Construction Contracts an Overview

7/16/2019 Construction Contracts an Overview

http://slidepdf.com/reader/full/construction-contracts-an-overview-5634f84fe8e7b 1/13T H E I N G E N I E U R

By Ir. Harbans Singh K.S. 1

Construction

Contracts: An Overview

6T H E I N G E N I E U R

coverfeature



coverfeature

A n engineering/construction

project in its lifetime from

initial inception to

eventual realization (and

subsequently within the limitation

period 2) touches on a whole spectrum

of legal disciplines ranging fromcontractual, commercial, civil and the

likes. This may be so despite the fact

that in its nascent and active stages,

it may be basically contractual in

essence. Hence, for a proper

appreciation of the encompassing

legalities when addressing the issue

of construction law, it is prudent to

consider all relevant fields of law such

as the law of contract, law of tort,

civil law, commercial law and public

law3

.The law of contract forms the core

of the field of construction law and

in due recognition of its significance,

this article has been penned to

elucidate the basic considerations vis-

à-vis the species of contracts going

under the label of ‘construction

contracts’. The discussion is confined

merely to the essential matters so that

the reader can grasp a ‘macro’ view

of this important subject without

getting bogged down in the intricate

details. With brevity and relevancein mind, the principal considerations

have been addressed and the reader

is encouraged to make reference to

other legal treatises if a deeper

appreciation of the topic is desired.

CONTRACTS GENERALLY

Nature Of Construction Contracts

A construction contract, for thepurposes of this article, is a contract

under which one party 4 (commonly

called the Contractor) agrees for

valuable consideration to undertake

to carry out works for another party

(commonly called the Employer 5)

involving design (where applicable),

fabrication, erection, alteration, repair

or demolition of structures and/or

installations on a site 6 made available

by the latter. It covers a whole range

of contracts i.e. from a simple oral

agreement to repair a house roof to a

mega highway contract. Such contracts

are 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 the

means by which those obligationsmay be varied from time to time; the

time for completion and interim

control of the progress of the works;

the machinery for payment of the

contractor; supervision of the works

on behalf of the employer; insurance

against a range of risks; and the

remedies available to the parties in

respect of default.

The Malaysian construction

industry relies essentially on a

number of types of forms of contract;

these being notably the standardforms of contract, modified standard

forms of contract and ‘ad hoc’ or

‘bespoke’ forms of contract. The

principal standard forms in common

use include those published by the

various institutions e.g. the Institution

of Engineers, Malaysia and the

Pertubuhan Akitek Malaysia. For

public sector contracts, the Public

Works Department 11 has drafted and

published 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 and

equipment installations 9. The

distinction between these terms is of

no legal significance, and indeed

construction contracts as a class are

regarded by Malaysian law, not as a

separate category of contracts but a

part of the general law of contract.

In most cases, the only parties to

a construction contract are the

Employer and the Contractor 10.

However, in actual practice, in all

likelihood, a construction projectfrequently involves a large number

of contributors or participants who

are contractually interlinked by a

matrix of contractual arrangements.

The roles of such contributors are

discussed below.

Forms of Construction Contracts

The main matters for which a

construction contract normally makes

provision are the extent of obligations

7



Lately, the Construction Industry

Development Board (CIDB) has issued

a standard form of contract for

building works 12. These forms of

contract may be used as published,

but they are frequently amended. A

true standard form i.e. one which isproduced by a body which is

representative of the industry e.g. the

Construction Industry Development

Board (CIDB), is in principle unlikely

to attract the operation of the ‘contra

proferantum’ principle 13. However,

the position may well be different

where an employer or contractor

repeatedly contracts on the basis of

standard form contract containing his

own amendments 14 or one that is self-

styled as a standard form15

.Other standard forms of contract

in used in the construction industry

include those published by particular

employers e.g. Tenaga Nasional

Berhad, Putrajaya Holdings, Telekom

Malaysia Berhad and the like for their

specific projects and a sprinkling of

foreign forms. The latter include

those standard forms generated by

bodies such as the Joint Contracts

Tribunal (JCT), the Institution of Civil

Engineers (ICE), the International

Federation of Consulting Engineers(FIDIC) and various international

bodies for use in relation to specialist

works 16.

Roles of the parties

In addition to the employer and

the contractor, the operation of a

construction contract commonly

involves a number of other persons

not party to the contract itself 17.

Except where the contractor undertakes to design as well as to

construct the works 18, the employer

will usually either undertake the

design departmentally 19 or

commission the design from a

professionally qualified person e.g.

architect or engineer whose rights

and obligations will be governed by

the contract under which he is

engaged 20.

Most sizeable construction

contracts make provision for the

employer to be represented during the

progress of the works by one or more

contract administrators 21. Such

person or persons may be given

authority to act as the employer’s

agent in supervising the works and

transmitting information and

instructions to the contractor; they

may also be empowered by the

construction contract itself to exercisecertification and other decision-

making powers which are binding

upon both the employer and the

contractor.

The principal contract

administrator has traditionally been

the engineer or architect responsible

for designing the works, although this

is by no means necessarily so. A

recent trend especially in ‘Design and

Build’ and ‘Management’ types of

contracts has been for non-professionals such as project

managers, construction managers and

the like to undertake the said role. In

addition, many contracts provide for

the appointment of a quantity

surveyor to carry out some of the

administrative functions. A sub-

contractor is one who carries out part

of the contract, and who works under

a contract with the main contractor

who is for all intents and purposes of

the sub-contract, the former’s

employer. A sub-contractor whosupplies only materials but undertakes

no work or other services under the

sub-contract is commonly called a

‘supplier’. Sub-contractors and

suppliers are referred to as ‘domestic’

where they are selected by and the

responsibility of the main contractor;

they are often referred to as

‘nominated’ where they are selectedby the employer, who then instructs

the main contractor to enter into the

relevant sub-contract 22.

TYPES OF CONTRACT

PROCUREMENT

I Traditional General Contracts

Appearing under various labels

such as ‘General’ contracts,

‘Employer-design’ contracts and‘Design-bid-build’ contracts, these

contracts are basically characterized

by the separation of the design from

the production or manufacture 23

elements of the contract. Under this

contract procurement route, the

employer 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) 56BLR 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.

8

coverfeature



works to be prepared by his

professional designers 24 and then

invites the contractor to tender on

the basis of the completed design 25.

The contractor builds or

manufactures what the designers

have specified. Since the designelement is within the ambit of the

employer’s obligations, he

accordingly assumes all

responsibility for all design work

undertaken. The contractor is only

answerable for the building or

construction aspects of the works i.e.

the quality of materials used and

workmanship involved in the

contract.

Another significant characteristic

of this form of procurement is that asingle main contractor 26 undertakes

total responsibility to the employer

for all the work under the contract.

In so far as parts of the work are in

fact carried out by other

organisations, these operate as sub-

contractors to the main contractor

and do not enter into direct

contractual relations with the

employer 27. However, where sub-

contractors are selected by the

employer 28, the main contractor’s

responsibility is frequently circumscribed and a limited form of

contract is entered between the

employer and the chosen sub-

contractor.

I Design and Build Contracts

A design-and-build contract 29,

also known as a ‘package deal’ or

‘turnkey contract’ 30, is one under

which the contractor undertakes both

designing and constructing thecontract works, which are to be

completed in such a way as to meet

the requirements of the employer 31.

The defining characteristic of this type

of contract is the combination of most

(if not all) of the essential tasks of a

project e.g. design procurement,

manufacture, fabrication, production,

construction and management into a

single package. Taken to the extreme,

the arrangement also places the task

of financing, procuring approvals,

complete fitting out, technology-

transfer and the like on the

contractor.

Acco rd ingly, th e con tr actor

shoulders full responsibility and sole

liability for the design and

construction elements of the works

in so far as these are included within

the ambit of his obligations. In

instances of default or breach by thecontractor, the onus is not on the

employer to distinguish the particular

element involved be this design,

quality of materials or workmanship

or the party actually culpable. His

redress is solely at the contractor’s

expense 32.

Selection of the contractor is

normally based on competitive

tendering or negotiations and

payment effected on either an interim,

milestone or lump sum basis. It iscommon under such an arrangement

to find that the supervisory powers

of the employer’s representative are

more limited than those of a contract

administrator under a traditional

general contract 33. Hence, unlike

traditional general contracting, the

employer’s representative plays a

limited administrative role which may

be confined to conducting

independent checks and auditing the

contractor’s works. The contractor,

his sub-contractors 34 and professionaladvisors are responsible for all aspects

of the works inclusive of managing

the contract up to its final realization.

I Management contracts

A compar at ive ly rec ent

development on large and complex

projects has been the emergence of

the ‘management contractor’, whose

only role is to manage, co-ordinateand supervise the work of numerous

specialists by whom the whole of the

construction work is carried out.

Under a modern management

contract, these specialists are

employed as sub-contractors 35 to the

main or management contractor 36,

but the latter is relieved of any

responsibility to the employer for sub-

contractor defaults 37. The underlying

philosophy of this species of contract

procurement is that the managementof the construction process constitutes

a particular expertise which can be

distinctly identified and accordingly

addressed through the employment of

the management contractor. The

latter is for all intents and purposes

not a builder in the strict sense but

an independent professional

providing essentially a management

service. This common thread runs,

in addition through the construction

management route of contract

procurement 38.Compared to traditional general

contracting or design and build types

of 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 maydictate 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.

9

coverfeature



is unfortunately deficient in the

availability of standard forms of

conditions of contract. On the local

level, no particular authority,

institution or body has published any

such form. Hence, there is a tendency

to use either ‘bespoke’ forms or modified foreign forms such as JCT

MC 87 39 or the ICE New Engineering

Contract 40.

I Construction management

As apt ly named, construction

management contracts are a sub-set

of the general corpus of management

type of contracts and as such share

common characteristics with

management contracts. These havemetamorphosed recently into an

alternative to the latter type of

contracts and are being employed

mainly on large and complex projects

having a multiplicity of trades, users

and designers 41. In essence, a

construction management contract is

an arrangement under which the

employer enters into a direct

contractual relationship with each of

the specialist contractors 42, while at

the same time employing a

‘construction manager’ to providemanagerial and supervisory services

for the project.

The obligations undertaken by the

construction manager in such a case

depend upon the terms of the contract

by which he is employed 43.

Owing to the novelty of this

method of contract procurement,

there is a paucity of standard forms

of conditions of contract available for

use by the local construction industry.

The tendency is to either employ a‘bespoke’ form or to use the JCT CM

94 Form 44, albeit in a modified form.

A further alternative is to draw up a

series of contracts i.e. between the

employers and firstly the construction

manager, secondly each member of

the design team and thirdly each

specialist trade contractor.

I Hybrids

In addition to the main types of

contract strategy described above,

there have also developed hybrids

such as 45:

(i) ‘Develop and construct’ contract:

this is similar to a design and

build contract, but a concept

design is prepared by

independent professionals

engaged by the employer before

the design and build contractor is selected 46;

(ii) ‘Design and manage’ contract:

This is similar to a management

contract, but the contractor is

also responsible for detailed

design or for managing the

design process;

(iii) ‘Design and construction

management’ contract: This is

similar to constructionmanagement but the construction

manager is also responsible for

detailed design or for managing

the design process.

There are no published standard

form contracts governing any of the

above hybrids and the practice is to

employ ‘ad hoc’ or ‘bespoke’ forms

customized for the particular project

or application.

I Term contracts

A ‘term contract’ is one by which

an employer seeks to make provision

for the carrying out of certain

categories of work (usually minor

works of alteration or repair and/or

maintenance) during a specified

period of time 47. Depending upon the

terms on which tenders are invited

and accepted, the resulting legal

relationship may be a contract whichbinds the contractor to carry out

whatever work of the specified

description the employer chooses to

order 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 forStrategic 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 LJKB677. 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.

10

coverfeature



Alternatively, the acceptance of a

tender may result in a ‘standing offer’

by the contractor, which ripens into

a contract on each occasion that an

order is placed but which may be

revoked at any time 49.

At the moment, there is no localstandard form of conditions of

contract for a term contract though

there is a tendency to either modify

the JCT Standard Form of Measured

Term Contract (1989 Edition) or to

generate ‘bespoke’ forms.

I Miscellaneous Contracts

Over and above the common

methods of contract procurement

described above, there exist other types of contracts that are being

utilized by the local construction

industry. These are essentially

va ri at ions of the conventi onal

methods and have been developed

to address specific uses. Such

contracts include, inter alia, the

following:

(i) ‘Build, operate and transfer 50

contract’: This is a type of a

privately financed contract

whereby the contractor financesthe project, designs it,

undertakes the construction,

owns and operates it over the

concession period and on its

expiry transfers the beneficial

ownership of the project back to

the employer 51.

(ii) ‘Serial contract’: This is a contract

resulting from a procedure called

‘serial tendering’. Fundamentally,

a serial tender is a standing offer to carry out work for more than

one project in accordance with

the tender submitted for the

initial project, or based on

hypothetical bills of quantities

representing the average project

of a series 52.

(iii) ‘Continuation contract’: This is an

‘ad hoc’ arrangement to extend

the scope of the initial or original

contract beyond its original

ambit i.e. there is no standing

offer to do more work than that

originally envisaged. The

original and continuation

contracts are dealt with

separately. If and when the latter

arises, the original contract may

be used as a basis for realizing

the continuation contract 53

(iv) ‘Periodic contract’: This is similar

to a term contract, but the

execution of work or supply of

goods is required at intervals,

regularly or on demand rather

than being continuous for a

stated time 54.

(v) ‘Partnering contract’: This

contract is in essence an

extension to the normal serial

contract whereby over a pre-determined period of time, the

contractor automatically receives

all new contracts from the

employer with payment to be

made by reference to an initially

agreed formula 55.

(vi) ‘Independent contract’: This is

essentially a ‘contract for

services’ whereby the party

undertaking a stipulated task for

an agreed consideration is free to

select his own mode of doing it.He is neither under the control

or direction of the other 56.

There are no published local

standard forms of conditions of

contract governing the above

miscellaneous contracts and use is

made of ‘ad hoc’ or ‘bespoke’ forms.

SPECIAL PARTIES

I The Government departments

The extent to which contracts can

be made on behalf of the Federal

Government, and the Governments of

the states is governed by the

Government Contracts Act 1949 57.

For the procedure pertaining to the

enforcement of such contracts and

matters relating to proceedings by and

against the Federal Government andthe Government of the states, the

applicable statutes are the

Government Contracts Act 1949 and

The Government Proceedings Act

1956 58.

In general, a construction contract

entered into on behalf of the

Government 59 is enforceable by and

against the Government.

Accordingly, the Government is

bound by a contract made by a proper

agent acting within the scope of his

authority but not otherwise 60. A Government Officer who enters into

a 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 AmericanArbitration 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).

11

coverfeature



authority is not liable to be sued

personally upon any contract

made in that capaci ty 61 .

Act ions by or against the

Government are instituted or

defended by the Attorney

General 62.

I Local authorities

A local authority 63 may

enter into contracts inclusive of

construct ion contracts

necessary for the discharge of

any of its functions 64. A local

authority must make standing

orders with regard to contracts

for the execution of works or

the supply of goods or materials65. However, a contractor is not

bound to inquire whether the

relevant standing orders have

been complied with, and non-

compliance by itself does not

invalidate any contract 66.

A local authority is bound by

any contract entered into by a

committee to which the necessary

powers have been delegated 67, or

by any officer acting within his

actual or ostensible authority 68.

Protection is afforded to localauthorities or persons acting in the

execution of statutory or other

public duties in respect of any act,

neglect or default done or

committed by the Publ ic

Authorities Protection Act 1948 69.

I Companies, corporations and

partnerships

Companies, corporations and

partnerships may enter intoconstruction contracts like any

other person. In fact the formalities

required for the execution of

contracts by companies ,

corporations and partnerships are

effectively identical to those for

individuals, save for particular

requirements as stipulated in the

respective statutory enactments 70.

A company may choose to make a

contract in writing, under its

common seal or a contract may be

made on behalf of the person by

any person under its express or

implied 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, no

contracts 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 and

Sarawak, 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 on

behalf of a corporation which

if made by private persons

would be required to be in

writing, or which would be

valid a lthough made by parole

only, may be similarly made onbehalf of a corporation by any

person acting under its express

or implied authority whether

by seal or not.

For partnerships 72 , when

either party is a member of the

partnership, the partnership

will be liable under the contract

if the contracting party was

acting within the scope of his

authority 73 . In general, a

member of a partnership isregarded as an agent of the

f i rm and b inds the o ther

pa r tner s in making any

contract fa l l ing within the

normal course of business of

the firm 74.

12

coverfeature



coverfeature

FORMATION OF CONTRACT

I Negotiated contracts

The formation of construction

contracts is governed by the ordinary

contractual rules of offer andacceptance 75. Where a contractor

quotes a price for works in a document

headed ‘estimate’ this may be treated

as an offer 76. Acceptance must be

absolute and unqualified 77 and in full

conformity with any requirements laid

down in the offer 78.

Any purported acceptance may, if

it alters the terms of the offer or

introduces new terms, be regarded as

a counter-offer and thus a rejection

of the original offer 79

. Where theparties ‘negotiate’ by delivering

inconsistent standard-form documents

to each other, the usual outcome is

that, when work commences or

materials are supplied, this will be

deemed to constitute acceptance of the

last document delivered 80.

Where a contract is concluded after

the contractor has commenced the

works, it may easily be concluded that

the parties intended the contract to

govern all the work, including what

has already been done 81.

I Tenders

In general, an invitation to

contractors to submit tenders to carry

out construction works is not an offer

but merely an invitation to treat 82;

the employer is in consequence under

no obligation to accept the lowest or

any of the tenders received 83.

However, an express undertaking by

the employer to accept the lowesttender will be binding upon the

submission of a tender which conforms

with any conditions laid down 84.

Moreover, the employer may in other

cases be under an implied obligation

to give reasonable consideration to any

tender submitted in accordance with

the published conditions 85.

The unconditional acceptance of a

tender creates a binding contract. Until

such acceptance occurs, the contractor

is free to withdraw his tender 86 by

giving notice of withdrawal to the

employer 87. This will be so

notwithstanding any undertaking by

the contractor to keep his offer open88, unless that undertaking is made by

deed or given for consideration 89.

An unsucces sful tender er is

normally not entitled to recover the

cost of preparing his tender from the

employer 90, except where theinvitation to tender was given

fraudulently and without any intention

of accepting it in any event 91.

However, a promise by the employer

to pay for such services may be implied

where the work involved far exceeds

what would normally be required of

the contractor or where the employer

is able to make profitable use of the

information supplied 92.

Where an employer invites tenders

from 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 MachineTool Co. v Ex-Cell-O-Corp. [1979] 1 All ER 965.

81. Trollope & Colls Ltd and Holland, Hannen & Cubitts Ltd v Atomic PowerConstructions 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 ShippingCo Ltd v Colson Builders Ltd [1975] 1 NZLR 422.

88. Routledge v Grant [1828] 4 Bing 653; Dickinson v Dodds [1876] 2 Ch D463.

89. The Canadian courts have upheld such undertakings despite the absenceof 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 ContractManagement: Pre-Contract Award Practice’ at P511 to 515.

94. E.g. supply items, repair, renovation, maintenance, etc.

or goods as the employer may require

during a specified period, the legal

relationship which is brought into

existence by the acceptance of a tender

depends upon the terms of the

invitation to tender.

I Purchase Orders

The purchase order system is one

of the methods of contract

procurement based essentially on the

nature of the work and its value

utilized by employers as distinct from

the tender system discussed above 93.

Synonymous with the ‘quotation’

system, the purchase order system is

used principally for minor works 94.

The calling of quotations by the

14



employer is in the legal sense

tantamount to an invitation to treat.

The contractor’s submission of a

quotation in response to the

employer’s request will legally

constitute the making of an ‘offer’

or ‘proposal’. The mere labelling of the submission as a quotation is not

conclusive of its legal effect. The

contents will have to be carefully

scrutinized to elicit the intention of

the submitting party 95. The formal

issue of the purchase order by the

employer constitutes an acceptance

of the quotation (or offer) in the

contractual sense and thereby

perfects the contract.

I

Letters of intent

A letter of intent is a document

which expresses an intention to enter

into a contract with the recipient at

some time in the future 96. Its legal

effects, if any, depend upon the true

construction of the words used 97 and

the relevant circumstances between

the parties 98. The document may

have no legal effect at all 99; it may

constitute an offer of payment which

the recipient is free to accept by

performance of specified services 100;

or (exceptionally) it may create an

ancillary or interim contract which

will entitle the recipient to recover his

wasted costs if the intended future

contract does not materialize 101.

Where a letter of intent does not

result in any kind of contractualrelationship, a recipient who carries

out work in accordance with its

terms may nevertheless be entitled

to payments on a restitutionary

basis 102 e.g. on a quantum merit

basis.

I Consideration

To be enforceable at law, a

promise must be supported by

valuable consideration103

. A unilateral declaration is not enough

to make a contract and that no

question of contract under seal

arises unless it falls within one of

the exceptions in Section 26 of the

Contracts Act 1950 10 4. An

undertaking by a contractor to

carry out work where no price is

agreed is generally enforceable,

since consideration exists in the

form of an implied promise by the

employer to pay a reasonable sum.

A promise by an employer to pay

an additional sum in return for the

contractor’s mere carrying out of

existing contractual obligations isgiven without consideration and is

thus unenforceable 105, unless the

court is able to discern sufficient

practical benefit to the employer

from the arrangement 106.

Furthermore, a contractor may file

a claim on an act done prior to a

promise made by the employer

provided the contractor had done

or abstained from doing something

pursuant to the desire of the

employer and not necessarily inpursuance of a promise to be made

by the latter 107.

I Formalities

The general legal position is that

the formation of a construction

contract requires no particular

formalities. 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; cf Monk 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).

coverfeature

15



coverfeature

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 of a 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 offer

and 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 of Building 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 , by

conduct or in writing. Contracts by

conduct are difficult to establish

evidentially and are often

encountered where parties have had

a course of dealing before. A further

illustration of the above, occasionswhere an employer makes an offer

to a contractor for the performance

of certain works upon stated terms,

and without making any express

acceptance, or counter-offer, the

contractor carries out the work 109.

The bulk of construction contracts

are either in writing 110 or evidenced

in writing 111. Written evidence is

also required for a contract of

guarantee 112, under which the

contractual performance of one of the parties is guaranteed by a third

party.

SCOPE OF CONTRACT

I Contract documents

There are no part icular

restrictions upon the documents

by which a construction contract

may be formed. It is trite that the

contents of the said documentsmust accurately and completely

record the express terms and

conditions of agreement reached

by the parties inclusive of all

rights, duties, obligations and

liabilities. The following is a brief

descr ip t ion of the types of

documents which constitute the

contract documents 113 :

(i) Agreement or articles of

agreement : This document114

describes in general terms the

parties, the contract works and

the price, and evidences the

intention of the parties to be

bound;

(ii) Conditions of contract : Detailed

conditions, often in standard

form 115 (with or without

amendments), amplify and

explain the basic obligations of

the parties and lay down

administrative procedures to be

followed during the progress of

the works;

(iii) Appendix to the condit ions :

Certain information specific to

a particular contract, such as

dates of commencement or

completion and amounts of

l iquidated damages, is

commonly required to beinserted by the parties in an

Append ix to the cond it ions

before the contract is executed;

(iv) Drawings and plans: Drawings

are prepared by whoever is

responsible to the employer for

the design of all or part of the

proposed works, and are the

major vehicle for conveying the

intentions of the designer to the

contractor. Among other matters , they provide

information as to the shape,

appearance, location and

interaction of the component

parts of the proposed works;

(v) Specifications: This document

amplifies the contract drawings

by providing a verbal

description of such methods as

the scope of work 116, methods

of construction, quality of

finishes and standards of

workmanship 117 to be provided.

It may also specify levels of

performance which individual

items of work are required to

achieve;

(vi) Bill of quantities : This

document itemises in great

detail the contract work as

described in the drawings and

the specifications 118. It may,

but need not constitute an

exhaustive statement of the

work which the contractor

undertakes to perform in return

for the agreed price. Where, as

is common, the bill of quantitiesis required by the contract to

be drawn up in accordance with

a particular standard method of

measurement 119, any deviation

from the prescribed method

may entitle the contractor to

claim payment for additional

work 120;

(vii) Schedule of rates 121: Where

there are no priced bill of

16



quantities 12 2, a document

setting out rates applicable to

various categories of contract

work may be required for the

assessment of interim

payments, the valuation of

variations or (in a measure and value contract) the calculation

of the total amount due to the

contractor;

(viii) Programme or method

statement : Although a

contractor is commonly

required to furnish such

documents 12 3, they are

frequently defined by the

contract in such a way that

there is no obligation on either party to comply with the dates

or methods contained in them.

In such cases these documents

are regarded merely as aids in

project planning and

coordination;

(ix) Miscellaneous documents :

Various other documents may

be required for sufficiency,

c lar i ty and completeness

purposes. These include, inter

alia, documents such as thecontractor ’s tender

submissions, any addenda

and/or clarifications, post

tender submiss ion

negot iat ions , documents

amending the offer in any

way and the like; and

(x) Design and build documents:

Certain design and build

contracts replace the documents

listed above with threealternative documents

comprising the ‘Employer’s

Requirements’ issued by the

employer and the ‘Contractor’s

Proposals’ and the ‘Contract

Sum Analysis’ submitted by the

contractor 124.

Incorporation and Priority of

Documents

A formal construction contract

usually contains a number of

documents which are incorporated

by reference into the agreement

executed by the parties. The

conditions of contract may

expressly define the documents

which constitute the contract 125,

and may make provision for the

priority of documents in the case of

discrepancies 126.Standard sets of contract

conditions are sometimes

incorporated by reference into

contracts which are not formally

executed 127. Such cases can lead

to uncertainty as to which particular

set of conditions is intended for

incorporation 128. These problems

are especially acute in relation to

sub-contracts which purport to

incorporate some or a l l the

provisions of the main contract129

.

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 WaterAuthority 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 in

writing, the meaning to be given to

its express terms is a question of law.

The court will seek to give effect to

the intention of the parties asexpressed in the written documents130. It is settled law that a written

document is presumed to have

embodied all material terms and

conditions and no extrinsic evidence

will be permitted to contradict, vary,

add to or subtract from the written

terms save for exceptions permitted

by the law 131.

If a written document contains

an ambigu i ty which cannot

o therwise be sa t i s fac to r i ly

18

coverfeature



resolved, it will be construed

adver se ly to the par ty who

proffered it for execution under

the ‘contra proferantum’ rule 132 .

In seeking the meaning of a

cont rac t , wr i t t en words a re

normal ly p resumed to takeprecedence over printed words in

the event of inconsistency 13 3.

However, this presumption can be

reversed by a clear provision in

the contract 134. Furthermore,

c lauses and words are to be

construed not by itself standing

alone, but in the light of other

words appearing in the context in

which it is used and all other

c lauses r e la t ing the reby 13 5 .

Where possible , the grammaticaland ordinary sense of words is to

be adhered to, unless they lead to

some absurd i ty o r to some

repugnance or inconsistency with

the rest of the document, in which

case the words may be modified

so as to avoid that absurdity or

inconsistency 136 .

The construction of a contract

also involves the application of a

host of cannons of construction

and p rocedura l gu ides

137

including the following, namely,

words as interpreted must be

consistent with the spirit and

le t t e r o f the ag reement 13 8 ,

typographical errors may be

corrected to give effect to the

parties’ intention 139, the contract

must be construed as at the date

i t was made 140 and a id s to

interpretation within the contract

document itself be considered in

the construction process. Wherea contract is partly oral or made

by conduct 141, the ascertainment

of the terms of the contract is a

question of fact 142 .

Implied Terms

A construction contract may be

subject to certain terms that are

expressly included in the contract.

In seeking to establish the intention

of the parties to a contract, certainterms need to be implied 143; these

being namely by custom and usage

pertaining to a particular type of

transaction 144, the courts based on

the intention of the parties 145 and

certain provisions contained in

statute, or generally by law 146.

There is a paucity of terms

implied by custom and usage and

by statute or law in construction

contracts. However, in respect of

construction contracts, the courts do

make 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 v

Nade 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 Contracts

Management: Law and Principles’ at P292 to 299.138. Lim Yee Teck & Ors v Shell (M) Trading Sdn. Bhd. [1985] 2 MLJ, 265; [1985] 4

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

two broad categories may be

discerned 147. First, there are those

usual terms which the law implies into

all contracts of a certain type unless

the parties have shown an intention

to exclude or modify them. In relation

to construction contracts, such

implied terms include the employer’s

obligations to co-operate with and not

to hinder the contractor and the

contractor’s obligations as to the

standard of work and the time for

completion.

Second, a term may be implied

into an individual contract where the

court finds that the parties must have

intended it to form part of their

contract 148, and where the transaction

would otherwise be inefficacious,

futile and absurd 149. The conditions

for such an implication are that it

19

coverfeature


http://slidepdf.com/reader/full/construction-contracts-an-overview-5634f84fe8e7b 13/13

BEM

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 an

introduction for further study/

updating as it is irrefutable that one

cannot escape the direct or indirect

effects of such contracts in whatever

capacity one is involved in the

engineering/construction industry.

REFERENCES

1. Ir. Harbans Singh K.S.,

‘Engineering and Construction

Contracts Management: Law &

Principles and Pre-Contract

Award’.

2. Ir. Harbans Singh K.S.,

‘Malaysian Precedents and

Forms: Engineering andConstruction Contracts’, MLJ

Sdn. Bhd.

3. Piyush Joshi ‘Law Relating to

Infrastructure Projects’,

Butterworths

4. Robinson, Lavers, Tan & Chan,

‘Construction Law in

Singapore and Malaysia’ [2nd

Edn.], Butterworths.

5. Sir Peter Mallet, ‘The

Encyclopedia of Forms and

Precedents: Building and

Engineering Contracts’ [5th

Edn.], Butterworths.

6. The Aqua Group, ‘Tenders and

Contracts For Building’ [2nd

Edn.]

7. V. Sinnadurai, ‘Law of

Contract’ [3rd Edn.] Lexis-

Nexis-Butterworths.

must be reasonable and equitable; it

must be necessary to give business

efficacy to the contract, so that no

term will be implied if the contract is

effective without it 150; it must be

so obvious that ‘it goes without

saying’ 151; it must be capable of clear

expression and it must not contradict

any express term of the contract 152.

Where the parties have contracted on

the basis of a detailed standard formdocument, the courts are generally

unwilling to imply terms on this basis,

even where to do so would improve

the contract 153; although there are

exceptions 154.

SUMMARY

Construction contracts are as

varied in their form nature, type and

content as there the projects or works

they circumscribe within their ambit.From a mere handshake agreement to

a multi-party, multi-volume express

document, they span the complete

spectrum of contracts that are hitherto

known to mankind. Whatever the

purpose behind their conception and

eventual formalization, the

importance of construction contracts

especially in Malaysia has evolved

over the years as the construction

industry has matured from ad-hoc

arrangements into formal/legalisticrelationships evidenced by express

pronouncements of the parties’

dealings, rights, obligations and

liabilities. It can therefore be inferred

that this metamorphosis has served

as the seed of crystallization of the

species of contracts called

‘construction’ contracts; the topic of

review of this article.

Legal practitioners are well

conversant with the intricacies of the

subject matter at hand. However,

most of the players in the constructionindustry such as engineers, architects,

quantity surveyors, employers, etc.

have at most times a fairly

rudimentary awareness of the

contracts which they are privy to or

have to deal with. For a non-legally

trained practitioner, this can be

intimidating and practically mind

boggling. Perhaps, the essence of the

instant paper will equip such

practitioners with the basic

coverfeature