Contract Administration and Legal

Studies

BEQ2043/BEQ203 – Construction Law and Dispute

Resolution 1

By: Muhammad Ariffuddin Arifin

 LEGAL ISSUES IN CONSTRUCTION CONTRACT
ADMINISTRATION
• Contract definition
✓ Offeror offeree
✓ Consideration involved
• Payments
• Swap land, projects
• Tendering
✓ Advertisement
✓ Purchase and submit
✓ During tendering issues, addendums
✓ Validity Period
✓ Valuation report
✓ Confidentiality issues
• Award
 WHAT IS CONTRACT?

A legally binding agreement between two parties, by which rights are

required by one or more to acts or forbearances on the part of the
other or others (Sir WilliamAnson)

A binding agreement between two or more persons which creates

mutual rights and duties and which is enforceable at law. There
must be an intention to create a legal relationship (Building Contract
Dictionary)
 WHAT IS CONTRACT?

An agreement enforceable by law is a contract

(Contract Act 1950 – section 2(h))

Every promise and every set of promises, forming the

consideration for each other, is an agreement (Contract
Act 1950 – section 2(e))
 WHAT IS CONTRACT?

OFFER

ACCEPTANCE CONTRACT

CONSIDERATION
 WHAT IS OFFER?

When a person signifies to another his willingness to do or to abstain

from doing anything, with a view to obtaining the assent of that other to
the act or abstinence, he is said to make a proposal (Contract Act,
Sec.2(a))

An expression by one party of willingness to be bound by some obligation

to another (Building Contract Dictionary)
 WHAT IS OFFER?

An intimation of willingness by the offer or to enter into a legally binding

contract. It terms either expressly or impliedly must indicate that it is to
become binding on the offeror as soon as it has been accepted by the
offeree (Salleh Abbas FJ)

Offer or Offeree, Promisor v Promisee (Contract Act Sec. 2(c))

 WHAT IS ACCEPTANCE?

• An expression by one party of willingness to be bound by some

obligation to another.
• When the person to whom the proposal is made signifies his assent
thereto, the proposal is said to have been accepted. (Section 2(b),
Contract Act 1950)
• Acceptance may be made in writing, orally or by conduct
 WHO MAY ACCEPT?

• An offer can be directed to a particular person or to the public at large.

• Section 2(c) Contract Act – only the person appraised of the offer can
accept it.
 WHO MAY ACCEPT?

• Should the offer be a general offer to the public at large, anyone

meeting the conditions of the offer may accept it – Carlill v Carbolic
Smoke Ball Co.(1893)

• An offer addressed to a specific group or class of persons only can be

accepted by the group members.
 CONSTRUCTION CONTRACT

• As an agreement for carrying out, arranging for the carrying out, or

providing labour for carrying out construction operations.

• It is expressly stated to include agreements for architectural design or

surveying work or for providing advice on building, engineering, interior
or exterior decoration or the laying out of landscape.
 CONSTRUCTION CONTRACT

• Standard Form of Contract

➢ PWD
➢ PAM
➢ CIDB
➢ FIDIC
➢ JCT
• Construction Contract
➢ Traditional
➢ Design and Build
➢ Build Operate Transfer
➢ Joint Venture
 CONSTRUCTION CONTRACT

• Parties Involved
➢ Client: Public, Private, Personal
➢ Contractors, Main, Sub, Specialist
➢ Consultants
➢ Suppliers, Manufacturers
 COMMON PROBLEMS

• Process of building procurement involves a series of different

specialists in contributing to the work at different times
➢ These people have widely differing skills; they often work for
different organizations, in different geographic locations and at
different times.
 COMMON PROBLEMS

The level of understanding between them is often less than would

be desirable.
There are several continuing problems that can stand in the way
of effective team building in construction projects.
 PROFESSIONAL PRIDE

• The attitude that sometimes seems to prevail in the industry is that

members of ‘other’ professions are greedy, self-righteous, dim or prima
donnas
• One must constantly remember that they too have been educated and
trained to at least the same level.
 EXTENDED PROJECT PARTICIPATION

• This shows an enormous range of terms that describe various project

participants, some of which are roughly synonymous with each other,
and all of which are in current use.

• It also shows how the role of the traditional role of the architect has
become fragmented, with different specialists taking on some aspects
of the work.
 TEMPORARY MULTI-ORGANIZATIONS

• Fragmentation is a problem within the construction industry and the

result is often internecine strife

• The reasons for this fragmentation are associated with the fact that a
variety of different people come together on a project, temporarily, each
with his or her own set of objectives and expectations, each from a
separate firm
 CONFLICT IN PROJECT TEAMS

• Each project participant has particular aim and objective and it is rare to
find contract structures that encourage harmony among these aims.
• Project participants expect to enter into confrontations with each other
and with the client.
• One of the purposes of assembling a team of people from different
professions is to harness a variety of views.
• The tensions thus generated should precipitate debate and dialogue so
that clear choices can be made.
 CONTRACT ADMINISTRATION

• Managing various aspect of contracts.

• From supervision of works to decision making functions such as
certificates, approval, acceptance etc.
• Circumscribed by terms and conditions i.e. form of contract (PWD, PAM,
CIDB)
 PURPOSE OF CONTRACT ADMINISTRATION

• Nature of the contract, client -contractor, main-contractor –

subcontractor.
• Type of contract, traditional, design and build, management contract.
• Terms of particular contract, rights and duties/obligations.
• Identities and roles of contract administrator.

To ensure:
• Contractor fulfills his obligations,
• Employer fulfills his obligations,
• Designer meet statutory obligations.
 CONTRACT ADMINISTRATION PRIMARY PURPOSE

• Works completed within original contract period and price.

• Contractor fulfill obligations.
• Employer fulfill obligations.
• Statutory / local authority approved.
• Employer is protected against various claims.
• Contract administrator obligations fulfilled.
 CONTRACT ADMINISTRATION

Award Site Possession Handing Over

Commencement Construction

KEY ISSUES
Lead to disputes
 CONTRACT ADMINISTRATION
• Commencement
• Site, Existing services,
Neighboring land
• Authorities, approvals
• Discrepancies
• Drawings, Designs
• BQs, Quantities, Price, Prov
and PC sum
• Payment, Claims details, Period
honoring, Amount,
• Downstream, wages, socso,
kwsp, insurance
• Variation, Instructions, Time
• Supervision, workmanship,
materials, workmen
• Warranties, Insurances,
Accidents, Guarantees
• Claims, Loss and expenses
• Defects, ratification, liability,
certification
• Safety and health,
environmental protection
• Third party, Land, pollution,
density, right of way,
reinstatement, accident
• Final account
 CONTRACT ADMINISTRATION

DAMAGES
• Liquidated Ascertained Damages

RESOLUTION
• Negotiation
• Mediation
• Adjudication
• Arbitration
• Litigation
 TERMINATION

• By client
• By contractor
• Mutual
• Effects
• Claims, cross claim
• Loss and expenses