4.

0 Legal & Contractual Implications and Relevant Cases Application

The dispute between Zenit Construction Sdn. Bhd. and the employer over variation orders (VOs) under
the PAM 2018 contract. Since the architect issued multiple VOs, leading to increased costs, the contractor
sought additional payment. However, the employer disputed some variations, claiming they were
unnecessary or unauthorized. This situation shows why it is important to understand proper contract
administration.

4.1 Legal and Contractual Principles

Doctrine of Contractual Compliance

- In Zenit Construction, under Clause 11.2 indicate that the architect had the obligation to made
variations order (VOs), once the VOs issued by Architect, Zenit Construction must carry out the
variation works as instructed.
- If the contractor has completed all the variation works and then requests additional payment, but
the employer disputes some of those variations fall outside the contract scope since some VOs
were not properly instructed in writing form under Clause 11.3.
- Since the variation work was done without proper instruction, so it does not qualify under the
variation clause (Team, 2015).

Principle of Quantum Meruit

- The employer had benefited from the additional works and the contractor did not intend the work
to be free.
- In that case, Zenit Contractor may claim under quantum meruit, asking for reasonable
compensation for the value of work done, even when the legal formalities are lacking (LegalBrief
AI, n.d.).
- To justify a recovery in quantum meruit, Zenit Construction must prove they did the works that
had value and must show the employer benefited directly from them (Voon Su Huei, 2020).
- It must also be shown that allowing the employer to retain the benefit without paying would
result in unfair enrichment.
- The court will then consider the facts and circumstances, and may award fair compensation for
the work, based on its value, not strictly the contract terms (Voon Su Huei, 2020).
4.2 Relevant Case Law

HOCK HUAT IRON FOUNDRY (SUING AS A FIRM) v NAGA TEMBAGA SDN BHD

Facts:
The plaintiff (contractor) sued the defendant (employer) for RM356,833.54 under a construction
contract for an office and factory. Although the agreed completion date was 30 November 1980,
the project was only completed on 24 September 1981. The defendant claimed the plaintiff was
liable for liquidated damages due to the delay and counterclaimed for RM594,308.45 in
liquidated damages and RM618,986.28 in interest losses. The plaintiff also claimed additional
works worth RM67,337.96, though this was not specifically included in the statement of claim's
prayers.

Helds:
- Based on this case, the Court held that since the defendant did not terminate the contract despite
the plaintiff’s delay and instead allowed the plaintiff to complete the construction works, time
was no longer considered to be of the essence of the contract under Section 56(1) of the Contracts
Act 1950. Furthermore, under Section 47 of the Act, as the defendant failed to issue a proper
notice fixing a reasonable deadline, it could not treat the contract as repudiated.
- On the issue of damages, the Court affirmed that the defendant had not sufficiently proven actual
loss due to the delay and therefore awarded only nominal damages of RM10 for the alleged loss
of interest and income on investment.
- A significant issue also arose concerning the plaintiff’s claim for additional works under a
variation order. The plaintiff had alleged that it carried out variation works worth RM67,337.96 at
the request of the defendant and supported this with evidence. Despite the trial judge accepting a
portion of the variation works amounting to RM62,608.98, the Court of Appeal held that this was
wrongly included in the judgment because the variation sum was not specifically pleaded in the
prayers of the statement of claim. As a result, the total judgment sum was reduced from
RM356,833.54 to RM352,104.56.
- This case clearly demonstrates that even if variation works are proven to have been carried out
and benefitted the employer, the claim may still fail if it is not properly pleaded. It reinforces the
 legal requirement that both proof and proper pleading are essential to succeed in variation work
claims, particularly in construction contracts where variations are frequent and often form the
basis of disputes.

Hercules Engineering (SEA) Sdn Bhd v Naim Engineering Sdn Bhd [2024] 10 MLJ 72

Facts:

The respondent appointed the appellant as a sub-contractor to carry out the supply, delivery, testing, and
installation of laminated elastomeric bearing pads (“the original works”). The appellant duly completed
the original works within the stipulated 12-month period. In addition to the original scope, the appellant
also carried out additional works, which involved casting an extra thickness of high strength shrink
levelling grout, allegedly at the request and for the benefit of the respondent. Despite completing both the
original and additional works, the respondent only made partial payment for the original works and failed
to pay for the additional works altogether. As a result, the appellant initiated legal action in the Sessions
Court, claiming payment for the unpaid works. The appellant argued that the respondent had accepted and
benefitted from the additional works, and was therefore entitled to be compensated—either the full
claimed amount or a reasonable sum under quantum meruit.

Helds:

- In the second appeal, a critical issue centered around the enforcement of contractual procedures
for variation works as outlined in clauses 34 and 35 of the Letter of Award (LOA). The Court held
that these clauses must be given their literal meaning and strictly complied with. Since the
appellant failed to prove that the variation works were carried out in accordance with these
specific contractual requirements—such as obtaining proper written instructions or approvals—
their claim for additional works could not be allowed.
- The learned trial judge (SCJ) emphasized that this outcome would remain the same even if the
appellant had indeed carried out the additional works as claimed. This judgment underscores a
crucial principle in construction law: proof of work alone is insufficient if the contractual process
for variations is not followed.
- The case highlights that, under a strict interpretation, failure to comply with express variation
procedures in the contract—even where the work benefits the employer—can result in the claim
 being dismissed. For contractors and quantity surveyors, this serves as a clear warning that strict
procedural compliance is just as important as documentation and performance when it comes to
recovering payment for variation works.

References

Team, C. (2015, October 5). Quantum Meruit - Definition, Examples, Cases, Processes. Legal Dictionary.
https://legaldictionary.net/quantum-meruit/

LegalBrief AI. (n.d.). quantum meruit - Meaning in law and legal documents, Examples and FAQs |
https://www.legalbriefai.com/legal-terms/quantum-meruit

Voon Su Huei, (2020) Just Desserts: Tale of Quantum Meruit | Thomas Philip Advocates and Solicitors,
Kuala Lumpur, Malaysia. https://www.thomasphilip.com.my/articles/just-desserts-tale-of-quantum-
meruit/