PROJEK PEMBINAAN TELAGA TIUB, TANGKI AIR MENARA DAN PEMANSANGAN PAIP UTAMA

TEMANGAN, MACHANG, KELANTAN

LAW FOR CONSTRUCTION

CEM583

Faculty of Civil Engineering

Universiti Tecknologi MARA Cawangan Pulau Pinang, 13500,
Permatang Pauh, Pulau Pinang
 TABLE OF CONTENTS

Page
LIST OF FIGURE 3

TASK 1: INTRODUCTION 4

TASK 2: 9 BASIC ELEMENTS OF CONTRACT 5

TASK 3: COURT CASE 11

TASK 4: DISCUSSION 13

TASK 5: REMEDIES AND RECOMMENDATION 15

TASK 6: CONCLUSION 16

TASK 7: REFERENCES AND APPENDICES 17

 LIST OF FIGURES

Page

Figures (a): Film offer or proposal 5

Figures (b): An acceptance of the offer or proposal 6

Figures (c): Intention to create legal relations 7

UNIVERSITI TEKNOLOGI MARA
LAW FOR CONSTRUCTION CEM583
0CT-FEB 2021 / MAT

Task 1: Introduction
This chapter review about the building infrastructure “Projek Pembinaan
Telaga Tiub, Tangki Air Menara Dan Pemasangan Paip Utama Temangan,
Machang, Kelantan”. The contract period of this project was set on 22 April 2019 until
22 September 2020 which 17 months from the date of commencement.

This project involving the contractor from Kreatif Mahir (M) Sdn. Bhd. The
company located at Suite, PT312, Tingkat 2 Jalan Kebun Sultan, 15300 Kota Bharu,
Kelantan. The value of this project was based on the contract sum. The Contract
Sum shall be in the amount of RM4,268,883.00 (Ringgit Malaysia: Four Million Two
Hundred Sixty Eight Thousand Eight Hundred and Eighty Three Only).

Few laws of construction need to be referred for better flow of work on this
infrastructure project. Contractor should have 9 basic element of the contract in the
project which is (a) A clear or firm offer or proposal, (b) An acceptance of the
offer/proposal, (c) Intention to create legal relations, (d) Consideration, (e) Certainty,
(f) Capacity, (g) Consent, (h) Legality and (i) Possibility.

4
UNIVERSITI TEKNOLOGI MARA
LAW FOR CONSTRUCTION CEM583
0CT-FEB 2021 / MAT
Task 2: 9 Basic Elements of Contract

(a) A clear or firm offer or proposal

A firm offer is an offer that will remain available for a certain period of time or until a
certain time or occurrence happens, after which it is unable to be withdrawn. As
general rule, all deals are valid, including those offers that purport to be irrevocable
on their face, at any time prior to acceptance. The figure (a) below shown the firm
offer of the Kreatif Mahir (M) Sdn. Bhd from Ministry of Rural Development.

Figure (a) firm offer/proposal

5
UNIVERSITI TEKNOLOGI MARA
LAW FOR CONSTRUCTION CEM583
0CT-FEB 2021 / MAT

(b) An acceptance of offer/proposal

Based on Engineering Contract Dictionary, an offer indicates a willingness on the
part of a party to be bound by an obligation. If a bid is accepted, the contract will be
binding. Section 2(b) of the Contracts Act 1950 also mentions that if the person to
whom the proposal is made shall express his consent to it, the request is considered
approved. A proposal, if approved, becomes a pledge. Offering and approval are
generally agreed upon as the required conditions for creating a contract, and a
current approach in contract law is the review of their service. Founded in the 19th
century, the offer and acceptance process defines a moment of development in
which the parties are of one mind. Figure (b) below shows an acceptance of the offer
or proposal from the Ministry of Rural Development to Kreatif Mahir Sdn. Bhd.

Figure (b) An acceptance of offer/proposal

6
UNIVERSITI TEKNOLOGI MARA
LAW FOR CONSTRUCTION CEM583
0CT-FEB 2021 / MAT

(c) Intention to create legal relations

The project's essential elements in the project are all parties must indicate their
intention to enter into a legally binding agreement. The binding contract can be in an
express form in which the acceptance is made in words. For example, in oral or
written. It also can be in an implied form in which the acceptance is made other than
in words. For example, by conduct, etc. A solely social or domestic relationship is not
a contract. The intention to create a legal relationship is defined as the intention to
enter into a legally binding contract or agreement. The aim to create legal
relationship is one of the necessary elements in the establishment of a contract. It is
because the desire to establish legal relations consists of a willingness on the part of
the party to accept the legal sequences of the agreement entered into. In order to
create legal relations, any party to the contract must have the requisite intention of
participating into a legally binding agreement. In that contract, the company made a
legal agreement to the client in order to establish their partnership with the project.
Both parties must sign the letter of a legally binding contract. Figure (c) below shows
the intention to create legal relations between the Ministry of Rural Development and
Kreatif Mahir Sd. Bhd.

Figure (c) The intention to create legal relations

7
UNIVERSITI TEKNOLOGI MARA
LAW FOR CONSTRUCTION CEM583
0CT-FEB 2021 / MAT
(d) Consideration

The parties must make a contribution to the validation of the pledge of the other.
Consideration is the price at which the pledge of the other is desired. Even so, this
price does not have to be in terms of money. In the event that the commitment is not
backed by consideration, the promise will be a mere promise and will not be
enforceable by statute. In addition, consideration must be both actual and legal.
Based on engineering contract dictionary, consideration also can be define as
anything given, executed or borne by one party in exchange for an action or improper
action by another party. It must have a valid meaning or legal meaning. According to
Section 2(d) of the Contracts Act 1950, if by the will of a promise, a promise or a
promise has been made, or has not been made, or agreed to do, or has not been
made, an act or abstinence or a promise shall be referred to as a consideration of a
promise. The consideration or subject-matter of the agreement shall be lawful, except
it is prohibited by law, it is of such a type that it would defeat any law if it were
allowed to do so, it's a scam, and the court finds that it is unethical or contrary to
public policy. The client, Ministry of Rural Development, approved a proposal from
the Kreatif Mahir Sdn. Bhd and welcomed them to meet the needs of the client. As an
agreement, Kreatif Mahir Sdn Bhd is going to build a building for the client and get
paid for their work. This consideration is of benefit to both of them.

(e) Certainty

Certainty can be refers as the terms of the contract must be certain or capable of
being concluded. The cost of certainty for this project was included in the contract
amount of document RM 4,268,883.00 for the Kreatif Mahir Sdn Bhd to build an
elevated water tank (EWT), a pump house, a pipeline, a compact substation and a
suction tank. The contract sum is a fixed lump sum based on the contract drawings
and requirements. No extra time or cost requests shall be granted in the event of
inconsistencies, disputes and/or differences in drawings and specifications. All such
variations, disputes and/or differences shall be resolved by reference to the
architectural drawings and shall be considered to have been decided on the basis of
your lump sum price on the achievement of the construction of the works in
accordance with the architectural drawings. The entire work shall be done within
seventeen (17) months from the date of commencement. The date of completion of
the work shall be 22 September 2020. The Company shall be liable for Liquidated
and Guaranteed Damages (L.A.D.) in the event that the whole Works is not finished
by the Date of Completion or, in the event that an extension to the Date of
Completion has been given under the terms and conditions of the Contract, by the
said extended Date of Completion.

8
UNIVERSITI TEKNOLOGI MARA
LAW FOR CONSTRUCTION CEM583
0CT-FEB 2021 / MAT
(f) Capacity

According to Section 11 of the Contracts Act 1950 mentions that any person is
competent to enter into a contract who is of the age of majority according to the law
to which he or she is subject and who is of a sound mind and is not excluded from
contracting by any law to which he or she is subject. Ability or competence to enter
into a legal contract and/or legal agreement with another party. The contractor has
conditions for entering into a binding contract. The contractor will execute all the
tasks assigned to the client in the completion of the job. Kreatif Mahir Sdn. Bhd. do
have certain conditions that make it possible for the client (Ministry of Rural
Development) to approve their request to enter into a legally binding contract.

(g) Consent

Based on Section 14 of the Contract Act 1950, the parties must enter into a contract
with free consent. The consent must not be gained through force, deceit, duress, etc.
According to the dictionary of law, consent is not based on compliance with or
intentional acceptance of the course of action. It is not necessarily applicable if it is
obtained through force, deceit or undue influence. If consent is obtained through
either of these defects, the contract is not legitimate. In basic terms, consent is the
recognition of the contract that the parties have in place. Both parties must voluntarily
give their consent to the contract. Consent would not be considered voluntary or
genuine if such errors are made, or if one party attempts to deceive or threaten the
other. On the basis of the agreement, the Kreatif Mahir Sdn. Bhd. must give its free
consent to the contract, which means that all the agreements have been entered into.

(h) Legality

The contract must be concluded within the scope of the law, its purpose or
consideration must not be unlawful. According to Section 10(1) of the Contracts Act
1950 mentions that all agreements shall be contractual if they are made by free
consent of the parties responsible for the contract, for legal consideration and for a
lawful purpose, and are not hereby expressly rendered null and void. The agreement
that both the contractor and the client have entered into provides the lawfulness for
them in order to get what they need. An agreement is reached when an offer is made
by one party to another and the offer is accepted. In this situation, the contract was
drawn up in order to prevent any fraud.

(i) Possibility

The contract must be both physically and legally enforceable. Based on Engineering
Contract Dictionary mentions that the contracts that cannot be executed are void and
unenforceable. A contract that should have existed at the time it was made, but then
became impossible due to a series of events that occurred. Originally valid but can
be found invalid. Based on this contract case, all the quality of the Kreatif Mahir Sdn.
Bhd. must be accomplished in order to prevent any impossibility during the contract

9
UNIVERSITI TEKNOLOGI MARA
LAW FOR CONSTRUCTION CEM583
0CT-FEB 2021 / MAT
period. The contract document and correspondence shall be followed by the
company.

10
UNIVERSITI TEKNOLOGI MARA
LAW FOR CONSTRUCTION CEM583
0CT-FEB 2021 / MAT
Task 3: Court Case

3.1 prosecutor/judge and defendant

The Defendant, Grandstep Development Sdn Bhd is the developer of a hill slope
development known as “Proposed Housing Development on Lot 1287, Seksyen 14,
Bandar Ampang, Daerah Hulu Langat, Selangor Darul Ehsan (“Project”). The
Defendant on 21 February 2011 issued its letter of appointment to the Plaintiff, WEA
Engineers & Associates Sdn Bhd. Pursuant to the Appointment Letter, the Plaintiff
carried out civil and structural engineering consultancy services as required by the
Defendant. The services were provided in conjunction with the other consultants
appointed by the Defendant including DMP Architects Sdn Bhd, Juruasli Planning &
Consultancy and Jurukur Bahan Bersatu. The Plaintiff consequently by letter dated
13 October 2014 issued two interim payment invoices for civil and structural
engineering services rendered, but the defendant did not pay the required amount.
The Plaintiff was displeased with the Defendant’s failure to settle the aforementioned
proforma invoices in full, leading to the plaintiff to appeal to the high court
(prosecutor) to set aside the decision and to adjourn the execution of the judgments
of the adjudicator.
3.2 mistakes made/ case fact
1) The Plaintiff contended that it is entitled to the sum in all its three invoices sent to
the Defendant as claimed plus a further RM36,093.75, but the defendant did not pay
in full.
2) On the other side, the Defendant contended that the Plaintiff’s claim is grossly
excessive. According to the Defendant, the Plaintiff did not complete the services as
contracted due to the Plaintiff’s own termination of the provision of the civil and
structural engineering consultancy services pursuant to the Appointment Letter.
3) The Defendant contended that the action was instituted in afterthought 3 years
after the conclusion of the adjudication proceedings between them pursuant to the
Construction Industry Payment and Adjudication Act 2012. This is due to the
Plaintiff’s excessive desire for more money.
3.3 Sentence imposed by the judge on the offender
For the foregoing reasons and in the absence of an offer to settle pursuant to Order
22B of the Rules of Court 2012, the High Court enter judgment for the Plaintiff in the
sum of RM177,927.56 inclusive of 6% GST (if applicable) and interest of 5% per
annum thereon from 24 October 2018 till full realization and costs of RM90,000.00
subject to 4% allocator.
3.4 court of the case
In this case, the high court were referred as the prosecutor for the case. The  high
courts in Malaysia are the third-highest courts in the hierarchy of courts, after
the Federal Court and the Court of Appeal
3.5 Act used for the Case
Construction Industry Payment and Adjudication Act 2012 (CIPAA) was used for this
case court. This Act applies to every construction contract made in writing relating to
construction work carried out wholly or partly within the territory of Malaysia including
a construction contract entered into by the government. This Act does not apply to a
11
UNIVERSITI TEKNOLOGI MARA
LAW FOR CONSTRUCTION CEM583
0CT-FEB 2021 / MAT
construction contract entered into by natural person for any construction work in
respect of any building which is less than four storey high and which is wholly
intended for his occupation.

12
UNIVERSITI TEKNOLOGI MARA
LAW FOR CONSTRUCTION CEM583
0CT-FEB 2021 / MAT
Task 4: Discussion

According to the earlier project in task 2, the construction of the building is

more than four storey high which it is in the category of application. The Act
Construction Industry Payment and Adjudication Act 2012 (CIPAA) does extend to
that construction project. Referring to the firm offer/proposal that has been
submitted by contractor to the client, the contractor need to follow the rule of contract
that have been state by the contract document tender to avoid from the case re-
occurring in future. Client also need to fulfill the payment after the work done by the
contractor.
Next, according to the approval letter of proposal, the CIPAA act will be applied.
In the letter of approval of the proposal, the liquidated and determined damages
(L.A.D) already suggest that the employer will have real damages or injuries in the
event that the contractor fails to complete them by the date of completion or other
extension. The client can apply the act of CIPAA in order to not paying the contractor
if they not fulfill the task. This court case can be avoided by the contractor if they
follow the contract law. Therefore, probability of the case fact re-occurring in future
may happen if both parties do not create the legal relationship in the project. Legal
relation for project is compulsory in create trust between each of parties.
The consideration in this case, based on the court case in task 3, the client and
contractor may not follow the agreement law in promising the objective towards the
contract document. In order to maintain the legal contract between client and
contractor, the consideration for both parties must be fulfilled. From that, potential of
the case facts re-occurring can be avoided. Next, to avoid the case happen in task 1
and 2 project, both parties need to signed contract for agreement to accept the
certainty of the project. This certainty in legal contract give benefit for both parties. If
the certainty not been followed, the action by high court can be issued referring to the
Act CIPAA 2012.
In the contract agreement, the client has set the conditions under which the
contract bidder must have the characteristic features of the project. the bidder must
have all the equipment to perform the assigned task also the client must qualify with
the agreement. if the contract is not qualified, this can cause problems in continuing
the task. Qualification is very important because it is able to reduce problems while
carrying out tasks. Refers to the case that occurs in task 3, the client who has
problems with the capacity of a project where the client may not be able to provide
adequate payment to the contractor. Capacity is important because both qualified
parties can produce an effective development. One of the companies can be blamed
and punished under the act.
In the case fact above, showing that the client does not have the consent criteria
which lead to the failure to pay the exact amount according. In task 2, both parties
have performed legality to create the document contract. So, potential of the case
such in task 3 to happen low because the project has written and signed contract. In
the Act of CIPAA have been state that, both parties need to have legal contract in
order to create the perfect contract document. In task 3, probability of court case
happen during the period is because their legality between each other are not been
made or created. Therefore, possibility for the case to happen also higher if they do
have legality in contract. In the contract document have been state that all the
requirement needs to be perform by the Nakano company to achieve the standard of
contract. If they not following the instruction of tendering, they may have potential to
13
UNIVERSITI TEKNOLOGI MARA
LAW FOR CONSTRUCTION CEM583
0CT-FEB 2021 / MAT
recreate the same mistake. Thus the high court can sentenced them under the Act of
CIPPA 2012 if the client make a report on their negligence.

14
UNIVERSITI TEKNOLOGI MARA
LAW FOR CONSTRUCTION CEM583
0CT-FEB 2021 / MAT
Task 5: Remedies and Recommendation
Based on task 3, we can see that there is a conflict between the plaintiff and
defendant. The conflict happen because the defendant did not perform the payment
accordingly to the plaintiff. Defendant claimed that the plaintiff actually demand too
much from that construction but the plaintiff did not perform the work fully. A simple
or film offer or suggestion should be written in details to stop this happening, so that
there is no confusion between both parties.
Based on Section 2(a), Contract Act 1950 mentions when one person indicates to
another his willingness to do something, he needs to propose to receive the consent
of the other party to the act. The offer is an indicator of the offeror's willingness to
enter into a legally binding contract. Its terms must imply, either directly or indirectly,
that it will become binding on the offeror as soon as the offeree has approved it. A
firm offer is an offer that will be valid for a certain period or until a certain time or
event has occurred, during which it cannot be withdrawn. The defendant should point
out the work that the plaintiff should cover so the work will be carried out by the
plaintiff accordingly.
Any person involved in any project must have within themselves a high level of
integrity. When project issues arise, there is a deal of finger pointing. Nothing
decreases morale more than when people blame others. Individuals must, however,
be held responsible in a manner consistent with time, quality, and cost expectations
for completing their tasks.
Other than that, both parties should make an agreement where if any of the party
broke the agreement, they will be fined. This can prevent the party from breeching
the contract as they will faced loss if they did not follow the agreement accordingly.
According to the contract act 1950, an agreement will be void if any of the party
breech the contract.

15
UNIVERSITI TEKNOLOGI MARA
LAW FOR CONSTRUCTION CEM583
0CT-FEB 2021 / MAT
Task 6: Conclusion
In conclusion, contract is an important element in a project. A contract is a legally
binding document between at least two parties that defines and governs the rights
and duties of the parties to an agreement. Contracts provide a written document that
outlines the full understanding of the business relationship and scope of the work so
that no one can claim any misunderstandings later down the road. They specify
exactly what rights are being purchased and what rights you're retaining. They're
binding and legally enforceable. As well as preventing misunderstandings about
scope, time, cost and quality, it also means that there is a culture that means the
project manager doesn't just get work dumped on them with no expectations of an
analysis phase or further work.

From the task 3 that have been carried out above, we can learn from the mistakes
that the company made. First, there is a misunderstanding between the parties that
lead to the lawsuit. To prevent this from happening, a clear offer and proposal should
be written in detail to avoid any misunderstanding during the project work in
progress.

In task 4, as we compared both court case and the contract in task 2 and task 3, we
can do an analysis of the flaws of the contract and predict the possibilities of the
problems occur in task 3 to happen again in task 2. From the analysis that have been
made in task 4, we can conclude that with a weak firm proposal, certainty, capacity
and certainty in these contract elements, the problem will likely to happen again.

16
UNIVERSITI TEKNOLOGI MARA
LAW FOR CONSTRUCTION CEM583
0CT-FEB 2021 / MAT
Task 7: References & Appendices
Contract Document

17
UNIVERSITI TEKNOLOGI MARA
LAW FOR CONSTRUCTION CEM583
0CT-FEB 2021 / MAT

18
UNIVERSITI TEKNOLOGI MARA
LAW FOR CONSTRUCTION CEM583
0CT-FEB 2021 / MAT

19
UNIVERSITI TEKNOLOGI MARA
LAW FOR CONSTRUCTION CEM583
0CT-FEB 2021 / MAT
Court Case
 Series, L. N. (2012). 2012] 1 LNS 465 Legal Network Series. 1–8.

20