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Contract Administration For Construction Engineering Contracts 1
Contract Administration For Construction Engineering Contracts 1
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CONTRACT ADMINISTRATION FOR
CONSTRUCTION/ ENGINEERING CONTRACTS
DAY 1 - PROGRAMME
DAY 2 - PROGRAMME
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CONTENTS
6.0 VARIATIONS/CHANGES
10.0 DEFECTS
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CONSTRUCTION/
ENGINEERING CONTRACTS:
INTRODUCTION
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1.0 CONSTRUCTION/ENGINEERING CONTRACTS: INTRODUCTION
• TYPES OF CONTRACTS
1. GENERAL CONTRACTS
2. ENGINEERING/CONSTRUCTION CONTRACTS
2. MANAGEMENT TYPES
4. MISCELLANEOUS METHODS
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• BASIC CONTRACT PRINCIPLES
1. CONTRACT DEFINITIONS
2. ELEMENTS OF CONTRACT
• MISCELLANEOUS ISSUES
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SIMPLE
CONTRACTS
COLLATERAL SPECIALITY
CONTRACTS CONTRACTS
(DEED)
MATERIAL
& LABOUR
CONTRACTS ORAL
CONTRACTS
LABOUR
CONTRACT GENERAL EXPRESS
CONTRACTS
CONTRACTS:
TYPES
MATERIAL SUPPLY
MAIN CONTRACTS
CONTRACT
INDEPENDENT
CONTRACTS SUB-CONTRACTS
EMPLOYMENT SUB-SUB
CONTRACTS CONTRACTS
BASED ON
BASED ON A
APPROXIMATE SCHEDULE
QUANTITIES
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COMMON CONTRACT PROCUREMENT METHODS
TRADITIONAL
MANAGEMENT PACKAGE MISCELLANEOUS
GENERAL
TYPE DEAL TYPE METHODS
CONTRACTTING
MANAGEMENT CONSTRUCTION
CONTRACTING MANAGEMENT BUILD, OPERATE FAST
& TRANSFER TRACKING PARTNERING
2.0 MANAGEMENT 2% 3% 2% 1%
CONTRACTING
6.0 OTHER - 1% 1% 1%
MISCELLANEOUS
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FIG. 1-6: TRADITIONAL GENERAL CONTRACTING (TGC) – CONTRACTUAL RELATIONSHIPS
EMPLOYER
PROFESSIONAL
TEAM - DESIGN AND
CONTRACT ADMINISTRATION
SUB-
SUB-SUB SUB-
SUB-SUB
CONTRACTORS SUB--SUB SUPPLIERS
SUB CONTRACTORS SUB-
SUB-SUB SUPPLIERS
Key
_______ : Contractual Link
_____ : Responsibility
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FIG. 1-7: ‘TURNKEY’ CONTRACTS/DESIGN & CONSTRUCT (D&C) - CONTRACTUAL
RELATIONSHIPS
PROFESSIONAL 1. Architect
EMPLOYER 2. Engineers - C&S, M&E
ADVISORS 3. Quantity Surveyor
4. Other Specialist
1. Setting up Employers
Requirements
2. Auditing role during
construction
D & C CONTRACTOR
SUB-
SUB-SUB SUB-
SUB-SUB
CONTRACTORS SUB-
SUB-SUB SUPPLIERS CONTRACTORS SUB--SUB SUPPLIERS
SUB
Key
_______ : Contractual Link
_____ : Responsibility
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FIG. 1-8: MANAGEMENT CONTRACTING (MC) - CONTRACTUAL RELATIONSHIPS
EMPLOYER
MANAGEMENT
PROFESSIONAL TEAM CONTRACTOR
(MC)
1. Architect
2. Engineers - C&S, M&E
3. Quantity Surveyor
4. Other Specialist
Key
_______ : Contractual Link
_____ : Responsibility
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FIG. 1-9: CONSTRUCTION MANAGEMENT (CM) - CONTRACTUAL RELATIONSHIPS
EMPLOYER
PROFESSIONAL CONSTRUCTION
TEAM MANAGER (CM)
1. Architect
2. Engineers - C&S, M&E
3. Quantity Surveyor
4. Other Specialist
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* CONTRACT - DEFINATIONS
2.0 PER SECTION 2(h) MALAYSIAN CONTRACTS ACT 1950 (REV. 1974)
* An agreement
* Enforceable by Law
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FIRM OFFER/
PROPOSAL
+
UNQUALIFIED
ACCEPTANCE
+
CONSIDERATION
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DEFINITION/
MEANING
CHARACTERISTICS
MAIN TYPES
STANDARD
DISADVANTAGES FORMS OF TYPES
CONTRACT
ADVANTAGES
PURPOSE
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STANDARD FORMS OF CONTRACT
GOVERNMENT/ INTERNATIONAL
PRIVATE SECTOR
PUBLIC SECTOR CONTRACTS
1. FIDIC Conditions
2. ICE Conditions
JKR / PWD MISCELLANEOUS 3. IEEE Conditions
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2.0 COMMENCEMENT OF CONTRACT AT SITE
• APPROACHES IN:
1. TRADITIONAL GENERAL CONTRACTS
2. DESIGN & BUILD / TURNKEY CONTRACTS
• FORMALITIES:
1. CONDITIONS PRECEDENT
2. INSURANCES, PERFORMANCE BONDS, ETC.
• SITE POSSESSION : MEANING AND EFFECT
• SUBMITTALS :
1. CONSTRUCTION DRAWINGS
2. SHOP DRAWINGS
3. SAMPLES
4. QA AND QC DOCUMENTS
5. HEALTH AND SAFETY DOCUMENTS
6. METHOD STATEMENTS
• TEMPORARY WORKS
• ISSUES FOR ATTENDANCE OF NOMINATED SUB-
SUB-CONTRACTORS
• MISCELLANEOUS ISSUES
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• RELEVANT CASES
1. THE RADIO & GENERAL TRADING CO. SDN. BHD. V WYASS & FREYTAG (M)
SDN. BHD. [1998] 1 MLJ 346
2. LEC CONTRACTORS (M) SDN. BHD. V CASTLE INN SDN. BHD. & ANOR [2000]
3 MLJ 339
3. KLEINWORT BENSON LTD. V MALAYSIA MINING CORP. BHD [1989] 1 WLR 379
9. YIP SHOU SHAN V SIN HEAP LEE – MARUBENI SDN. BHD. [2002] 5 MLJ
43, HC`
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TAKING OVER OF COMMENCEMENT
THE SITE OF CONTRACT
COMMENCEMENT: COMMENCEMENT
SITE POSSESSION
OF CONTRACT
COMMON LABELS PERIOD
COMMENCEMENT
COMMENCEMENT
OF OPERATIONS OF WORKS
ON SITE
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PARENT COMPANY
GUARANTEE
PROTECTION AGAINST
CONTRACTOR’S FAILURES:
COMMON MECHANISMS
LETTER OF AWARENESS
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PROTECTION AGAINST CONTRACTOR’S FAILURES: AN OVERVIEW (PART I)
1. Letters of Comfort
2. Standby Letters of Credit
3. Insurances
PROCEDURAL
NATURE USE REQUIREMENTS
Cont’d….
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Cont’n.
MISCELLANEOUS MECHANISMS/
PERFORMANCE BONDS
INSTRUMENTS
DURATION
DURATION OF
OF FINANCIAL LIMITS PROCEDURAL
PROCEDURAL NON-
NON--PROVISION
PROVISION OF
OF RELEASE OF BOND
DEFINITION
DEFINITION TYPES
TYPES LIABILITY
LIABILITY OF LIABILITY REQUIREMENTS BOND/GUARANTEE /GUARANTEE
• See Robinson and • Two main types: • Normally stipulated in • Normally • Preliminary • Timing for • Seven main
Laver’s definition bond. Types include: stipulated in review submission circumstances
1. ‘Conditional/
Bond itself.
• Means of Default’ Bond 1. Entire duration of • Checks for • Consequences of • Effect of
guaranteeing to contract • Normally 5-10% authenticity failure to submit: breaches of
the employer: 2. ‘Unconditional/
terms and
On-Demand’ 2 Up to CPC - • Sometimes • Check for 1. Contract
conditions
1. The Bond ‘Construction’ higher compliance with provisions
contractor’s Bond formalities 2. Common law
financial • Features of • See use of
rules
local practice 3 CPC to Final ‘Indexed
viability and
Certificate – Performance
2. Contractor’s • Rules of
‘Maintenance’ Bonds’
construction
ability to Bond
and
perform
obligations enforcement 4 Up to date of
release stipulated
under the
contract by guarantor
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INSURANCES: AN OVERVIEW (PART I)
• Two Main Categorization: • Liability based • Loss based • Contractor: Common Types
1. Liability based • Indemnification of insured • Compensate insured for • Employer: Common Types
2. Loss based against damages payable to loss/damage directly
3rd party incurred by insured • Occupier: Common Types
• Difference: basis of
compensation • Examples: • Examples: • Management Corporation:
Common Types
1. 3rd Party Liability 1. Contractor’s All Risk
Insurance Policy
2. Workmen’s 2. Erection All Risk
Compensation Policy
3. Professional Indemnity
Insurance
IMPORTANT
IMPORTANT
BASIS
BASIS OF
OF STANDARD PARTIES
PARTIES COMMENCEMENT
COMMENCEMENT DURATION
DURATION FINANCIAL
FINANCIAL LIMITS
LIMITS TERMINATION
TERMINATION
CONTRACTING STANDARD OF
CONTRACTING CONDITIONS
CONDITIONS
EFFECTING POLICY
POLICY OF
OF POLICY
POLICY OF POLICY
POLICY OF
OF LIABILITY
LIABILITY OF
OF POLICY
POLICY
• Submission of • Six main ones i.e. • General rule: • Various possibilities: • Different formulae: • Normally stipulated • Three main methods:
proposal by employer in
1. Condition precedent 1. Named party 1. Date of 1. Up to issue of CPC tender/contract 1. Satisfaction of
• Issue of policy to liability 2. With insurable commencement of conditions
interest contract; or 2. Up to issue of CMGD • Guidelines for precedent in
• Effect of : 2. During estimating limits. contract e.g. issue
work/construction • Typical parties: 2. Date of 3. Up to issue of Final
1. Contracts of Certificate of CPC, etc.
commencement of • General rule on
‘uberrimae 3. As to risk 1. Employer work on site; or deductibles/excess 2. Termination of
fidei’ 2. Contractor 4. Up to Final Certificate
4. Following a loss plus fixed period clauses policy by
3. Sub-contractors 3. Date of delivery of breach/mutual
2. Cover notes, event 4. Selected 3rd parties material, etc.
etc. • Requirements agreement
5. As to subrogation • Effect of ‘cross • Function of the nature pertaining to extension
of period 3. Lapse of insurance
6. On contribution liability’ provisions of contract works period and/or
extension
FIG. 2-7 : INSURANCES – AN OVERVIEW (PART II)
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SITE POSSESSION: AN OVERVIEW
• Licence revocable by
Employer at any time
• Licence to be free from
any encumbrances
GENERAL
EXCEPTIONS
EXPRESS IMPLIED LEGAL POSITION
EXCEPTIONS POSSESSION
GENERAL LATEST LEGAL GENERAL
TO GENERAL ON PIECEMEAL EFFECT
PRINCIPLE POSITION LEGAL POSITION
PRINCIPLE BASIS?
• Contractor entitled to • Express Stipulations • Sufficient degree • General Position: No • Breach of Contract • Contractor entitled to
Sole/exclusive of possession/ loss occasioned
possession • Case Law • Exceptions: • Entitles Contractor to
access rescind Contract. • Contractor entitled to
a) Express EOT if expressly
• To execute work
stipulations to permitted
unimpeded
contrary contractually
• To be able to
b) Where Common • Otherwise, LAD
perform work
Law applies cannot be imposed
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SITE POSSESSION MEETINGS
MATTERS PARTICIPANTS
TIMING PURPOS E MINUTES
DEALT
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WORK PROGRAMME
MISCELLANOUES
REPORTS
AND DOCUMENTS METHOD STATEMENTS
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MONITORING OF
WORK PROGRESS
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3.0 MONITORING OF WORK PROGRESS
• PROGRAMMING OF WORKS
• PARTIES RESPONSIBLE:
1. EMPLOYER
2. MAIN CONTRACTOR
3. CONTRACT ADMINISTRATOR
• PROGRESS REPORTS
• SITE RECORDS
• MEETINGS:
1. SITE POSSESSION
2. PROGRESS/SITE
3. NSC COORDINATION
4. AD-HOC
• MISCELLANEOUS ISSUES
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• RELEVANT CASES
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FIG. 3-1 : WORK PROGRAMME - TYPICAL FORMS
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PRINCIPAL ACTIVITIES
IMPORTANT
MILESTONES FOR
EMPLOYER TO MEET SEQUENCE OF
ACTIVITIES
WORK PROGRAMME:
PRINCIPAL CONTENTS
IMPORTANT
TIMING OF ACTIVITIES
MILESTONES FOR
CONTRACTOR TO MEET
IDENTIFICATION OF
CRITICAL ACTIVITIES
AND CRITICAL PATH
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WORK PROGRAMME: AN OVERVIEW
• Effect of
Alternatives/
Revision
METHOD OF SEQUENCE OF FOR CONTRACT FOR
WORKING WORKING ADMINISTRATOR CONTRACTOR
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TO LEVY CONTROL OVER
PROGRESS OF THE WORKS
TO ENSURE CONTRACT
MISCELLANEOUS IS COMPLETED
PURPOSES ACCORDING TO
SCHEDULE
PROGRESS MONITORING:
EMPLOYER’S PURPOSES
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PROGRESS MONITORING: AN OVERVIEW
FREQUENCY/
DURATION PURPOSE METHODS BASIS PARTIES NATURE OF
RESPONSIBLE CHECKS
• From Site • Primary Purposes • Use of Contractor’s • Employer/ contract • On regular basis
Possession Work Programme administrator
• Secondary Purposes • Normally ‘monthly’
• To Issue of Final • Contractor
Certificate • Maybe
• Normally up to i. Weekly
Practical Completion ii. Fortnightly
only PROGRESS SITE iii. Quarterly, etc.
MEETINGS RECORDS
COORDINATION/
SITE SUB-
SUB-
SITE PROGRESS PROJECT ‘AD-
AD-HOC’
HOC’
POSSESSION CONTRACTORS
MEETINGS MANAGEMENT MEETINGS
MEETINGS MEETING
MEETINGS
OFFICIAL SITE
OFFICIAL WORK
PROGRESS DIARY
RECORDS
REPORTS
POST CONTRACT
AD-HOC AWARD STAGE: SITE PROGRESS
MEETINGS PRINCIPAL TYPES MEETINGS
OF MEETINGS
COORDINATION/
SUB-CONTRACTOR’S PROJECT
MEETINGS MANAGEMENT
MEETINGS
WHO DISTRIBUTION/
ENABLE PERMIT WORK MISCELLANEOUS PREPARES? CIRCULATION
CONTRACTOR TO PROGRESS TO
• Officially present • Be reviewed on • Enable Employer/ C.A. to • S.O./ Contract • To all parties/
progress report regular basis redress delay caused by Administrator attendees
him/them
• Present problems • Identify areas and
encountered causes of delay • Keep track of financial
progress/allocation
3RD PARTY
ONLY SITE ISSUES FINANCIAL ISSUES ISSUES AFFECTING MISCELLANEOUS
CONTRACT ISSUES
• Chairs Meeting • Main participant • Observers Only • By invitation only • Observer only
• Main participant • Participants if contract
administrator's assistants/
representatives
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‘AD-HOC’ MEETINGS: AN OVERVIEW
CONVENORS
TIMING PURPOSE
(AS APPLICABLE)
• The Employer
• The Contractor
• The Sub-Contractors
AS AND WHEN USUALLY TO DISCUSS
NECESSARY FROM DICTATED BY SPECIFIC ISSUES /
TIME TO TIME CIRCUMSTANCES MATTERS
• Completion of works
• Normally up to Practical
Completion only
PROVIDE NECESSARY OFFICIAL
INFORMATION/ EVIDENCE OFFICIAL WORK PROGRESS SITE DIARY
TO RECORDS REPORT
• Contractor’s Scope • Extension of Time • Best evidential value • Some evidential value
• NSC’s/DSC’s Scope • Additional Work
• Miscellaneous matters
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OFFICIAL WORK RECORDS: AN OVERVIEW
USE OF
DAILY WEEKLY FORTNIGHTLY DESIGNATED SIGNING OR
STAFF FOR ENDORSEMENT
• Preparing • By authorized
TIME OF SAFE
• Maintaining ENTRY Person(s) KEEPING
• Submitting • S.O/ Contract
• Daily Administrator • By S.O./Contract
FOR BASIS administrator
RECORD OF FOR CONTRACT OF OFFICIAL
SITE INFORMATION ADMINISTRATION PROGRESS REPORT • Up to lapse of
period of
limitation
• Undertaken • As to Site Work • Issued to Contractors • Contractor’s • Site/ factory visits • ‘As-Built’ sketches,
defaults drawings, diagrams,
• Coordination • Carried out by /omissions • Weather conditions etc.
Contractor
• Disruption to site • ‘As-erected’/ ‘As-
activities Installed’ Work/ plant,
etc.
FIG. 3-12 : SITE DIARY – AN OVERVIEW
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SUPERVISION OF WORKS/
CONTRACT ADMINISTRATION
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4.0 SUPERVISION OF WORKS/CONTRACT ADMINISTRATION
PURPOSE
DESIGNATION
ROLES
SOURCES OF DUTIES AND POWERS
REPRESENTATIVE/ASSISTANTS
PRINCIPAL DUTIES
LIABILITY
2.0 SUPERVISION
FORMS
DURATION
LEVEL
LIABILITIES
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ENSURE THAT CONTRACTOR
FULFILLS HIS OBLIGATIONS
ENSURE WORKS UNDER THE CONTRACT
SATISFACTORILY
COMPLETED WITHIN ENSURE THAT EMPLOYER
ORIGINAL CONTRACT PERIOD FULFILLS HIS OBLIGATIONS
AND PRICE UNDER THE CONTRACT
CONTRACT
ADMINISTRATION:
PRIMARY PURPOSES
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CONSTRUCTION SUPERINTENDING
MANAGER OFFICER/ S.O.
CONTRACT
PROJECT DIRECTOR ADMINISTRATORS:
ARCHITECT
COMMON
DESIGNATIONS
EMPLOYER’S
ENGINEER
REPRESENTATIVE
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AS TO
RIGHTS/ DUTIES UNDER
THE CONTRACT
WITH IMPLIED/
WITH EXPRESS OSTENSIBLE AS TO MATTERS AS TO OTHER
AUTHORITY AUTHORITY OF COST MATTERS
AS AN AGENT AS AN ADVISOR
OF THE EMPLOYER TO THE EMPLOYER
CONTRACT
ADMINISTRATOR:
RANGE OF ROLES
PERFORMED
AS AN INDEPENDENT AS AN INDEPENDENT/
CONTRACTOR IMPARTIAL
ADJUDICATOR
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CONDITIONS
CONDITIONS OF CONDITIONS OF
TERMS OF OF CONTRACT ENGAGEMENT/ CONTRACT
REFERENCE OF BEING SERVICES BEING
APPOINTMENT ADMINISTERED AGREEMENT ADMINISTERED
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ARCHITECT
SPECIALIST
CONSULTANT CIVIL ENGINEER
ELECTRICAL ENGINEER
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OVERALL SUPERVISION PROGRESS MONITORING
ISSUING INFORMATION,
DRAWINGS, DETAILS, ETC. ISSUING RELEVANT INSTRUCTIONS
MONITORING
PREPARING ‘FINAL ACCOUNT’
RECTIFICATION OF DEFECTS
FORMS OF SUPERVISION:
COMMON LABELS
PART-TIME SUPERVISION
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SUPERVISION/INSPECTIONS: OVERVIEW (PART I)
TYPICAL TYPICAL
CLAUSES IN NATURE PURPOSES
PROVISIONS IN
AGREEMENTS AND MEANING
BY-
BY-LAWS
• Engineer’s Agreement: • Building (Federal Territory of • Terms used synonymously • See Keating’s definition in
Kuala Lumpur) By-Laws 1985: ‘Building Contracts’
1. Clause 8.1 and 8.7 BEM • See Newey J’s definition
Form (1999) 1. By-Law 6: Supervision of • Three fold purpose:
Works • Distinction: Inspection imposes a
• Architect’s Agreement lesser duty: William Tompkinson 1. To ensure contractor
2. By-Law 23(1): Certificate For v St. Michael in the Hamlet. carries out work in
1. Clause 5(4)(iv) Part II: Occupation accordance with contract.
Architects (Scale of • In absence of express provisions
Minimum Fees) • By-Law 5(1) City of Kuala to contrary courts imply a duty of 2. To enable contract
(Amendment) Rules 1992 Lumpur (Earthworks) By-Laws supervision: Alexander Corfield v administrator to discharge
1975 David Grant. his obligations to employer.
2. Clause 9 Conditions of
Engagement of Architect • Malaysia: Statutory provisions 3. To enable contract
necessitate ‘supervision’ administrator to meet his
statutory obligations
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SUPERVISION/INSPECTIONS: OVERVIEW (PART II)
LEVEL OF RESIDENT
DURATION SUPERVISION LIABILITIES
SITE STAFF
REQUIRED
• Determining factors: • Determined by: • Necessity for Resident Site • Primary responsibility for
Staff (RSS) supervision: contractor’s.
1. Nature of works under 1. Conditions of engagement See East Ham Corp. v
contract • Typical examples: Bernard Sunley.
2. Applicable statutory
2. Conditions of engagement provisions e.g. By-Laws 1. Resident architect/engineer • Heads of liabilities of contract
2. Clerk-of-works. administrator for defaults/
• Normal periods: • Prevailing Forms: 3. Other relevant staff breaches:
1. Up to issue of Practical 1. Category I: Full- • Engagement:
Completion; or time/Standing/ Constant 1. Contractual
supervision 1. By employer; or 2. In tort
2. Up to application of certificate 2. By contract administrator 3. Statutory
for occupation; or 2. Category II: Part-
Time/Periodic Supervision • Powers and duties determined • Position of contract
3. Up to issue of Certificate of by engineering/construction administrators who are
Making Good Defects 3. Category III: ‘Nominal’ contract being administered professional engineers,
Supervision and/or letter of delegation of architects, etc.
• Common practice is up to issue of
Certificate of Making Good • Legal Position: power.
Defects • Responsibilities of:
1. Must be reasonable for
works involved 1. RSS
2. Must be sufficient to check 2. Contract Administrator
the important elements
3. Adequate to meet statutory
requirements
4. Sufficient to meet
obligations of engagement
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CONTRACT ADMINISTRATOR’S LIABILITIES: AN OVERVIEW (PART I)
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CONTRACT ADMINISTRATOR’S LIABILITIES: AN OVERVIEW (PART II)
TORTIOUS LIABILITY
• Laid down in • D owed P duty of • Application of the • Criterion: Objective • Per Hunter v • Only 3 types: • No liability to
Donoghue v care ‘Bolam Test’ Henley contractor
Stevenson • Less onerous 1. Deny existence of
• D breached this duty • Use of ‘Reasonable 1. There is a usual duty of care • Possible
• ‘Neighbourhood’ Man’ test • Use of standards and normal exceptions:
principle • Consequence: P prevailing at time of practice 2. Prove claim made See Para 5.9B5.
suffered • Use by Malaysian default not of type
• Important elements: loss/damage Courts 2. D did not adopt currently
• Proscribe use of the practice recognized
1. Causation • Loss/damage • 2 Categories: hindsight
2. Forseeability suffered not remote 3. Practice 3. Show service
1. Reasonable • See Eckersly v adopted by D rendered meets
skill & care Binnie & Partners would not be ‘Bolam Test’
2. Fitness for adopted by
another • No immunity to suit:
purpose Sutcliffe v Thackrah
reasonable D
• Need to satisfy all 3 • Situation per ‘Pure
element on balance Economic Loss’
of probabilities
STATUTORY LIABILITY
• In addition to Contractual and • Various Acts of Parliament • Liability under various By- • For professional contract
Tortious Liability applicable Laws e.g. UBBL, etc. administrator
• Various sub-heads: • Principal example: S71 Street, • Penalties/sanctions stipulated • Under specific Acts of
Drainage & Building Act 1974 in the By-Laws Parliament
1. Direct statutory liability
2. Under delegated legislation • Penalty for mis-supervision, etc. • Possible sanctions:
3. Professional liability 1. Fine
2. Suspension
3. Cancellation of
registration
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PAYMENTS/
COMMERCIAL MATTERS
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5.0 PAYMENTS/COMMERCIAL MATTERS
• PAYMENT TO SUB-
SUB-CONTRACTORS
• ‘BACK TO BACK’
BACK’ PAYMENTS
• RELEVANT CASES
* GUNUNG BAYU SDN. BHD. V SYARIKAT PEMBINAAN PERLIS SDN. BHD. [1987] 2 MLJ 332
* HAJI ABU KASSIM V TEGAP CONSTRUCTION SDN. BHD. [1981] 2 MLJ 149
* KAH SENG CONSTRUCTION SDN. BHD. V SELSIN DEVELOPMENT SDN. BHD. [1997] 1 CLJ
SUPP 448
* YONG MOK HIN V UNITED MALAY STATES SUGAR INDUSTRIES LTD. [1966] 2 MLJ 286
* JALLCON (M) SDN. BHD. V NIKKON METAL (M) SDN. BHD. (No. 2) [2001] 5 MLJ 716, HC.
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PROCEDURES AND CONDITIONS
PRECEDENT
QUANTUM/AMOUNT SET-OFF/DEDUCTIONS
TIMING ENFORCEMENT/HONOURI
NG
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TIMING OF PAYMENT TO CONTRACTOR: PRINCIPAL SCHEMES/SCHEDULES
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START
Contract administrator to
resolve all preliminary issues
No
No
Yes
Yes
Contract administrator to issue
formal record of issues agreed
upon by all relevant parties
Yes
Has he No
executed any physical
work?
Yes
Yes
Establish if it is necessary
for the contractor to apply for
the required payment
Yes
B C D
FIG. 5-4: FLOWCHART ON GENERAL PROCEDURE FOR PROCESSING OF PAYMENTS (PART II)
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B C D
Contractor not No
Is it mandatory?
obliged to apply
Yes
Has the No
date of valuation been
reached?
Yes
No Have the
parties involved been
identified?
Yes
E F G
FIG. 5-5: FLOWCHART ON GENERAL PROCEDURE FOR PROCESSING OF PAYMENTS (PART III)
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E F G
No
Yes Does he
sign off the No Does he officially
valuation report? register his protest with
valuers?
No Yes
Do the valuers No
Valuation deemed to have consider the objections
been accepted by the protest?
contractor
Yes
Do they No
agree with the Contractor may protest to
objections? the certifier if necessary
Yes
Valuers may revise/amend Does the
the valuation as necessary Contractor No
protest to the
certifier?
Valuers to endorse/sign off
the valuation report prepared Yes
H I J K
FIG. 5-6: FLOWCHART ON GENERAL PROCEDURE FOR PROCESSING OF PAYMENTS (PART IV)
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H I J K
M N O
Yes
Have all No
the stipulated pre-conditions been met?
Yes
Is the
subsequent Interim Certificate No
due?
Yes
Have all Prima facie,
No certificate cannot
the relevant pre-conditions
- been met?
be issued
Yes
Certifier to proceed with
preparation of Interim Certificate
P Q R S T
FIG. 5-8: FLOWCHART ON GENERAL PROCEDURE FOR PROCESSING OF PAYMENTS (PART VI)
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P Q R S T
No
Amount certified
Are for such parties
Yes to be indicated
there any official
assignees? separately in certificate
No
No Are
all procedural requirements met?
Yes
No Are
all formal requirements
met?
Yes
Certificate may be
challenged as invalid and No Is the signatory an
unenforceable, if and authorized person under the
when issued contract?
Yes
Yes
U V W X
FIG. 5-9: FLOWCHART ON GENERAL PROCEDURE FOR PROCESSING OF PAYMENTS (PART VII)
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U V W X
Yes
Prima facie, employer may
be in breach of contract. Is certificate
Contractor may take No
issued within the said
appropriate action for period?
employer’s breach
Yes
Contractor to Is the recipient
be furnished with No
of the original copy
original copy stipulated?
Yes
Default in service may
constitute a breach of
Is the certificate No contract on employer’s part.
issued to the stipulated To be corrected/ rectified
person? forthwith
Yes
No Is the service
of certificate formally
evidenced?
Yes
Y Z AA AB
FIG. 5-10: FLOWCHART ON GENERAL PROCEDURE FOR PROCESSING OF PAYMENTS (PART VIII)
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Y Z AA AB
Do the Omission to
recipients formally No acknowledge may
acknowledge receipt of lead to future evidential
document? problems
Yes
Contract administrator
No Is presentation to procure said
of certificate stipulated in the acknowledgements as
contract? soon as possible
Yes
Contractor
may present Is there a
certificate within No period stipulated for the
a reasonable presentation?
period of receipt
Yes
Yes
Does employer Omission to acknowledge may
formally acknowledges receipt No lead to future evidential
of the certificate from problems and may affect the
contractor? honouring of certificate
Yes
Employer to review Contractor to procure
certificate for validity said acknowledgement
as soon as possible
AC AD AE AF
FIG. 5-11: FLOWCHART ON GENERAL PROCEDURE FOR PROCESSING OF PAYMENTS (PART IX)
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AC AD AE AF
Yes
Employer must
No Are these
pay amount
expressly permitted by the
as certified
contract?
to the contractor
Yes
Has the Employer to determine amount
amount certified less the set- No due before the stipulated
-
offs/ deduction been honouring period lapses
established?
Yes
Yes
STOP
DEFAULT IN PAYMENT:
TYPICAL CONTRACTUAL
REMEDIES
© HSKS
CERTIFICATE WRONG ON ITS’ FACE
INTERIM CERTIFICATES:
TYPICAL CHALLENGES
MISCELLANEOUS CHALLENGES
© HSKS
DIRECT PAYMENT BY THE
EMPLOYER
PAYMENT TO SUB-CONTRACTORS:
PRINCIPAL METHODS
© HSKS
START
Yes
Yes
MC to include
SC’s details in his claim
CA to issue interim
payment certificate to MC
Establish if there is a
Contingent Payment Type II
-
clause in the sub-contract
FIG. 5-16: FLOWCHART ON GENERAL PROCEDURE FOR TYPE II ‘CONTINGENT PAYMENT’ (PART I)
© HSKS
A
Is there No
such a clause in the
contract?
Yes
Is the MC may pay SC within
No
period for payment a reasonable time of receipt of
stated? monies from the Employer
Yes
No
SC to pursue the remedies
available under the contract
Are there
Yes SC to initiate the contractual
any contractual remedies
remedies as applicable
available?
No
No
STOP
FIG. 5-17: FLOWCHART ON GENERAL PROCEDURE FOR TYPE II ‘CONTINGENT PAYMENTS’
(PART II)
© HSKS
PAYMENT IN ‘PACKAGE DEAL’ TYPES OF CONTRACTS: AN OVERVIEW
© HSKS
FINAL AMOUNT TO WHICH
CONTRACTOR ENTITLED TO UNDER
THE CONTRACT
© HSKS
APPROVED VARIATIONS
TO THE CONTRACT
MISCELLANEOUS
APPROVED
ADJUSTMENTS
CONTRACTOR’S CLAIMS
© HSKS
VARIATIONS/CHANGES
© HSKS
6.0 VARIATIONS/CHANGES
• ISSUES AS TO VALIDITY
• LIMITATIONS OF VARIATIONS
• RELEVANT CASES
* COMMISSIONER FOR MAIN ROADS V REED & STUART PTY LTD. & ANOR [1974] A.L.J.R.
461
* SIR LINDSAY PARKINSON & CO. LTD. V COMMISSIONERS OF HIS MAJESTY’S WORKS
AND PUBLIC BUILDINGS [1950] 1 ALL ER 2008
* ANTARA ELEKTRIK SDN. BHD. V BELL & ORDER BHD [2002] 3 MLJ 321, HC.
© HSKS
VARIATIONS
FACTORS DETERMINING
TYPES A VALID V.O.
LEGAL NATURE OF
FORMALITIES
PROPOSED CHANGE
© HSKS
CHANGE TO BE IN RELATION
TO SCOPE OF THE WORK
© HSKS
INCREASE/
DECREASE OMIT
QUANTITY OF
WORK
WORK
EXECUTE
CHANGE
ADDITIONAL WORK
CHARACTER OF
OF ANY KIND
WORK
CHANGE TIMING
OF WORK CHANGE
ACTIVITIES KIND OF WORK
CHANGE
DIMENSIONS OF CHANGE LEVELS
WORK OF WORK
CHANGE POSITION
OF WORK
© HSKS
OMISSIONS
ADDITIONS HYBRID
ACCORDING TO NATURE
OF THE CHANGE
CONTRACTOR NSC
TIME IMPLICATIONS
ACCORDING TO
ACCORDING TO IDENTIT Y
CONSEQUENCES/EFFECT
OF INITIATOR OF CHANGE
OF THE CHANGE
TYPES OF VARIATIONS:
MAIN METHODS OF CLASSIFICATION
© HSKS
CHANGES IN
EMPLOYER’S DEFECTIVE
REQUIREMENTS DRAWINGS
INTEFERENCE DEFECTIVE
BY EMPLOYER SPECIFICATIONS
WRONG/
NEGLIGENT ADVICE DIFFERENCES
FROM CONTRACT BETWEEN BILLED
ADMINISTRATOR AND ACTUAL
QUANTITIES
CHANGES DUE
TO STATUTORY/
LEGISLATIVE
CHANGES
© HSKS
WHAT CONSTITUTES VARIATION WORKS
1. Test: What is the intention of 1. Rule: All items intended to be 1. Rule: Contract requires: 1. Item specifically provided for
the parties at time of executed by Contractor must in Contract: ‘Not Extra’
contracting be provided for in the a) Not only work set out in
Contract. drawings and/or 2. If Contractor varies, contract
2. Extras: Work not specifications without an instruction:
contemplated by parties when 2. All items not provided for in Cannot Claim for ‘Extra’
contracting and not provided Contract are extras. b) But also all work incidental or
in Contract. necessarily required whether 3. If Contractor instructed by
3. Literal interpretation/ strict set out in the drawings and/or C.A. to change contract: has
3. Works which are construction. described in specifications or basis for claim for ‘Extra’
indispensably necessary to not
give effect to parties
intentions: Not extra 2. Effect: Difficult to claim extra
work [Re: Sharpe v Sao Paulo
Railway]
© HSKS
EXISTENCE OF EXPRESS
COMPLIANCE WITH THE CONTRACTUAL PROVISION
RELEVANT EXPRESS CONTRACT PERMITING VARIATION OF WORK
PROCEDURES UNDER THE CONTRACT
© HSKS
LIMITATIONS TO VARIATIONS
EXERCISE OF POWER
BY CONTRACT SCOPE OF WORK NATURE TESTS EFFECTS
ADMINISTRATOR
1. Power to vary work 1. Power to vary confined 1. Was it in the reasonable 1. General Rule:
confined to genuine to scope of works contemplation of the Invalid
omissions contemplated by parties parties when
at time of contracting. contracting? 2. Contractor cannot
2. If effect of omission is be compelled to
to give omitted work to 2. If effect of variation is to 2. Although not included, carry it out
3rd Parties: Invalid substantially change can it be considered an
Omission scope of work (‘Cardinal indispensable part of 3. If compelled,
Change’): Invalid the Contract? breach of contract
Variation 4. If Contractor
3. Functionally is it similar
to the intended work or carries out work,
some other work Contract rates not
required by the applicable
Contract?
• Mutually agree upon a formula/rate; • Any contractual formula rendered • Portion of works within scope of
or invalid /inapplicable contract to be paid according to
the contract formula (if
• Be paid a reasonable sum i.e. on a • Whole works to be paid on applicable)
‘quantum meruit’ basis, etc. ‘measure and value’ basis and on
‘altered’ or ‘adjusted’ rates • Remaining works falling outside
scope of contract to be paid at a
reasonable rate
© HSKS
START
Has measurement No
stage been satisfactorily
completed?
Yes
Yes
No Is there a
contract provision prescribing
the same?
Yes
No
Have the No
requirements been agreed to by
the parties?
Yes
B C D
Have the No
requirements been complied
with?
Yes
Have the No
particulars been completely and
properly filled in?
Yes
Is the No
V.O./instruction
attached?
Yes
Yes
Yes
No Has it been
signed by the authorized
person?
Yes
E F G
Has it been
No prepared within a
reasonable/ prescribed period of
completion of measurement
and valuation?
Yes
Contract administrator to
issue certificate to the contractor
No Is the
certificate sufficient and
accurate?
Yes
No Has it been
signed by the authorized
person?
Yes
No Does it
Prima facie, comply with any prescribed
certificate is invalid requirements?
Yes
H I J
No
Does he notify No
the contract administrator officially
of his dissent?
Yes
Are the No
full particulars/details
given?
Yes
Yes
Contractor deemed
Has the No to have accepted
contractor met the time the measurement
requirements? and valuation
Yes
Contract administrator
to review contractor’s notice
and make decision
K L M
Is the
Yes notice sufficient and
accurate?
No
Yes
No
Has he complied with the request?
Yes
No Contract
administrator to
Is there any Yes undertake necessary
reason not to reject the contractor’s amendments/
application? revisions
No
N
Reject the contractor’s application/notice
STOP
FIG. 6-17: FLOWCHART ON THE GENERAL PROCEDURE FOR CERTIFICATION OF VALUATION (PART V)
© HSKS
VARIATIONS: PRINCIPAL REQUIREMENTS FOR ‘PACKAGE DEAL’
TYPE OF CONTRACTS
EXPRESS EMPLOYER’
EMPLOYER’S CONTRACTOR’
CONTRACTOR’S VARIATIONS VARIATIONS EFFECT OF
STIPULATIONS RIGHT TO VARY RIGHT TO VARY IN DLP/DCP IN WRITING PROCEDURE
NECESSITY
NECESSITY FOR
FOR
CONTRACT
CONTRACT ‘‘WRITTEN’
WRITTEN’’ RECOVERY
RECOVERY WITHOUT
WITHOUT
PROVISIONS ORAL INSTRUCTIONS INSTRUCTIONS
PROVISIONS INSTRUCTIONS
INSTRUCTIONS INSTRUCTIONS
• Most Standard Forms have • Requirement for ‘Writing’ • Only if contract expressly • Generally no
express clauses allows
• Includes: • Situations where permitted:
• Issued by E.R./ P.D. • Need for written confirmation
1. Letters 1. If contract expressly allows
2. Minutes of Meetings • Duty of confirmation either on: 2. Under Waiver/Estoppel
3. Drawings 3. Under concept of
1. Contractor or ‘Constructive Change’
2. Employer
FIG. 6-18: VARIATIONS – PRINCIPAL REQUIREMENTS FOR ‘PACKAGE DEAL’ TYPE OF CONTRACT
© HSKS
DELAY AND
EXTENSION OF TIME
© HSKS
7.0 DELAY AND EXTENSION OF TIME
• ACCELERATION OF WORKS
• MISCELLANEOUS ISSUES
• RELEVANT CASES
* PEAK CONSTRUCTION (LIVERPOOL) LTD. V MCKINNEY FOUNDATION LTD. [1970] 1 BLR 114
• SYARIKAT TAN KIM BENG DAN RAKAN-RAKAN V PULAI JAYA SDN. BHD. [1992] 1 MLJ 42
© HSKS
CONSEQUENCES OF DELAY: AN OVERVIEW
BY EMPLOYER
(ACTS OF PREVENTION) BY CONTRACTOR
DUE TO CONTRACTOR’
CONTRACTOR’S DUE TO CONTRACTOR’
CONTRACTOR’S
DUE TO
OWN ACTS AND/OR OR SUB-
SUB-CONTRACTORS/
NEUTRAL EVENTS
OMISSIONS SUPPLIERS
© HSKS
‘FORCE MAJEURE’
‘ACTS OF PREVENTION’:
TYPICAL EXAMPLES
© HSKS
‘FORCE MAJEURE’
DELAYS BY NOMINATED SUB-
CONTRACTORS/SUPPLIERS
FOR THE SAID ‘NEUTRAL
EXCEPTIONALLY INCLEMENT/
EVENTS’
ADVERSE WEATHER
‘NEUTRAL EVENTS’:
TYPICAL EXAMPLES
© HSKS
CAUSE OF THE DELAY
APPROPRIATE
CONTRACT
ALL OTHER SUPPORTING REFERENCES TO SUCH
RECORDS, DETAILS, ETC. EVENT OF DELAY
DETAILS OF EFFECT OF
SCHEDULING DELAY ON WORK
DOCUMENTATION APPLICATION FOR PROGRAMME
EXTENSION OF TIME:
TYPICAL CONTENTS
© HSKS
OFFICIAL WORK RECORDS
SITE DIARIES
MEMORANDA
DRAWINGS, ETC.
EXTENSION OF TIME
APPLICATION: TYPICAL
SOURCES OF INFORMATION
Is progress No
delayed or is likely to be
delayed?
Yes
Does the
delaying event constitute No
one of the ‘relevant events’ /grounds
under the provisions of the
contract?
Yes
Initiate notification
of the delay procedure
Is the No
notice given in writing?
Yes
Yes No
Has an
Proceed with the Yes extension been No
application of the extension granted by the contract
of time process administrator?
A B
FIG. 7-7: FLOWCHART ON THE GENERAL PROCEDURE FOR CLAIMING EXTENSION OF TIME (PART I)
© HSKS
A B
Is the No
application given in
writing?
Yes
Is the
application made within No Is the Yes
the period expressly application a condition
stipulated? precedent?
Yes No
Has an
Contract Administrator to Yes extension been No
check application made granted by the contract
administrator?
Is the
Is the application No requirement as to Yes
complete/sufficient and sufficiency, etc. a condition
accurate? precedent?
Yes No
Establish whether contractor Has the
has done all that is reasonably No contract administrator Yes
required of him requested for information,
details, etc.?
Yes
Contract Administrator to Return to contractor
proceed with further assessment for resubmission
for the possible grant of or reject application
extension of time as appropriate
STOP
FIG. 7-8: FLOWCHART ON THE GENERAL PROCEDURE FOR CLAIMING EXTENSION OF TIME (PART II)
© HSKS
PROCEDURES FOR CLAIMING EXTENSION OF TIME: AN OVERVIEW (PART I)
TYPES
TYPES OF
OF WRITTEN
WRITTEN NOTICES
NOTICES
EXPRESS
EXPRESS REQUIREMENTS
REQUIREMENTS GENERAL RULE EVIDENTIAL VALUE
EVIDENTIAL
/NOTICES
/NOTICES IN
IN WRITING
WRITING
• Included in most standard forms • Correspondence • Where the form is expressly • A written notice/notice in writing is
stipulated, it must be complied with of immense evidential value
• Usually stipulated as: • Facsimile transmissions
• Where not expressly stipulated, may • Therefore, even if not expressly
1. ‘Written notice’ or • Entries in official records be implied required, must try to give written
2. ‘Notice in writing’ • Entries in site diaries notice
• Official Progress reports
FIG. 7-10 : PROCEDURES FOR CLAIMING EXTENSION OF TIME – AN OVERVIEW (PART II)
© HSKS
PROCEDURES FOR CLAIMING EXTENSION OF TIME:
AN OVERVIEW (PART III)
DETERMINING
DETERMINING FACTORS
FACTORS PRINCIPAL
PRINCIPAL SOURCES
SOURCES
FIG. 7-11 : PROCEDURES FOR CLAIMING EXTENSION OF TIME – AN OVERVIEW (PART III)
© HSKS
ASSESSMENT OF THE APPLICATION: AN OVERVIEW (PART I)
© HSKS
ASSESSMENT OF THE APPLICATION: AN OVERVIEW (PART II)
PROSPECTIVE/
PROSPECTIVE/
PRINCIPAL ISSUES
PRINCIPAL FACTORS
FACTORS DICTATING
DICTATING TIME
TIME PERIOD
PERIOD RETROSPECTIVE GRANTING
GRANTING
OF
OF EXTENSION
EXTENSION
• Factors dictating the timing • The need to preserve the LAD • Various formulae: • Where expressly permitted
of the grant provisions for the benefit of
the employer 1. Use of specific time • Where implied
• Express stipulations as to period stipulations
time period for granting • Courts approach:
• To allow contractor 2. Within reasonable time
• Prospective/Retrospective opportunity to reprogramme 1. Previous strict interpretation
granting of extension his works • Effect of failure to comply 2. Current liberal approach
• Situation of continuing delay • Circumstances where
retrospective granting permitted
© HSKS
CERTIFICATE NOT GIVEN
ON TIME
DECISIONS IMPROPERLY
DELEGATED
© HSKS
DELAY AND EXTENSION OF TIME FOR NOMINATED SUB-CONTRACTORS:
AN OVERVIEW
© HSKS
8.0 NON COMPLETION AND DAMAGES
• CONTRACTUAL FORMULAE
• RIGHTS TO IMPOSE
• CHALLENGES
• MALAYSIAN POSITION
• RELEVANT CASES
* DUNLOP PNEUMATIC TYRE CO. LTD. V NEW GARAGE & MOTOR COMPANY LTD. [1915]
AC 79
* LION ENGINEERING SDN. BHD. V PAUCHUAN DEVELOPMENT SDN. BHD. [1997] 4 AMR
3315
© HSKS
* MANIAM V STATE OF PERAK [1957] MLJ 75
* SELVA KUMAR A/L MURUGIAH V THIAGARAJAH A/L RETNASAMY [1995] 1 MLJ 817
* REALVEST PROPERTIES SDN. BHD. V THE COOPERATIVE CENTRAL BANK LTD. (Under
Receivership) [1996] 2 AMR 2292, FC.
* SAKINAS SDN. BHD. V SIEW YIK HAU & ANOR [2002] 5 MLJ 497, HC.
* ARAB MALAYSIAN CORP. BUILDERS SDN. BHD. & ANOR V ASM DEVELOPMENT SDN. BHD.
[1998] 6 MLJ 136, HC.
© HSKS
RECOVERY/PAYMENT
TRIGGERED BY OCCURRENCE SUM OF MONEY AGRRED
OF SPECIFIED DEFAULT/BREACH BY THE PARTIES
LIQUIDATED DAMAGES:
PRINCIPAL CHARACTERISTICS
© HSKS
LIQUIDATED DAMAGES: AN OVERVIEW
LIQUIDATED
BASIC DAMAGES AND
DEFINITION ADVANTAGES DISADVANTAGES
CHARACTERISTICS PENALTIES
DISTINGUISHED
• Prof. Vincent Powell- • Four basic characteristics: • Common view • Common view
Smith’s definition
1. Sum of money • Reiteration in Philips • Disadvantages to:
• Per Eggleston agreed/fixed in Hong Kong Ltd. v AG
of Hong Kong. 1. Employer
advance by parties
• Per Robinson and Lavers
Advantages to: 2. Contractor
2. Sum is a genuine •
pre-estimate of 3. Sub-contractor
1. Employer
likely loss
2. Contractor
3. Sum is stipulated in
the contract 3. Sub-contractor
4. Recovery of sum is
triggered by
contractor’s breach
e.g. non-completion
DISTINGUISHING
EXAMPLES OF LEGAL EFFECTS
GENERAL PENALTY: DEFINITION BETWEEN THE
PENALTY CLAUSES OF PENALTIES
TWO TERMS
• Use of terms • Per Prof. Vincent Powell- • Mere labeling is inclusive • Elicited from the • Penalty: Invalid and
interchangeably Smith relevant case-law unenforceable
• Depends on construction
• Distinct difference • Per Lord Dunedin in afforded to term by the • Legal effect per Watts,
Dunlop Pneumatic Tyre courts Watts & Co. Ltd. v Mitsui
• Position in Malaysia post Co. Ltd. v New Garage & & Co. Ltd.
Selvakumar v Thiagarajah Motor Co. Ltd. • Lord Dunedin’s proposed
tests. • See Keating’s view
IMPOSITION OF
LIQUIDATED DAMAGES:
TYPICAL PRE-CONDITIONS
© HSKS
CONTRACTOR SHALL FAIL THE CONTRACT
TO COMPLETE ON TIME ADMINISTRATOR SHALL
DETERMINE AND ISSUE
ANY EXTENSIONS OF
MISCELLANEOUS TIME DUE TO
PRE-CONDITIONS CONTRACT
DEDUCTION OF
LIQUIDATED DAMAGES:
COMMON CONDITIONS
PRECEDENTS USED
• Recovery of LAD must be in accordance with the • Need to satisfy general rule
contract
• Six principal pre-conditions:
• Procedural requirements/conditions precedent
must be strictly followed 1. Existence of express contractual provision on
LAD
• Effect of the application of the ‘contra proferantum’
rule 2. LAD Clause must be valid
3. LAD details must be clearly filled in
4. Contractual provisions must be strictly complied
with
5. Definite date from which LAD can run
6. Non-waiver by employer of his rights to the LAD
DETERMINE IF DETERMINE
ESTABLISH EMPLOYER
ESTABLISH EMPLOYER HAS IF RELEVANT POST LAD
BASIC STEPS EXISTENCE AND RECOVERS THE
DEFAULT OF WAIVED HIS CERTIFICATES/ DEDUCTION
VALIDITY OF LIQUIDATED
CONTRACTOR RIGHTS TO LAD NOTICES HAVE PROCEDURES
LAD CLAUSE DAMAGES
BEEN ISSUED
• Five basic steps • Triggering event: • Crucial to • 2 forms of waiver: • Certificate of Non- • Conditions precedent • Effect of further
failure of enforceability Completion (CNC) E.O.T.
• See Figures 6-11 contractor to of provision 1. Express • Decision as to recovery
to 6-13 on the complete on time and recovery of 2. Implied • Notice of Intention to • See Fig. 6-14 & 6-
flowcharts deduct LAD • Timing 15 for flowchart
LAD • Was there
consideration in
return?
• Legal principles similar to Main Contractor • Clause 7.0: PAM ‘98 Sub-Contract Form
• Liability for 2 types of damages: • Clause 27: JKR 203N (Rev. 10/83)
1. Liquidated damages, or • Clause 27: IEM.CES 1/90 Form
2. Unliquidated/general damages
• Clause 25: ‘Putrajaya’ Conditions of Nominated Sub-Contract
• Effect of default in completing • Governing Provision: S 74 • Called the ‘Financial Contractual • Necessity for parties to agree
works in time: breach of contract Contracts Act 1950 (Rev. 1974) - Remedy’ upon and arrive at a genuine pre-
‘Compensation for loss or damage estimate
• Consequences of the said breach • Usually an LAD clause
caused by breach of contract’
- Employer entitled to damages • Need to clearly stipulate
• Express stipulations as to:
i.e., either: • Three main heads of damage per conditions precedent to recovery
.
Eggleston: 1. Rate
1. LAD as stipulated in the sub- • Prudent to cap maximum limit
2. Scope of coverage
contract, or 1. Main Contractor’s liability to
3. Maximum limit • If LAD clause ‘stepped down’ into
pay LAD to employer of NSC’s
2. General damages 4. Pre-conditions, etc. sub-contract, sub-contractor
default
enforceable through bound irrespective of value of the
• Issues pertaining to the
arbitration/court action 2. Main Contractor’s own loss sub-contract
‘stepping down’ of the Main
consequent to NSC’s default
Contractor’s LAD clauses
3. Third party claims due to NSC’s
default
© HSKS
CONTRACTUAL PROVISION IS A PENALTY CLAUSE
CONTRACT IS AT LARGE
LIQUIDATED DAMAGES:
TYPICAL GROUNDS FOR
CHALLENGING
MISCELLANEOUS CHALLENGES/DEFENCES
1. No difference between penalty and liquidated 1. Employer cannot recover simpliciter sum fixed
damages clauses. in contract, whether as a penalty or liquidated
damages.
2. All liquidated damages clauses to be treated
as penalty clauses under English law. 2. Must prove actual damages/reasonable
compensation per Hadley v Baxendale.
1. Parties of equal bargaining strength. 1. By parties on circumventing decision 1. Contractor confirms that by
in Selvakumar v Thiagarajah. entering into the Contract
2. Free to agree on any terms between
themselves. 2. Can draft appropriate clause 2. He agrees to pay such sums
Is the No
contractor liable to pay
LAD?
Yes
Yes
Does the
contractor challenge the No
employer’s deduction of the
LAD?
Yes
No
Matter to be resolved
through arbitration/litigation
A B
Is
employer able to No Employer may not be
prove damages as able to recover any damages at all
required?
Yes
No
STOP
© HSKS
9.0 COMPLETION AND HANDING-OVER
• CONDITIONS PRECEDENT
• NON-
NON-ISSUE BY CONTRACT ADMINISTRATOR
• CHALLENGES TO CPC
• RELEVANT CASES
* H.W. NEVILL (SUNBLEST) LTD. V WILLIAM PRESS & SONS LTD. [1981] 20 BLR 78
* EMSON EASTERN (IN RECEIVERSHIP) V EME DEVELOPMENTS LTD. [1991] 55 BLR 114
© HSKS
CONTRACT ADMINISTRATOR
HAS DISCRETION TO ISSUE
C.P.C. WHERE MINOR WORKS C.P.C. CAN BE ISSUED
ARE LEFT TO BE DONE ON A ‘DE NOTWITHSTANDING PRESENCE
MINIMIS’ BASIS OF LATENT DEFECTS
© HSKS
FUNCTIONAL TEST
MISCELLANEOUS TESTS
COMPLETENESS TEST
ESTABLISHING PRACTICAL
COMPLETION:
PRINICPAL TESTS
INCONVENIENCE TEST
© HSKS
MARKS END OF CONSTRUCTION PERIOD
SECTIONAL COMPLETION:
PRINICPAL ISSUES/EFFECTS
© HSKS
ISSUE OF CERTIFICATE OF
PARTIAL OCCUPATION OF COMMENCEMENT OF
RELEVANT PART WITHIN DEFECT LIABILITY
RELEASE OF STIPULATED PERIOD PERIOD FOR RELEVANT
PERFORMANCE BOND PART ON DATE OF
AND FINAL PAYMENT POSSESSION/
UNAFFECTED OCCUPATION
PARTIAL POSSESION/
OCCUPATION:
PRINICPAL ISSUES/EFFECTS
• Strict View • Also termed ‘Substantial • Envisages completion in • Situation where Employer takes
Completion’ in some cases sections/ stages/phases over/resumes possession of:
• Absence of any patent
defects; and • Adopts an expedient view • Intention must be a)Whole works, or
agreed/expressed at time of b) Part of works
• Absence of any outstanding • Connotates a state of contracting. before Contract Completion Date
works however trifling readiness for use or
occupation by Employer • Contract Documents must • Pre-Conditions:
• Rarely used in practice identify/ define: a)With consent of Contractor
• Formalized by issue of b) Consent not to be
• Has been abandoned in Certificate of Practical a) Each Section unreasonably withheld
favour of a more expedient Completion (CPC) or Taking b) The Completion dates
approach Over Certificate (TOC) c) The Corresponding LAD • Procedural aspects:
a)Issue of Certificate of Partial
• More common in practice • Each section has separate: Occupation (CPO) within 7
days of possession.
• Provided for expressly in a) Certificate of Practical
many Standard Forms Completion (CPC)/TOC b) Certificate to identify:
or Defect Notification
i) Relevant part possessed
Period (DNP)
ii) Its estimated value
b) Defects Liability Period c)DLP/DNP starts on date of
(DLP) possession
c) Liquidated and d) LAD rate reduced pro-
Ascertained Damages rata for unoccupied
(LAD) part/portion
GENERAL
GENERAL TIMING
TIMING FOR
FOR TYPES/
TYPES/ NATURE
NATURE UPDATING ACCURACY
ACCURACY
POSITION SUBMISSION
AS-
AS--BUILT/
BUILT/ OPERATION & RECORDS
RECORDS OF
OF FINAL
FINAL MISCELLANEOUS
AS-
AS--CONSTRUCTED/
CONSTRUCTED/ MAINTENANCE MANUALS/
MAINTENANCE MANUALS/
MEASUREMENT
MEASUREMENT RECORDS/ DOCUMENTS
RECORDS/
AS-
AS-INSTALLED DRAWINGS HANDBOOKS
• Permanent record of works • To enable Works to be operated and • Undertaken by Contract • Final testing and commissioning
maintained efficiently and safely. Administrator jointly with records
• Suitably detailed for future Contractor.
reference. • Contents, etc. to express contract • Servicing and Maintenance
stipulations/industry practice. • To facilitate preparation of Final records
• Contents, etc. to express Account.
contract stipulations/industry • O & M Training records, etc.
practice.
© HSKS
IDENTIFICATION OF PATENT
ISSUE OF RELEVANT
DEFECTS
COMPLETION CERTIFICATE
& OUTSTANDING WORKS
HANDOVER OF HANDOVER OF
ALL NECESSARY TOOLS ALL ‘AS-BUILT’ DOCUMENTS/
RECORDS
HANDOVER OF ALL
KEYS
© HSKS
IDENTIFICATION OF THE TYPES AND
DETAILS OF NECESSARY INSPECTIONS
TAKING OVER OF
COMPLETED WORKS:
PROCEDURAL ISSUES
ESTABLISHMENT OF THE
RELEVANT DELIVERABLES
© HSKS
DEFECTS
© HSKS
10.0 DEFECTS
• RECENT DEVELOPMENTS
• RELEVANT CASES
* HII SOO CHIONG V BOARD OF MANAGEMENT YEE TING PRIMARY SCHOOL [1973] 2 MLJ 204
© HSKS
* DANCOM ENGINEERING PTE LTD. V TAKASAGO THERMAL ENGINEERING CO. LTD. [1989] BLD
[MAY] 606
* PIRELLI GENERAL CABLE WORKS LTD. V OSCAR FABER & PARTNERS [1983] 2 AC 1
* PEARCE & HIGH LTD. V JOHN BAXTER & MRS. A.S. BAXTER [1999] BLR 101
* DUTTON V BOGNOR REGIS UNITED BUILDING CO. LTD. & ANOR [1972] 1 QB 373
* STEVEN PHOA CHENG LOON & 72 ORS V HIGHLAND PROPERTIES SDN. BHD. & 9 ORS [2000]
3 AMR 3567
© HSKS
STANDARD OF
WORKMANSHIP
QUALITY OF STANDARD
PATENT DEFECT LATENT DEFECT MATERIAL OF DESIGN
TYPES NATURE
© HSKS
DEFECTS FOR WHICH CONTRACTOR IS GENERALLY RESPONSIBLE
• Quality of Materials
• Standard of Workmanship
© HSKS
ARISING FROM
‘FAIR WEAR AND TEAR’
HAVING NUMBER OF
CAUSES, CONTRACTOR’S ARISING FROM MISUSE/
PORTION BEING MINOR ABUSE BY USERS /
EMPLOYER
© HSKS
POST-COMPLETION STAGE
• Or Post-Handing Over Stage
• Or During ‘Defects Liability Period’, etc.
© HSKS
DETERMINATION OF
CONTRACTOR’S EMPLOYMENT THIRD PARTY ACTION TO MAKE
UNDER THE CONTRACT GOOD DEFECTS
© HSKS
LIMITATION ACT 1953 (REV.
MISCELLANEOUS ACTS 1981) - WEST MALAYSIA
E.G. RAILWAYS ACT
1991 (SECTION 97) CIVIL LIMITATION ORDINANCE
LAW ACT 1965 (SECTION 1959 (REPRINT 1965) -
7(5), ETC. SARAWAK
LIMITATION: RELEVANT
STATUTORY ENACTMENTS
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EXPIRY OF PERIOD FOR RECTIFYING DEFECTS:
OPTIONS AVAILABLE TO CONTRACT ADMINISTRATOR
EMPLOYER TO UNDERTAKE
TAKE 3RD
RD PARTY ACTION WORKS HIMSELF I.E.
DEPARTMENTALLY
• Deduct costs involved from: • Deduct costs involved from:
a) money due to contractor and/or a) money due to contractor and/or
b) Performance bond and/or b) Performance bond and/or
c) as a liquidated demand c) as a liquidated demand
CONTRACTOR’S LIABILITY
FOR LATENT AND PATENT MARKS THE BEGINING OF
DEFECTS CONTINUES FOR THE CONTRACTUAL PERIOD
THE STATUTORY PERIOD OF ISSUE OF CERTIFICATE FOR PREPARATION OF FINAL
LIMITATION ACCOUNT
MAKING GOOD OF
DEFECTS: PRINCIPAL
EFFECTS ON PARTIES
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POST-COMPLETION
AND
FINAL ACCOUNT
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11.0 POST COMPLETION AND FINAL ACCOUNT
* TRAINING
* O & M MANUALS
* AS-BUILT DRAWINGS
• POST-
POST-FINAL CERTIFICATE PROBLEMS
• RELEVANT CASES
* CHEW SIN LONG CONSTRUCTION CO. LTD. V COSY HOUSING DEVELOPMENT PTE LTD.
[1988] 1 MLJ 331
* THAMESA DESIGNS SDN. BHD. & ORS V KUCHING HOTELS SDN. BHD. [1993] 3 MLJ 28
* SHEN YUAN PAI V DATO’ WEE HOOD TECK & ORS [1976] 1 MLJ 16
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SERVICING & MAINTENANCE: AN OVERVIEW
PROCEDURE
GENERAL PURPOSE FREQUENCY EXTENT EFFECT OF
FOR
POSITION FAILURE
MONITORING
• Must follow express • To ensure Contractor • Per stipulations in: • To carry out and/or
Contract stipulations meets contractual erroneous/negligent
obligations a) Contract and/or servicing.
• Most Contracts e.g. b) O & M Manuals
M&E have such • Not to nullify equipment • P.C. may not be issued
provisions in the warranties. • Implied from:
specifications. • Period may be extended
• To minimize defects and a) Statutory
downtime and prolong requirements • Use of 3rd Parties at
lifetime and efficiency. Contractor’s Cost
b) Trade usage
• Warranties may be
c) Local practice compromised.
• Possible action in contract,
tort, statute, etc.
PREVALENT
PREVALENT EXPRESS
EXPRESS IMPLIED
PRACTICE
PRACTICE REQUIREMENTS REQUIREMENTS
REQUIREMENTS
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‘AS-BUILT’ DRAWINGS: AN OVERVIEW
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FINAL CERTIFICATE
FINAL PAYMENT
CERTIFICATE
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ISSUED UPON EXPIRY OF THE
CONTRACT PERIOD
FINALCERTIFICATE:
PRINCIPAL
CHARACTERISTICS
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ISSUE OF PERFORMANCE
CERTIFICATE (P.C.)
SATISFACTION OF ALL
OTHER OBLIGATIONS/DUTIES EXPIRY OF DEFECT
UNDER CONTRACT NOTIFICATION PERIOD (DNP)
TYPICAL PRE-CONDITIONS TO
THE ISSUE OF THE
FINAL CERTIFICATE
PREPARATION AND
FINALIZATION OF THE FINAL
ACCOUNT
FIG. 11-6 : TYPICAL PRE-CONDITIONS TO THE ISSUE OF THE FINAL PAYMENT CERTIFICATE
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SATISFACTION OF THE COMPLETION
CRITERIA AS SPELT OUT IN THE
CONTRACT AND WHERE IT IS
THAT ALL THE CONTRACTOR’S STIPULATED TO BE TO THE
FINANCIAL CLAIMS HAVE BEEN REASONABLE SATISFACTION OF THE
PROPERLY ACCOUNTED FOR CONTRACT ADMINISTRATOR
FIG. 11-7 : EFFECT OF ISSUE OF FINAL PAYMENT CERTIFICATE – PRINCIPAL MATTERS FOR
WHICH CERTIFICATE PROVIDES ‘CONCLUSIVE EVIDENCE’
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FRAUD/DISHONESTY/FRAUDULENT CONCEALMENT BY CONTRACTOR
FINAL CERTIFICATE:
TYPICAL CHALLENGES TO
‘CONCLUSIVENESS’/’FINALITY’
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