutory enactment.112. Although Section 79 Contracts Act 1950 (Act 136) permits the guarantee to be

also in an oral form.113. The actual contents varies with the type of contract and the requirements of the

particular form of contract used. For further details see Ir. Harbans Singh K.S.‘Engineering and Construction Contracts Management: Pre-Contract AwardPractice’ at P536 to 574.

114. Or an informal equivalent such as an exchange of correspondence indicating offerand acceptance.

115. Sometimes ‘bespoke’ or ‘ad hoc’.116. For contract based on Drawings and Specifications. See JKR Form 203 (Rev. 10/

83).117. And design where this is part of the contractor’s scope.118. Bills of quantities (or B.Q.) may not be required for smaller or less complex projects

where the drawings and specifications themselves provide sufficient informationor in the event the contract is of the ‘package deal’ type.

119. For building works this is currently the ‘Standard Method of Measurement ofBuilding Works’ as published by the Institution of Surveyors, Malaysia and forCivil Engineering is the ‘Civil Engineering Standard Method of Measurement’(CESMM) as published by CIDB, Malaysia.

120. See C Bryant & Son Ltd v Birmingham Hospital Saturday Fund [1938] 1 All ER 503.121. Also called ‘Schedule of Unit Rates’ in some contracts.

be validly made orally 108, byconduct or in writing. Contracts byconduct are difficult to establishevidential ly and are oftenencountered where parties have hada course of dealing before. A furtherillustration of the above, occasionswhere an employer makes an offerto a contractor for the performanceof certain works upon stated terms,and without making any expressacceptance, or counter-offer, thecontractor carries out the work 109.The bulk of construction contractsare either in writing 110 or evidencedin writing 111. Written evidence isalso required for a contract ofguarantee 112, under which thecontractual performance of one ofthe parties is guaranteed by a thirdparty.

SCOPE OF CONTRACT

� Contract documents

There are no par t icu larrestrictions upon the documentsby which a construction contractmay be formed. It is trite that thecontents of the said documentsmust accurately and completelyrecord the express terms andconditions of agreement reachedby the parties inclusive of allrights, duties, obligations andliabilities. The following is a briefdescr ip t ion of the types ofdocuments which constitute thecontract documents 113 :

(i) Agreement or art ic les ofagreement: This document 114

describes in general terms theparties, the contract works andthe price, and evidences theintention of the parties to bebound;

(ii) Conditions of contract: Detailedconditions, often in standardform 115 (with or withoutamendments) , amplify andexplain the basic obligations ofthe parties and lay downadministrative procedures to befollowed during the progress ofthe works;

(iii) Appendix to the conditions:Certain information specific toa particular contract, such asdates of commencement orcompletion and amounts ofl iquidated damages, iscommonly required to beinserted by the parties in anAppendix to the conditionsbefore the contract is executed;

(iv) Drawings and plans: Drawingsare prepared by whoever isresponsible to the employer forthe design of all or part of theproposed works, and are themajor vehicle for conveying theintentions of the designer to thecontractor. Among othermatters , they provideinformation as to the shape,appearance, location andinteraction of the componentparts of the proposed works;

(v) Specifications: This documentamplifies the contract drawingsby providing a verbaldescription of such methods asthe scope of work 116, methods

of construction, quality offinishes and standards ofworkmanship 117 to be provided.It may also specify levels ofperformance which individualitems of work are required toachieve;

(vi) Bil l of quantit ies : Thisdocument itemises in greatdetail the contract work asdescribed in the drawings andthe specifications 118. It may,but need not constitute anexhaustive statement of thework which the contractorundertakes to perform in returnfor the agreed price. Where, asis common, the bill of quantitiesis required by the contract tobe drawn up in accordance witha particular standard method ofmeasurement 119, any deviationfrom the prescribed methodmay entitle the contractor toclaim payment for additionalwork 120;

(vii) Schedule of rates 121: Wherethere are no priced bill of

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quantities 122, a documentsetting out rates applicable tovarious categories of contractwork may be required for theassessment of interimpayments, the valuation ofvariations or (in a measure andvalue contract) the calculationof the total amount due to thecontractor;

(viii) Programme or methodstatement : Although acontractor is commonlyrequired to furnish suchdocuments 123, they arefrequently defined by thecontract in such a way thatthere is no obligation on eitherparty to comply with the datesor methods contained in them.In such cases these documentsare regarded merely as aids inproject planning andcoordination;

(ix) Miscellaneous documents :Various other documents maybe required for sufficiency,c lar i ty and completenesspurposes. These include, interalia, documents such as thecontractor ’s tendersubmissions, any addendaand/or clarifications, posttender submiss ionnegot iat ions , documentsamending the offer in anyway and the like; and

(x) Design and build documents:Certain design and buildcontracts replace the documentsl isted above with threealternative documentscomprising the ‘Employer’sRequirements’ issued by theemployer and the ‘Contractor’sProposals’ and the ‘ContractSum Analysis’ submitted by thecontractor 124.

Incorporation and Priority ofDocuments

A formal construction contractusually contains a number ofdocuments which are incorporatedby reference into the agreement

executed by the parties. Theconditions of contract mayexpressly define the documentswhich constitute the contract 125,and may make provision for thepriority of documents in the case ofdiscrepancies 126.

Standard sets of contractconditions are sometimesincorporated by reference intocontracts which are not formallyexecuted 127. Such cases can leadto uncertainty as to which particularset of conditions is intended forincorporation 128. These problemsare especially acute in relation tosub-contracts which purport toincorporate some or a l l theprovisions of the main contract 129.

122. In contracts based on drawings and specifications or design and build contracts.123. See the effect of a tender submission being incorporated in Yorkshire Water

Authority v Sir Alfred McAlpine & Sons (Northern) Ltd. [1985] 32 BLR 114 andHavant Borough Council v South Coast Shipping Co. Ltd. [1996] CILL 1146.

124. See PWD Form DB/T 2002 Edn.125. See the second recital and clause 1(a)(i) JKR Form 203A (Rev. 10/83).126. See clause 4.1 CIDB Standard Form of Contract for Building Works (2000 Edn.).127. These may arise from e.g. an exchange of correspondence, or an informal

notification that a tender has been accepted.128. See e.g. Killby & Gayford Ltd v Selincourt Ltd [1973] 3 BLR 104, CA; SP Chua Pte.

Ltd. v Lee Kim Tah (Pte.) Ltd. [1993] 3 SLR 122.129. See e.g. Royden (M) Sdn. Bhd. v Syarikat Pembenaan Yeoh Tiong Lay Sdn. Bhd.

[1992] 1 MLJ 33.130. See Mulpha Pacific Sdn Bhd v Paramount Corp Bhd [2003] 4 MLJ 357; Shore v

Wilson [1842] 9 Cl & F 355, HL; Investors Compensation Scheme v WestBromiwich Building Society [1998] 1 All ER 98, HL.

131. See Section 92 Evidence Act 1950 (Act 56); cf Tindok Besar Estate v Tinjar Co.[1977] 2 MLJ 229.

Construction of Contract

Where a contract is made inwriting, the meaning to be given toits express terms is a question of law.The court will seek to give effect tothe intention of the parties asexpressed in the written documents130. It is settled law that a writtendocument is presumed to haveembodied all material terms andconditions and no extrinsic evidencewill be permitted to contradict, vary,add to or subtract from the writtenterms save for exceptions permittedby the law 131.

If a written document containsan ambigu i ty wh ich cannoto the rwi se be sa t i s f ac to r i l y

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resolved, it will be construedadver se ly to the pa r ty whoproffered it for execution underthe ‘contra proferantum’ rule 132.In seeking the meaning of acont rac t , wr i t t en words a renorma l ly p re sumed to t akeprecedence over printed words inthe event of inconsistency 133.However, this presumption can bereversed by a clear provision inthe contract 134. Furthermore,c lauses and words are to beconstrued not by itself standingalone, but in the light of otherwords appearing in the context inwhich it is used and all otherc lauses r e l a t ing the reby 135.Where possible, the grammaticaland ordinary sense of words is tobe adhered to, unless they lead tosome absurd i ty o r to somerepugnance or inconsistency withthe rest of the document, in whichcase the words may be modifiedso as to avoid that absurdity orinconsistency 136.

The construction of a contractalso involves the application of ahost of cannons of constructionand p rocedura l gu ides 137

including the following, namely,words as interpreted must beconsistent with the spirit andle t t e r o f the ag reement 138,typographica l e r rors may becorrected to give effect to theparties’ intention 139, the contractmust be construed as at the datei t was made 140 and a id s tointerpretation within the contractdocument itself be considered inthe construction process. Wherea contract is partly oral or madeby conduct 141, the ascertainmentof the terms of the contract is aquestion of fact 142.

Implied Terms

A construction contract may besubject to certain terms that areexpressly included in the contract.In seeking to establish the intentionof the parties to a contract, certainterms need to be implied 143; thesebeing namely by custom and usage

pertaining to a particular type oftransaction 144, the courts based onthe intention of the parties 145 andcertain provisions contained instatute, or generally by law 146.

There is a paucity of termsimplied by custom and usage andby statute or law in constructioncontracts. However, in respect ofconstruction contracts, the courts domake various implications of which

132. Per Lord Brightman in Kandasami v Mohamed Mustafa [1983] 2 MLJ 85, [1983]4 PCC 183, PC. For a recent application of this rule see MBF Finance Bhd vSim Peng Bee @ Sim Bay Bee & Anor [2003] 5 MLJ 303.

133. Robertson v French [1803] 3 East 130 applied in Bumiputera Malaysia BerhadKuala Trengganu v Mae Perkayuan Sdn. Bhd. [1998] 2 MLJ 76; [1993] 1 SCR385, SC.

134. John Mowlem & Co Ltd v British Insulated Callenders Pension Trust Ltd [1977]3 Con LR 64, DC.

135. Per Salleh Abbas FJ in Trengganu State Economic Development Corporation vNade Finco Ltd. [1982] 1 MLJ 365, FC.

136. Grey v Pearson [1875] 6 HLC 61 at 106. See also Polygram Records Sdn. Bhd.v The Search & Anor [1994] 3 MLJ 127, HC.

137. See Ir. Harbans Singh K.S. ‘Engineering and Construction ContractsManagement: Law and Principles’ at P292 to 299.

138. Lim Yee Teck & Ors v Shell (M) Trading Sdn. Bhd. [1985] 2 MLJ, 265; [1985] 4PCC 433, PC.

139. Ng Siew Wah & Ors v MAA Holdings Sdn. Bhd. & Anor [1985] 2 MLJ 332, SC.140. City Investments Sdn. Bhd. v Koperasi Serbaguna Cuepacs Tanggungan Berhad

[1985] 1 MLJ 285, FC, [1988] 1 SCR 122; 4 PCC 709, PC141. Allen v Pink [1838] 4 M & W 140; J Evans & Sons (Portsmouth) Ltd v Andrea

Merzario Ltd [1976] 2 All ER 930, CA.142. Smith v Hughes [1871] LR 6 QB 597; British Crane Hire Corpn v Ipswich Plant

Hire Ltd [1975] QB 303 1 All ER 1059, CA.143. Hamid Abdul Rashid, Dr. v Jurusan Malaysia Consultants (Sued as a Firm) [1997]

1 AMR 637.144. Hamzah & Yeang Sdn. Bhd. v Lazar Sdn. Bhd. [1985] 1 CLJ 72, FC and Udachin

Development Sdn. Bhd. v Datin Peggy Taylor [1985] 1 MLJ 121, FC.145. Sababumi (Sandakan) Sdn. Bhd. v Datuk Yap Pak Leong [1998] 3 MLJ 151, FC.146. E.g. S14 to 16 Sale of Goods Act 1957 (Act 382), S6 Hire Purchase Act 1967

(Act 212), etc.147. Liverpool City Council v Irwin [1977] AC 239 at 255,257, HL.148. Trollope & Colls Ltd v North West Metropolitan Regional Hospital Board [1973] 2

All ER 260 at 268, HL, per Lord Pearson.149. Liverpool City Council v Irwin [1977] AC 239 at 263, HL, per Lord Salmon and

Hamid Abdul Rashid, Dr. v Jurusan Malaysia Consultants (Sued as a Firm) [1997] 1AMR 637.

two broad categories may bediscerned 147. First, there are thoseusual terms which the law implies intoall contracts of a certain type unlessthe parties have shown an intentionto exclude or modify them. In relationto construction contracts, suchimplied terms include the employer’sobligations to co-operate with and notto hinder the contractor and thecontractor’s obligations as to thestandard of work and the time forcompletion.

Second, a term may be impliedinto an individual contract where thecourt finds that the parties must haveintended it to form part of theircontract 148, and where the transactionwould otherwise be inefficacious,futile and absurd 149. The conditionsfor such an implication are that it

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150. ‘The Moorcock’ [1889] PD 64 at P68 applied in Sababumi (Sandakan) Sdn. Bhd. vDatuk Yap Pak Leong [1998] 3 MLJ 151, FC; [1997] 1 MLJ 587, CA.

151. Reigate v Union Manufacturing Co (Rambottom) Ltd. [1918] 1 KB 592; and YapNyo Nyok v Bath Pharmacy Sdn. Bhd. [1993] 2 MLJ 25, HC.

152. BP Refinery (Westernport) Pty Ltd v Hastings Shire Council [1977] 52 ALJR 20 at26, PC.

153. See e.g. Greater London Council v Cleveland Bridge and Engineering Co Ltd [1986]34 BLR 50, CA (no implied term as to regular and diligent progress); KC Lim &Associates Sdn. v Pembenaan Udarama Sdn. Bhd. [1980] 2 MLJ 26, FC (no impliedterm that developer was able to carry on the project at or reasonably near thearchitect’s estimated costs), etc.

154. See Bruno Zornow (Builders) Ltd v Beechcroft Developments Ltd [1990] 51 BLR 16(implication of fixed date for completion). 143. Hamid Abdul Rashid, Dr. v JurusanMalaysia Consultants (Sued as a Firm) [1997] 1 AMR 637.

knowledge and serve as anintroduction for further study/updating as it is irrefutable that onecannot escape the direct or indirecteffects of such contracts in whatevercapacity one is involved in theengineering/construction industry.

REFERENCES

1. Ir. Harbans Singh K.S.,‘Engineering and ConstructionContracts Management: Law &Principles and Pre-ContractAward’.

2. Ir. Harbans Singh K.S.,‘Malaysian Precedents andForms: Engineering andConstruction Contracts’, MLJSdn. Bhd.

3. Piyush Joshi ‘Law Relating toInfrastructure Projects’,Butterworths

4. Robinson, Lavers, Tan & Chan,‘Construction Law inSingapore and Malaysia’ [2nd

Edn.], Butterworths.

5. Sir Peter Mallet, ‘TheEncyclopedia of Forms andPrecedents: Building andEngineering Contracts’ [5th

Edn.], Butterworths.

6. The Aqua Group, ‘Tenders andContracts For Building’ [2nd

Edn.]

7. V. Sinnadurai, ‘Law ofContract’ [3rd Edn.] Lexis-Nexis-Butterworths.

must be reasonable and equitable; itmust be necessary to give businessefficacy to the contract, so that noterm will be implied if the contract iseffective without it 150; it must beso obvious that ‘it goes withoutsaying’ 151; it must be capable of clearexpression and it must not contradictany express term of the contract 152.Where the parties have contracted onthe basis of a detailed standard formdocument, the courts are generallyunwilling to imply terms on this basis,even where to do so would improvethe contract 153; although there areexceptions 154.

SUMMARY

Construction contracts are asvaried in their form nature, type andcontent as there the projects or worksthey circumscribe within their ambit.From a mere handshake agreement toa multi-party, multi-volume expressdocument, they span the completespectrum of contracts that are hithertoknown to mankind. Whatever thepurpose behind their conception andeventual formalization, theimportance of construction contractsespecially in Malaysia has evolvedover the years as the constructionindustry has matured from ad-hocarrangements into formal/legalisticrelationships evidenced by expresspronouncements of the parties’

dealings, rights, obligations andliabilities. It can therefore be inferredthat this metamorphosis has servedas the seed of crystallization of thespecies of contracts called‘construction’ contracts; the topic ofreview of this article.

Legal practitioners are wellconversant with the intricacies of thesubject matter at hand. However,most of the players in the constructionindustry such as engineers, architects,quantity surveyors, employers, etc.have at most times a fairlyrudimentary awareness of thecontracts which they are privy to orhave to deal with. For a non-legallytrained practitioner, this can beintimidating and practically mindboggling. Perhaps, the essence of theinstant paper will equip suchpractitioners with the basic

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