Contract Administration For Construction & Engineering Contracts - 1

IEM TRAINING CENTRE SDN. BHD.
TWO DAY INTENSIVE COURSE ON

CONTRACT ADMINISTRATION FOR
CONSTRUCTION & ENGINEERING
CONTRACTS
Presented by: IR. HARBANS SINGH K.S.
B.E. (Mech) SPORE, LLB (Hons) London
CLP, DipICArb, C. Eng, PE.
HSKS
ABOUT THE COURSE PRESENTER
Ir. Harbans Singh K.S.
B.E. (Mech) Spore, LLB (Hons) London,
CLP, DipICArb, P.E.,
C. Eng., MIEM, MIMechE,
MIHEEM, MASHRAE, MCIArb, MMIArb.
Ir. Harbans Singh K.S. is a Professional and Chartered Engineer, Arbitrator,
Adjudicator, Mediator, Advocate & Solicitor (non-practising). He commenced his
career in Malaysia before working in Germany and then locally in various professional
capacities. He is presently domiciled in Malaysia where he is active in construction
law and dispute resolution. Ir. Harbans is the recipient of IEMs Tan Sri Hj. Yusoff
Prize (2001), the Cedric Barclay and the Chartered Institute of Arbitrators Awards for
the Diploma in International Commercial Arbitration Examination (Oxford 2003). He
is also the author of a series of four books entitled Engineering & Construction
Contracts Management, coauthor of the book The PAM 2006 Standard Form of
Building Contract, contributor to the Malaysian Standard Forms & Precedents:
Construction & Engineering Contracts, The Ingenieur and the Malayan Law
Journal.
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CONSTRUCTION/ ENGINEERING CONTRACTS
DAY 1 - PROGRAMME
8.30 a.m. - 9.00 a.m. : Registration
9.00 a.m. - 10.30 a.m. : Session 1
10.30a.m. - 10.45a.m. : Tea/Coffee Break
10.45 a.m. - 12.30 noon : Session 2
12.30 noon - 1.00 p.m. : Q & A Session
1.00 p.m. - 2.00 p.m. : Lunch Break
2.00 p.m. - 3.15 p.m. : Session 3
3.15 p.m. - 3.30 p.m. : Tea/Coffee Break
3.30 p.m. - 4.45 p.m. : Session 4
4.45 p.m. - 5.00 p.m. : Q & A Session
5.00 p.m. : End of Day 1
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CONSTRUCTION/ ENGINEERING CONTRACTS
DAY 2 - PROGRAMME
9.00 a.m. - 10.30 a.m. : Session 1
10.30a.m. - 10.45a.m. : Tea/Coffee Break
10.45 a.m. - 12.30 noon : Session 2
12.30 noon - 1.00 p.m. : Q & A Session
1.00 p.m. - 2.00 p.m. : Lunch Break
2.00 p.m. - 3.15 p.m. : Session 3
3.15 p.m. - 3.30 p.m. : Tea/Coffee Break
3.30 p.m. - 4.45 p.m. : Session 4
4.45 p.m. - 5.00 p.m. : Q & A Session
5.00 p.m. : End of Course
CONTENTS
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1.0 CONSTRUCTION/ENGINEERING CONTRACTS: INTRODUCTION
2.0 COMMENCEMENT OF CONTRACT AT SITE
3.0 MONITORING OF WORK PROGRESS
4.0 SUPERVISION OF WORKS/CONTRACT ADMINISTRATION
5.0 PAYMENTS/COMMERCIAL MATTERS
6.0 VARIATIONS/CHANGES
7.0 DELAY AND EXTENSION OF TIME
8.0 NON-COMPLETION AND DAMAGES
9.0 COMPLETION AND HANDING OVER
10.0 DEFECTS
11.0 POST COMPLETION AND FINAL ACCOUNT
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CONSTRUCTION/
ENGINEERING CONTRACTS:
INTRODUCTION
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1.0 CONSTRUCTION/ENGINEERING CONTRACTS: INTRODUCTION
TYPES OF CONTRACTS TYPES OF CONTRACTS TYPES OF CONTRACTS TYPES OF CONTRACTS
1. GENERAL CONTRACTS
2. ENGINEERING/CONSTRUCTION CONTRACTS
TYPES OF BUILDING CONTRACTS TYPES OF BUILDING CONTRACTS TYPES OF BUILDING CONTRACTS TYPES OF BUILDING CONTRACTS
COMMON CONTRACT PROCUREMENT METHODS COMMON CONTRACT PROCUREMENT METHODS COMMON CONTRACT PROCUREMENT METHODS COMMON CONTRACT PROCUREMENT METHODS
1. TRADITIONAL GENERAL CONTRACTS
2. MANAGEMENT TYPES
3. PACKAGE DEAL TYPES
4. MISCELLANEOUS METHODS
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BASIC CONTRACT PRINCIPLES BASIC CONTRACT PRINCIPLES BASIC CONTRACT PRINCIPLES BASIC CONTRACT PRINCIPLES
1. CONTRACT DEFINITIONS
2. ELEMENTS OF CONTRACT
3. STANDARD FORMS OF CONTRACT
4. BREACH OF CONTRACT: REMEDIES
MISCELLANEOUS ISSUES MISCELLANEOUS ISSUES MISCELLANEOUS ISSUES MISCELLANEOUS ISSUES
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FIG. 1-1: GENERAL CONTRACTS - TYPES
SIMPLE
CONTRACTS
SPECIALITY
CONTRACTS
(DEED)
MATERIAL
& LABOUR
CONTRACTS
SUB-SUB
CONTRACTS
INDEPENDENT
CONTRACTS
MATERIAL SUPPLY
CONTRACT
LABOUR
CONTRACT
COLLATERAL
CONTRACTS
ORAL
CONTRACTS
EXPRESS
CONTRACTS
EMPLOYMENT
CONTRACTS
MAIN CONTRACTS
SUB-CONTRACTS
GENERAL
CONTRACTS:
TYPES
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ENGINEERING/
CONSTRUCTION
CONTRACTS:
TYPES
FIG. 1-2 : ENGINEERING/CONSTRUCTION CONTRACTS - TYPES
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FIG. 1-3 : TYPES OF CONTRACTS BASED ON PRICING MECHANISM
TYPE OF CONTRACT
LUMP SUM
CONTRACTS
LUMP SUM
CONTRACTS
COST
REIMBURSEMENT
CONTRACTS
COST
REIMBURSEMENT
CONTRACTS
LUMP SUM WITH
PLAN AND
SPECIFICATION
LUMP SUM WITH
PLAN AND
SPECIFICATION
LUMP SUM WITH
BILLS
OF QUANTITIES
LUMP SUM WITH
BILLS
OF QUANTITIES
COST PLUS
FIXED FEE
COST PLUS
FIXED FEE
COST PLUS
PERCENTAGE
COST PLUS
PERCENTAGE
COST PLUS
FLUCTUATING FEE
COST PLUS
FLUCTUATING FEE
TARGET COST
TARGET COST
VALUE COST
VALUE COST
MESUREMENT
CONTRACTS
MESUREMENT
CONTRACTS
BASED ON
APPROXIMATE
QUANTITIES
BASED ON
APPROXIMATE
QUANTITIES
BASED ON A
SCHEDULE
BASED ON A
SCHEDULE
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TRADITIONAL TRADITIONAL TRADITIONAL TRADITIONAL
GENERAL GENERAL GENERAL GENERAL
CONTRACTTING CONTRACTTING CONTRACTTING CONTRACTTING
TRADITIONAL TRADITIONAL TRADITIONAL TRADITIONAL
CONTRACTTING CONTRACTTING CONTRACTTING CONTRACTTING
MANAGEMENT MANAGEMENT MANAGEMENT MANAGEMENT
TYPE TYPE TYPE TYPE
TYPE TYPE TYPE TYPE
TURNKEY TURNKEY TURNKEY TURNKEY
TURNKEY TURNKEY TURNKEY TURNKEY
ENGINEERING, PROCUREMENT, ENGINEERING, PROCUREMENT, ENGINEERING, PROCUREMENT, ENGINEERING, PROCUREMENT,
CONSTRUCTION & COMMISSIONING CONSTRUCTION & COMMISSIONING CONSTRUCTION & COMMISSIONING CONSTRUCTION & COMMISSIONING
ENGINEERING, PROCUREMENT, ENGINEERING, PROCUREMENT, ENGINEERING, PROCUREMENT, ENGINEERING, PROCUREMENT,
CONSTRUCTION & COMMISSIONING CONSTRUCTION & COMMISSIONING CONSTRUCTION & COMMISSIONING CONSTRUCTION & COMMISSIONING
DESIGN & BUILD/ DESIGN & BUILD/ DESIGN & BUILD/ DESIGN & BUILD/
DESIGN & CONSTRUCT DESIGN & CONSTRUCT DESIGN & CONSTRUCT DESIGN & CONSTRUCT
DESIGN & BUILD/ DESIGN & BUILD/ DESIGN & BUILD/ DESIGN & BUILD/
DESIGN & CONSTRUCT DESIGN & CONSTRUCT DESIGN & CONSTRUCT DESIGN & CONSTRUCT
FAST FAST FAST FAST
TRACKING TRACKING TRACKING TRACKING
FAST FAST FAST FAST
TRACKING TRACKING TRACKING TRACKING
CONSTRUCTION CONSTRUCTION CONSTRUCTION CONSTRUCTION
CONTRACTING CONTRACTING CONTRACTING CONTRACTING
MISCELLANEOUS MISCELLANEOUS MISCELLANEOUS MISCELLANEOUS
METHODS METHODS METHODS METHODS
PACKAGE PACKAGE PACKAGE PACKAGE
DEAL TYPE DEAL TYPE DEAL TYPE DEAL TYPE
PACKAGE PACKAGE PACKAGE PACKAGE
DEAL TYPE DEAL TYPE DEAL TYPE DEAL TYPE
BUILD, OPERATE BUILD, OPERATE BUILD, OPERATE BUILD, OPERATE
& TRANSFER & TRANSFER & TRANSFER & TRANSFER
BUILD, OPERATE BUILD, OPERATE BUILD, OPERATE BUILD, OPERATE
& TRANSFER & TRANSFER & TRANSFER & TRANSFER
PARTNERING PARTNERING PARTNERING PARTNERING
PARTNERING PARTNERING PARTNERING PARTNERING
COMMON CONTRACT PROCUREMENT METHODS
FIG. 1-4 : COMMON CONTRACT PROCUREMENT METHODS IN USE
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1985 1985 1985 1985 1990 1990 1990 1990 1995 1995 1995 1995 2000 2000 2000 2000
1.0 TRADITIONAL GENERAL 95% 76% 31% 20%
CONTRACTING
2.0 MANAGEMENT 2% 3% 2% 1%
CONTRACTING
3.0 CONSTRUCTION 1% 3% 9% 10%
MANAGEMENT
4.0 PACKAGE DEAL TYPE 2% 15% 52% 60%
5.0 BUILD, OPERATE AND - 2% 5% 8%
TRANSFER
6.0 OTHER - 1% 1% 1%
MISCELLANEOUS
FIG. 1-5 : COMPARISON OF COMMON CONTRACT PROCUREMENT METHODS
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EMPLOYER EMPLOYER EMPLOYER EMPLOYER
PROFESSIONAL PROFESSIONAL PROFESSIONAL PROFESSIONAL
TEAM TEAM TEAM TEAM - -- - DESIGN AND DESIGN AND DESIGN AND DESIGN AND
CONTRACT ADMINISTRATION CONTRACT ADMINISTRATION CONTRACT ADMINISTRATION CONTRACT ADMINISTRATION
TEAM TEAM TEAM TEAM - -- - DESIGN AND DESIGN AND DESIGN AND DESIGN AND
CONTRACT ADMINISTRATION CONTRACT ADMINISTRATION CONTRACT ADMINISTRATION CONTRACT ADMINISTRATION
SUB SUB SUB SUB- -- -SUB SUPPLIERS SUB SUPPLIERS SUB SUPPLIERS SUB SUPPLIERS
MAIN CONTRACTOR MAIN CONTRACTOR MAIN CONTRACTOR MAIN CONTRACTOR
(MC) (MC) (MC) (MC)
MAIN CONTRACTOR MAIN CONTRACTOR MAIN CONTRACTOR MAIN CONTRACTOR
(MC) (MC) (MC) (MC)
SUB SUB SUB SUB- -- -SUB SUB SUB SUB
CONTRACTORS CONTRACTORS CONTRACTORS CONTRACTORS
1. Architect
2. Engineers - C&S, M&E
3. Quantity Surveyor
4. Other Specialist
NOMINATED SUPLLIER NOMINATED SUPLLIER NOMINATED SUPLLIER NOMINATED SUPLLIER
(NS) (NS) (NS) (NS)
NOMINATED SUPLLIER NOMINATED SUPLLIER NOMINATED SUPLLIER NOMINATED SUPLLIER
(NS) (NS) (NS) (NS)
DOMESTIC SUPPLIER DOMESTIC SUPPLIER DOMESTIC SUPPLIER DOMESTIC SUPPLIER
(DS) (DS) (DS) (DS)
DOMESTIC SUPPLIER DOMESTIC SUPPLIER DOMESTIC SUPPLIER DOMESTIC SUPPLIER
(DS) (DS) (DS) (DS)
Key
_______ : Contractual Link
_ _ _ _ _ : Responsibility
FIG. 1-6: TRADITIONAL GENERAL CONTRACTING (TGC) CONTRACTUAL RELATIONSHIPS
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ADVISORS ADVISORS ADVISORS ADVISORS
ADVISORS ADVISORS ADVISORS ADVISORS
D & C CONTRACTOR D & C CONTRACTOR D & C CONTRACTOR D & C CONTRACTOR
D & C CONTRACTOR D & C CONTRACTOR D & C CONTRACTOR D & C CONTRACTOR
1. Architect
4. Other Specialist
SUB SUB SUB SUB- -- -
SUPPLIER SUPPLIER SUPPLIER SUPPLIER
SUPPLIER SUPPLIER SUPPLIER SUPPLIER
CONTRACTOR CONTRACTOR CONTRACTOR CONTRACTOR
TEAM TEAM TEAM TEAM
TEAM TEAM TEAM TEAM
1. Architect
4. Other Specialist
1. Setting up Employers
Requirements
2. Auditing role during
construction
1. Detailed Design
2. Construction supervision
Key
FIG. 1-7: TURNKEY CONTRACTS/DESIGN & CONSTRUCT (D&C) - CONTRACTUAL
RELATIONSHIPS
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PROFESSIONAL TEAM PROFESSIONAL TEAM PROFESSIONAL TEAM PROFESSIONAL TEAM
PROFESSIONAL TEAM PROFESSIONAL TEAM PROFESSIONAL TEAM PROFESSIONAL TEAM
TRADE TRADE TRADE TRADE
(MC) (MC) (MC) (MC)
(MC) (MC) (MC) (MC)
1. Architect
4. Other Specialist
Key
FIG. 1-8: MANAGEMENT CONTRACTING (MC) - CONTRACTUAL RELATIONSHIPS
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TEAM TEAM TEAM TEAM
TEAM TEAM TEAM TEAM
MANAGER (CM) MANAGER (CM) MANAGER (CM) MANAGER (CM)
MANAGER (CM) MANAGER (CM) MANAGER (CM) MANAGER (CM)
1. Architect
4. Other Specialist
Key
FIG. 1-9: CONSTRUCTION MANAGEMENT (CM) - CONTRACTUAL RELATIONSHIPS
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* CONTRACT - DEFINATIONS
1.0 1.0 1.0 1.0 PER ANSON PER ANSON PER ANSON PER ANSON
* Legally binding agreement
* Between two or more parties
* By which rights are acquired by one or more
* To acts or forbearances on the part of the other or others
2.0 2.0 2.0 2.0 PER SECTION 2(h) MALAYSIAN CONTRACTS ACT 1950 (REV. 1974) PER SECTION 2(h) MALAYSIAN CONTRACTS ACT 1950 (REV. 1974) PER SECTION 2(h) MALAYSIAN CONTRACTS ACT 1950 (REV. 1974) PER SECTION 2(h) MALAYSIAN CONTRACTS ACT 1950 (REV. 1974)
* An agreement
* Enforceable by Law
** CONTRACT - BASIC ELEMENTS
CLEAR + UNQUALIFIED + CONSIDERATION = CONTRAC CLEAR + UNQUALIFIED + CONSIDERATION = CONTRAC CLEAR + UNQUALIFIED + CONSIDERATION = CONTRAC CLEAR + UNQUALIFIED + CONSIDERATION = CONTRACT TT T
OFFER OFFER OFFER OFFER ACCEPTANCE ACCEPTANCE ACCEPTANCE ACCEPTANCE (LEGAL (LEGAL (LEGAL (LEGAL
AGREEMENT) AGREEMENT) AGREEMENT) AGREEMENT)
FIG. 1-10: CONTRACT DEFINITIONS
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FIRM OFFER/
PROPOSAL
FIRM OFFER/
PROPOSAL
UNQUALIFIED
ACCEPTANCE
UNQUALIFIED
ACCEPTANCE
CONSIDERATION
CONSIDERATION
INTENTION TO CREATE
LEGAL RELATIONS
CERTAINTY OF TERMS
LEGAL CAPACITY TO
CONTRACT
FREE CONSENT
LAWFUL OBJECT AND
CONSIDERATION
PHYSICAL/LEGAL
POSSIBILITY
FIG. 1-11: ELEMENTS OF A VALID/ENFORCEABLE AGREEMENT
+
+
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FIG. 1-12 : STANDARD FORMS OF CONTRACT (PART I)
STANDARD
FORMS OF
CONTRACT
DISADVANTAGES
DEFINITION/
MEANING
MAIN TYPES
ADVANTAGES
CHARACTERISTICS
PURPOSE
TYPES
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GOVERNMENT/ GOVERNMENT/ GOVERNMENT/ GOVERNMENT/
PUBLIC SECTOR PUBLIC SECTOR PUBLIC SECTOR PUBLIC SECTOR
GOVERNMENT/ GOVERNMENT/ GOVERNMENT/ GOVERNMENT/
PUBLIC SECTOR PUBLIC SECTOR PUBLIC SECTOR PUBLIC SECTOR
STANDARD FORMS OF CONTRACT
PRIVATE SECTOR PRIVATE SECTOR PRIVATE SECTOR PRIVATE SECTOR
PRIVATE SECTOR PRIVATE SECTOR PRIVATE SECTOR PRIVATE SECTOR
INTERNATIONAL INTERNATIONAL INTERNATIONAL INTERNATIONAL
CONTRACTS CONTRACTS CONTRACTS CONTRACTS
INTERNATIONAL INTERNATIONAL INTERNATIONAL INTERNATIONAL
BUILDING WORKS
BUILDING WORKS
JKR / PWD
JKR / PWD
MISCELLANEOUS
MISCELLANEOUS
1. FIDIC Conditions
2. ICE Conditions
3. IEEE Conditions
4. IMechE Conditions
5. JCT Conditions
CIVIL ENGINEERING
WORKS
CIVIL ENGINEERING
WORKS
M & E WORKS
M & E WORKS
FIG. 1-13: STANDARD FORMS OF CONTRACT (PART II)
203 (Rev. 1/2010) - without
quantities
203A (Rev. 1/2010) - with
quantities
203N (Rev. 1/2010) - For NSC
203P (Rev. 1/2010) - For
Nominated Suppliers
PWD Form DB (2007 Edn.)
For Design & Build Contracts
CIDB Form for:
- Building Contracts 2000 Edn.
- Form CIDB.B (NSC/2002)
Modified JKR/PWD Forms e.g.
LPK, MHA, etc.
IEM Conditions
- IEM.CE 2011
- IEM.CES 1/90
PAM Contract 2006
(with quantities)
PAM Contract 2006
(without quantities)
PAM Sub-Contract 2006
IEM Conditions
- IEM.ME 1/94
TNB Conditions, etc.
HSKS
COMMENCEMENT OF
CONTRACT AT SITE
2.0 COMMENCEMENT OF CONTRACT AT SITE
APPROACHES IN: APPROACHES IN: APPROACHES IN: APPROACHES IN:
1. TRADITIONAL GENERAL CONTRACTS
2. DESIGN & BUILD / TURNKEY CONTRACTS
FORMALITIES: FORMALITIES: FORMALITIES: FORMALITIES:
1. CONDITIONS PRECEDENT
2. INSURANCES, PERFORMANCE BONDS, ETC.
SITE POSSESSION : MEANING AND EFFECT SITE POSSESSION : MEANING AND EFFECT SITE POSSESSION : MEANING AND EFFECT SITE POSSESSION : MEANING AND EFFECT
SUBMITTALS : SUBMITTALS : SUBMITTALS : SUBMITTALS :
1. CONSTRUCTION DRAWINGS
2. SHOP DRAWINGS
3. SAMPLES
4. QA AND QC DOCUMENTS
5. HEALTH AND SAFETY DOCUMENTS
6. METHOD STATEMENTS
TEMPORARY WORKS TEMPORARY WORKS TEMPORARY WORKS TEMPORARY WORKS
ISSUES FOR ATTENDANCE OF NOMINATED SUB ISSUES FOR ATTENDANCE OF NOMINATED SUB ISSUES FOR ATTENDANCE OF NOMINATED SUB ISSUES FOR ATTENDANCE OF NOMINATED SUB- -- -CONTRACTORS CONTRACTORS CONTRACTORS CONTRACTORS
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RELEVANT CASES RELEVANT CASES RELEVANT CASES 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
4. NANYANG INSURANCE CO. LTD. V SALBIAH & ANOR [1967] 1 MLJ 94
5. SURREY HEALTH BOROUGH COUNCIL V LOVELL CONSTRUCTION
[1988] 42 BLR 25
6. FREEMAN V HENSLER [1981] 20 BLR 78
7. TAN HOCK CHAN V KHO TECK SENG [1980] 1 MLJ 308
8. PUTRA PERDANA CONSTRUCTION SDN. BHD. V AMI INSURANCE BHD
& ORS [2005] 2 MLJ 123 HC
9. YIP SHOU SHAN V SIN HEAP LEE MARUBENI SDN. BHD. [2002] 5 MLJ
43, HC`
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FIG. 2-1 : COMMENCEMENT - COMMON LABELS
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COMMENCEMENT
OF CONTRACT
PERIOD
COMMENCEMENT
OF CONTRACT
TAKING OVER OF
THE SITE
SITE POSSESSION
COMMENCEMENT
OF WORKS
COMMENCEMENT
OF OPERATIONS
ON SITE
COMMENCEMENT:
COMMON LABELS
FIG. 2-2: PROTECTION AGAINST CONTRACTORS FAILURES COMMON MECHANISMS
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PARENT COMPANY
GUARANTEE
LETTER OF AWARENESS
INSURANCE
PERFORMANCE BOND
STANDBY LETTER
OF CREDIT
LETTER OF COMFORT
PROTECTION AGAINST
CONTRACTORS FAILURES:
COMMON MECHANISMS
FIG. 2-3 : PROTECTION AGAINST CONTRACTORS FAILURES AN OVERVIEW (PART I)
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PURPOSE
PROTECTION AGAINST CONTRACTORS FAILURES: AN OVERVIEW (PART I)
COMMON MECHANISMS/
INSTRUMENTS: TYPES
PARENT COMPANY
GUARANTEES
USE NATURE
PROCEDURAL
REQUIREMENTS
Preliminary review
Check for legal compliance
Check for compliance with
formalities
Contractual performance of
Company within a corporate
group is underwritten by other
members of group
E.g. Subsidiary and Holding
Company
For commercial and
administrative convenience
Owing to requirements of
applicable law e.g. company
law, etc.
Risk transferring contracts
Enable recovery of compensation
upon contractors default/failure
under the contract
Parent Company Guarantees
Performance Bonds
Miscellaneous Types:
1. Letters of Comfort
2. Standby Letters of Credit
3. Insurances
Contd.
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FIG. 2-4 : PROTECTION AGAINST CONTRACTORS FAILURES AN OVERVIEW (PART II)
PERFORMANCE BONDS PERFORMANCE BONDS PERFORMANCE BONDS PERFORMANCE BONDS
PROTECTION AGAINST CONTRACTORS FAILURES: AN OVERVIEW (PART II)
MISCELLANEOUS MECHANISMS/ MISCELLANEOUS MECHANISMS/ MISCELLANEOUS MECHANISMS/ MISCELLANEOUS MECHANISMS/
INSTRUMENTS INSTRUMENTS INSTRUMENTS INSTRUMENTS
TYPES TYPES TYPES TYPES
Two main types:
1. Conditional/
Default Bond
2. Unconditional/
On-Demand
Bond
Features of
local practice
Rules of
construction
and
enforcement
DURATION OF DURATION OF DURATION OF DURATION OF
LIABILITY LIABILITY LIABILITY LIABILITY
DURATION OF DURATION OF DURATION OF DURATION OF
Normally stipulated in
bond. Types include:
1. Entire duration of
contract
2 Up to CPC -
Construction
Bond
3 CPC to Final
Certificate
Maintenance
Bond
4 Up to date of
release stipulated
by guarantor
DEFINITION DEFINITION DEFINITION DEFINITION
See Robinson and
Lavers definition
Means of
guaranteeing to
the employer:
1. The
contractors
financial
viability and
2. Contractors
ability to
perform
obligations
under the
contract
FINANCIAL LIMITS FINANCIAL LIMITS FINANCIAL LIMITS FINANCIAL LIMITS
OF LIABILITY OF LIABILITY OF LIABILITY OF LIABILITY
Normally
stipulated in
Bond itself.
Normally 5-10%
Sometimes
higher
See use of
Indexed
Performance
Bonds
PROCEDURAL PROCEDURAL PROCEDURAL PROCEDURAL
REQUIREMENTS REQUIREMENTS REQUIREMENTS REQUIREMENTS
Preliminary
review
Checks for
authenticity
Check for
compliance with
formalities
NON NON NON NON- -- -PROVISION OF PROVISION OF PROVISION OF PROVISION OF
BOND/GUARANTEE BOND/GUARANTEE BOND/GUARANTEE BOND/GUARANTEE
NON NON NON NON- -- -PROVISION OF PROVISION OF PROVISION OF PROVISION OF
BOND/GUARANTEE BOND/GUARANTEE BOND/GUARANTEE BOND/GUARANTEE
Timing for
submission
Consequences of
failure to submit:
1. Contract
provisions
2. Common law
rules
RELEASE OF BOND RELEASE OF BOND RELEASE OF BOND RELEASE OF BOND
/GUARANTEE /GUARANTEE /GUARANTEE /GUARANTEE
RELEASE OF BOND RELEASE OF BOND RELEASE OF BOND RELEASE OF BOND
/GUARANTEE /GUARANTEE /GUARANTEE /GUARANTEE
Seven main
circumstances
Effect of
breaches of
terms and
conditions
LETTER OF AWARENESS LETTER OF AWARENESS LETTER OF AWARENESS LETTER OF AWARENESS
LETTER OF AWARENESS LETTER OF AWARENESS LETTER OF AWARENESS LETTER OF AWARENESS
Reasons for
Comparison with letters of
comfort
Typical contents
Legal effect of letter
INSURANCE INSURANCE INSURANCE INSURANCE
INSURANCE INSURANCE INSURANCE INSURANCE
Reasons for:
Legal effect of Insurance
Comparison with the other
mechanisms/instruments
STANDBY LETTER STANDBY LETTER STANDBY LETTER STANDBY LETTER
OF CREDIT OF CREDIT OF CREDIT OF CREDIT
STANDBY LETTER STANDBY LETTER STANDBY LETTER STANDBY LETTER
OF CREDIT OF CREDIT OF CREDIT OF CREDIT
Reasons for
Comparison with
Unconditional/On-Demand Bond
Obligations under
LETTER OF COMFORT LETTER OF COMFORT LETTER OF COMFORT LETTER OF COMFORT
LETTER OF COMFORT LETTER OF COMFORT LETTER OF COMFORT LETTER OF COMFORT
Reasons for
Typical contents
Contn.
FIG. 2-5 : CONTRACTORS INSURANCE POLICIES COMMON TYPES
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FIG. 2-6 : INSURANCES AN OVERVIEW (PART I)
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PURPOSES
INSURANCES: AN OVERVIEW (PART I)
DEFINITION TYPES
CATEGORY II CATEGORISATION PRINICPAL TYPES
Contractor: Common Types
Employer: Common Types
Occupier: Common Types
Management Corporation:
Common Types
Two Main Categorization:
1. Liability based
2. Loss based
Difference: basis of
compensation
Risk allocation mechanisms
Means of seeking compensation
following default/failure
Per Robinson and Lavers
Voluntary assumption of
specified risk in return for an
agreed payment
CATEGORY I
Liability based
Indemnification of insured
against damages payable to
3
rd
party
Examples:
1. 3
rd
Party Liability
Insurance
2. Workmens
Compensation
3. Professional Indemnity
Insurance
Loss based
Compensate insured for
loss/damage directly
incurred by insured
Examples:
1. Contractors All Risk
Policy
2. Erection All Risk
Policy
Contd.
FIG. 2-7 : INSURANCES AN OVERVIEW (PART II)
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FEATURES AND FEATURES AND FEATURES AND FEATURES AND
CONDITIONS CONDITIONS CONDITIONS CONDITIONS
FEATURES AND FEATURES AND FEATURES AND FEATURES AND
INSURANCES: AN OVERVIEW (PART II)
FAILURE TO INSURE FAILURE TO INSURE FAILURE TO INSURE FAILURE TO INSURE
IMPORTANT IMPORTANT IMPORTANT IMPORTANT
STANDARD STANDARD STANDARD STANDARD
IMPORTANT IMPORTANT IMPORTANT IMPORTANT
Six main ones i.e.
1. Condition precedent
to liability
2. During
work/construction
3. As to risk
4. Following a loss
event
5. As to subrogation
6. On contribution
PARTIES PARTIES PARTIES PARTIES
EFFECTING POLICY EFFECTING POLICY EFFECTING POLICY EFFECTING POLICY
EFFECTING POLICY EFFECTING POLICY EFFECTING POLICY EFFECTING POLICY
Necessity for checking authenticity
of: 1. Cover notes 2. Policy
Necessity to check for compliance
with: 1. Contract requirements
2. Formalities
BASIS OF BASIS OF BASIS OF BASIS OF
Submission of
proposal
Issue of policy
Effect of :
1. Contracts of
uberrimae
fidei
2. Cover notes,
etc.
COMMENCEMENT COMMENCEMENT COMMENCEMENT COMMENCEMENT
OF POLICY OF POLICY OF POLICY OF POLICY
COMMENCEMENT COMMENCEMENT COMMENCEMENT COMMENCEMENT
Various possibilities:
1. Date of
commencement of
contract; or
2. Date of
commencement of
work on site; or
3. Date of delivery of
material, etc.
Function of the nature
of contract works
DURATION DURATION DURATION DURATION
Different formulae:
1. Up to issue of CPC
2. Up to issue of CMGD
3. Up to issue of Final
Certificate
4. Up to Final Certificate
plus fixed period
Requirements
pertaining to extension
of period
Normally stipulated
by employer in
tender/contract
Guidelines for
estimating limits.
General rule on
deductibles/excess
clauses
TERMINATION TERMINATION TERMINATION TERMINATION
TERMINATION TERMINATION TERMINATION TERMINATION
Three main methods:
1. Satisfaction of
conditions
precedent in
contract e.g. issue
of CPC, etc.
2. Termination of
policy by
breach/mutual
agreement
3. Lapse of insurance
period and/or
extension
TIMING FOR SUBMISSION TIMING FOR SUBMISSION TIMING FOR SUBMISSION TIMING FOR SUBMISSION
TIMING FOR SUBMISSION TIMING FOR SUBMISSION TIMING FOR SUBMISSION TIMING FOR SUBMISSION
Normally stipulated in contract
2 Common alternatives:
1. Before commencement of
work/contract; or
2. Within stipulated period of
award of contract
Effects dictated by:
1. Governing contractual
provisions
2. Common law rules
Possible options: Employer insures
and charges premiums to contractor
Apparently not a serious ground to
effect determination
General rule:
1. Named party
2. With insurable
interest
Typical parties:
1. Employer
2. Contractor
3. Sub-contractors
4. Selected 3
rd
parties
Effect of cross
liability provisions
HSKS
FIG. 2-8 : SITE POSSESSION AN OVERVIEW
PROVISIONS PROVISIONS PROVISIONS PROVISIONS
FOR FOR FOR FOR
SITE POSSESSION: AN OVERVIEW
EXCEPTIONS EXCEPTIONS EXCEPTIONS EXCEPTIONS
TO GENERAL TO GENERAL TO GENERAL TO GENERAL
PRINCIPLE PRINCIPLE PRINCIPLE PRINCIPLE
MEANING MEANING MEANING MEANING DEGREE DEGREE DEGREE DEGREE
POSTPONEMENT POSTPONEMENT POSTPONEMENT POSTPONEMENT
FAILURE TO GIVE FAILURE TO GIVE FAILURE TO GIVE FAILURE TO GIVE
POSSESSION POSSESSION POSSESSION POSSESSION
In Letter of
Acceptance
Or in Contract
LATEST LEGAL LATEST LEGAL LATEST LEGAL LATEST LEGAL
POSITION POSITION POSITION POSITION
ON PIECEMEAL ON PIECEMEAL ON PIECEMEAL ON PIECEMEAL
BASIS? BASIS? BASIS? BASIS?
No
PRINCIPLE PRINCIPLE PRINCIPLE PRINCIPLE
EXPRESS EXPRESS EXPRESS EXPRESS IMPLIED IMPLIED IMPLIED IMPLIED
If not expressed, by
Law
Freeman & Son v
Hensler
Licence revocable by
Employer at any time
Licence to be free from
any encumbrances
Contractor entitled to
Sole/exclusive
possession
Express Stipulations
Case Law
Sufficient degree
of possession/
access
To execute work
unimpeded
To be able to
perform work
Express contract
stipulations permitting
postponement
LEGAL POSITION LEGAL POSITION LEGAL POSITION LEGAL POSITION
EXCEPTIONS EXCEPTIONS EXCEPTIONS EXCEPTIONS
EFFECT EFFECT EFFECT EFFECT
Breach of Contract
Entitles Contractor to
rescind Contract.
loss occasioned
EOT if expressly
permitted
contractually
Otherwise, LAD
cannot be imposed
General Position: No
Exceptions:
a) Express
stipulations to
contrary
b) Where Common
Law applies
TIMING
SITE POSSESSION MEETINGS
EXPLANATION
OF CONTRACT
REQUIREMENTS
PURPOSE
MATTERS
DEALT
MINUTES
PARTICIPANTS
On Date of Commencement
of Contract /
Date of Site Possession
INTRODUCTION
OF PROJECT
MEMBERS
HANDOVER
OF VARIOUS
DOCUMENTS
1. All Project Team
Member
LETTER OF
DELEGATION
OF POWERS
SET OUT
PROCEDURES
COVERING
COPY OF
CONTRACT
DOCUMENTS
PRICED COPY
OF B.Q.
SET OF
CONSTRUCTION
DRAWINGS
To officially handover
Possession of Site to
the Contractor
DISTRIBUTION/
CIRCULATION
WHO
PREPARES ?
Document Submittals and
Approvals
Sample Submittals and

Approvals
Inspection of Work
Interim Valuations
Claim Procedures
Contract Administrator To all parties
FIG. 2-9 : SITE POSSESSION MEETINGS
HSKS
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WORK PROGRAMME
WORKS UNDER CONTRACT:
TYPICAL SUBMITTALS BY
CONTRACTOR
HEALTH AND SAFETY
DOCUMENTS
DESIGN AND CALCULATIONS
FOR WORKS UNDER P.C.
SUM, PACKAGE DEAL TYPE
CONTRACTS, ETC.
DRAWINGS I.E. SHOP,
FABRICATION, SETTING
OUT, ETC.
MISCELLANOUES
REPORTS
AND DOCUMENTS METHOD STATEMENTS
DESIGN AND
CALCULATIONS FOR
TEMPORARY WORKS
QA/QC DOCUMENTS
FIG. 2-10: WORKS UNDER CONTRACT TYPICAL SUBMITTALS BY CONTRACTOR
HSKS
MONITORING OF
WORK PROGRESS
3.0 MONITORING OF WORK PROGRESS
PROGRAMMING OF WORKS PROGRAMMING OF WORKS PROGRAMMING OF WORKS PROGRAMMING OF WORKS
PARTIES RESPONSIBLE: PARTIES RESPONSIBLE: PARTIES RESPONSIBLE: PARTIES RESPONSIBLE:
1. EMPLOYER
2. MAIN CONTRACTOR
3. CONTRACT ADMINISTRATOR
PROGRESS REPORTS PROGRESS REPORTS PROGRESS REPORTS PROGRESS REPORTS
SITE RECORDS SITE RECORDS SITE RECORDS SITE RECORDS
MEETINGS: MEETINGS: MEETINGS: MEETINGS:
1. SITE POSSESSION
2. PROGRESS/SITE
3. NSC COORDINATION
4. AD-HOC
HSKS
1. GLENLION CONSTRUCTION LTD. V THE GUINESS TRUST [1987] 39 BLR 89
2. YORKSHIRE WATER AUTHORITY V SIR ALFRED MCALPINE & SON
(NORTHERN) LTD. [1986] 32 BLR 114
3. GREATER LONDON COUNCIL V CLEVELAND BRIDGE & ENGINEERING CO.
LTD. [1986] 8 Con LR 30
4. KITSONS SHEET METAL LTD. V MATTHEW HALL MECHANICAL &
ELECTRICAL ENGINEERS LTD. [1989] 47 BLR 82
5. WEST FAULKNER ASSOCIATES V LONDON BOROUGH OF NEWHAM [1994]
71 BLR 1
6. EQUITABLE DEBENTURES ASSETS CORP. LTD. V MORGAN BRANCH
ROBERTS & ORS [1984] 2-CLD-10-01
HSKS
FIG. 3-1 : WORK PROGRAMME - TYPICAL FORMS
HSKS
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PRINCIPAL ACTIVITIES
IDENTIFICATION OF
CRITICAL ACTIVITIES
AND CRITICAL PATH
IMPORTANT
MILESTONES FOR
EMPLOYER TO MEET
SEQUENCE OF
ACTIVITIES
IMPORTANT
MILESTONES FOR
CONTRACTOR TO MEET
TIMING OF ACTIVITIES
WORK PROGRAMME:
PRINCIPAL CONTENTS
FIG. 3-2 : WORK PROGRAMME PRINCIPAL CONTENTS
HSKS
FIG. 3-3 : WORK PROGRAMME AN OVERVIEW
RESPONSIBILITY RESPONSIBILITY RESPONSIBILITY RESPONSIBILITY
WORK PROGRAMME: AN OVERVIEW
OPTIONS ON OPTIONS ON OPTIONS ON OPTIONS ON
SUBMISSION SUBMISSION SUBMISSION SUBMISSION
METHOD OF METHOD OF METHOD OF METHOD OF
WORKING WORKING WORKING WORKING
SEQUENCE OF SEQUENCE OF SEQUENCE OF SEQUENCE OF
WORKING WORKING WORKING WORKING
MEANING MEANING MEANING MEANING FORM FORM FORM FORM CONTENTS CONTENTS CONTENTS CONTENTS PURPOSE PURPOSE PURPOSE PURPOSE
PART OF PART OF PART OF PART OF
CONTRACT? CONTRACT? CONTRACT? CONTRACT?
ALTERATION/ ALTERATION/ ALTERATION/ ALTERATION/
REVISION REVISION REVISION REVISION
Express Provisions
By Implication
Sequence and
Timing of Activities
Critical Milestones
FOR CONTRACT FOR CONTRACT FOR CONTRACT FOR CONTRACT
ADMINISTRATOR ADMINISTRATOR ADMINISTRATOR ADMINISTRATOR
FOR FOR FOR FOR
Approval
Rejection
Withholding of
Approval
SUBMITTED AFTER SUBMITTED AFTER SUBMITTED AFTER SUBMITTED AFTER
TENDER AWARD TENDER AWARD TENDER AWARD TENDER AWARD
PART OF TENDER PART OF TENDER PART OF TENDER PART OF TENDER
SUBMISSION? SUBMISSION? SUBMISSION? SUBMISSION?
General
Policies
Mode of
Alternatives /
Revision
Effect of
Alternatives/
Revision
BAR BAR BAR BAR
CHARTS CHARTS CHARTS CHARTS
CRITICAL PATH CRITICAL PATH CRITICAL PATH CRITICAL PATH
ANALYSIS ANALYSIS ANALYSIS ANALYSIS
PERT PERT PERT PERT
PRIMIVERA/ PRIMIVERA/ PRIMIVERA/ PRIMIVERA/
MICROSOFT MICROSOFT MICROSOFT MICROSOFT
PROJECT PROJECT PROJECT PROJECT
FIG. 3-4 : PROGRESS MONITORING EMPLOYERS PURPOSES
HSKS
TO LEVY CONTROL OVER
PROGRESS OF THE WORKS
TO TAKE NECESSARY
REMEDIAL MEASURES IF
DELAY OCCURS OR IF
EMPLOYER IS AT FAULT
MISCELLANEOUS
PURPOSES
TO ENSURE CONTRACT
IS COMPLETED
ACCORDING TO
SCHEDULE
TO PLAN AND
STREAMLINE FINANCIAL
ARRANGEMENTS
TO OBVIATE DEFAULT
TO WARN CONTRACTOR
TO TAKE REMEDIAL
MEASURES IN CASE
DELAY OCCURS
PROGRESS MONITORING:
EMPLOYERS PURPOSES
HSKS
FIG. 3-5 : PROGRESS MONITORING AN OVERVIEW
PROGRESS MONITORING: AN OVERVIEW
SITE PROGRESS SITE PROGRESS SITE PROGRESS SITE PROGRESS
MEETINGS MEETINGS MEETINGS MEETINGS
PURPOSE PURPOSE PURPOSE PURPOSE METHODS METHODS METHODS METHODS BASIS BASIS BASIS BASIS
FREQUENCY/ FREQUENCY/ FREQUENCY/ FREQUENCY/
NATURE OF NATURE OF NATURE OF NATURE OF
CHECKS CHECKS CHECKS CHECKS
MEETING MEETING MEETING MEETING
COORDINATION/ COORDINATION/ COORDINATION/ COORDINATION/
PROJECT PROJECT PROJECT PROJECT
SITE SITE SITE SITE
DIARY DIARY DIARY DIARY
OFFICIAL WORK OFFICIAL WORK OFFICIAL WORK OFFICIAL WORK
RECORDS RECORDS RECORDS RECORDS
OFFICIAL OFFICIAL OFFICIAL OFFICIAL
PROGRESS PROGRESS PROGRESS PROGRESS
REPORTS REPORTS REPORTS REPORTS
SITE SITE SITE SITE
SITE SITE SITE SITE
AD AD AD AD- -- -HOC HOC HOC HOC
PURPOSE PURPOSE PURPOSE PURPOSE METHODS METHODS METHODS METHODS EVIDENTIAL VALUE EVIDENTIAL VALUE EVIDENTIAL VALUE EVIDENTIAL VALUE
RESPONSIBLE RESPONSIBLE RESPONSIBLE RESPONSIBLE
From Site
Possession
To Issue of Final
Certificate
Normally up to
Practical Completion
only
Use of Contractors
Work Programme
Primary Purposes
Secondary Purposes
Employer/ contract
administrator
Contractor
On regular basis
Normally monthly
Maybe
i. Weekly
ii. Fortnightly
iii. Quarterly, etc.
FIG. 3-6 : POST CONTRACT AWARD STAGE PRINCIPAL TYPES OF MEETINGS
HSKS
POST CONTRACT
AWARD STAGE:
PRINCIPAL TYPES
OF MEETINGS
SITE POSSESSION
MEETINGS
MISCELLANEOUS
MEETINGS
SUB-CONTRACTORS
MEETINGS
COORDINATION/
PROJECT
MANAGEMENT
MEETINGS
SITE PROGRESS
MEETINGS
AD-HOC
MEETINGS
FIG. 3-7 : SITE PROGRESS MEETINGS AN OVERVIEW
HSKS
TIMING
SITE PROGRESS MEETINGS: AN OVERVIEW
ENABLE ENABLE ENABLE ENABLE
CONTRACTOR TO CONTRACTOR TO CONTRACTOR TO CONTRACTOR TO
PURPOSE
ISSUES/
MATTERS DEALT
MINUTES
PARTICIPANTS
PERMIT WORK PERMIT WORK PERMIT WORK PERMIT WORK
PROGRESS TO PROGRESS TO PROGRESS TO PROGRESS TO
S.O./ Contract
Administrator
DISTRIBUTION/ DISTRIBUTION/ DISTRIBUTION/ DISTRIBUTION/
CIRCULATION CIRCULATION CIRCULATION CIRCULATION
WHO WHO WHO WHO
PREPARES? PREPARES? PREPARES? PREPARES?
Officially present
progress report
Present problems
encountered
Be reviewed on
regular basis
Identify areas and
causes of delay
Enable Employer/ C.A. to
redress delay caused by
him/them
Keep track of financial
progress/allocation
CONTRACT CONTRACT CONTRACT CONTRACT
MAIN MAIN MAIN MAIN
CONSULTANTS CONSULTANTS CONSULTANTS CONSULTANTS
NSCs NSCs NSCs NSCs EMPLOYER EMPLOYER EMPLOYER EMPLOYER
Chairs Meeting
Main participant
Observers Only
Participants if contract
administrator's assistants/
representatives
By invitation only Observer only
To all parties/
attendees
Main participant
ONLY SITE ISSUES ONLY SITE ISSUES ONLY SITE ISSUES ONLY SITE ISSUES FINANCIAL ISSUES FINANCIAL ISSUES FINANCIAL ISSUES FINANCIAL ISSUES
3 33 3
RD RD RD RD
PARTY PARTY PARTY PARTY
ISSUES AFFECTING ISSUES AFFECTING ISSUES AFFECTING ISSUES AFFECTING
ISSUES ISSUES ISSUES ISSUES
FIG. 3-8 : SUB-CONTRACTORS MEETINGS AN OVERVIEW
HSKS
TIMING
SUB-CONTRACTORS MEETINGS: AN OVERVIEW
TO ENABLE SUB TO ENABLE SUB TO ENABLE SUB TO ENABLE SUB- -- -
PURPOSE
ISSUES/
MATTERS DEALT
MINUTES
TO PERMIT TO PERMIT TO PERMIT TO PERMIT
Main
Contractor
DISTRIBUTION/ DISTRIBUTION/ DISTRIBUTION/ DISTRIBUTION/
CIRCULATION CIRCULATION CIRCULATION CIRCULATION
WHO WHO WHO WHO
PREPARES? PREPARES? PREPARES? PREPARES?
Officially present
progress report to
Contractor
Present problems
encountered
Review NSCs progress,
areas of delay, etc.
Identify and sort
coordination problems
(MAIN) (MAIN) (MAIN) (MAIN)
NOMINATED NOMINATED NOMINATED NOMINATED
DOMESTIC DOMESTIC DOMESTIC DOMESTIC
OTHERS OTHERS OTHERS OTHERS
(BY (BY (BY (BY
INVITATION INVITATION INVITATION INVITATION) ) ) )
Chairs Meeting
Employer
Third Parties
Contract
Administrator
To all parties/
attendees
PARTICIPANTS
Usually monthly prior
to site meetings
If necessary more
frequently
COORDINATION COORDINATION COORDINATION COORDINATION
MATTERS MATTERS MATTERS MATTERS
SITE PROBLEMS SITE PROBLEMS SITE PROBLEMS SITE PROBLEMS
FINANCIAL ISSUES FINANCIAL ISSUES FINANCIAL ISSUES FINANCIAL ISSUES
3 33 3
RD RD RD RD
PARTY ISSUES PARTY ISSUES PARTY ISSUES PARTY ISSUES
Design
Site Work
Possession
Access
Security
Payments
V.O.s
Claims
Authorities
Utilities Providers
Others
FIG. 3-9 : AD-HOC MEETINGS AN OVERVIEW
HSKS
AD-HOC MEETINGS: AN OVERVIEW
AS AND WHEN AS AND WHEN AS AND WHEN AS AND WHEN
NECESSARY FROM NECESSARY FROM NECESSARY FROM NECESSARY FROM
TIME TO TIME TIME TO TIME TIME TO TIME TIME TO TIME
TIMING TIMING TIMING TIMING PURPOSE PURPOSE PURPOSE PURPOSE
USUALLY USUALLY USUALLY USUALLY
DICTATED BY DICTATED BY DICTATED BY DICTATED BY
CIRCUMSTANCES CIRCUMSTANCES CIRCUMSTANCES CIRCUMSTANCES
TO DISCUSS TO DISCUSS TO DISCUSS TO DISCUSS
SPECIFIC ISSUES / SPECIFIC ISSUES / SPECIFIC ISSUES / SPECIFIC ISSUES /
EMERGENCY EMERGENCY EMERGENCY EMERGENCY
FINANCIAL FINANCIAL FINANCIAL FINANCIAL
TECHNICAL TECHNICAL TECHNICAL TECHNICAL
ADMINISTRATIVE ADMINISTRATIVE ADMINISTRATIVE ADMINISTRATIVE
Site Issues
Design/ Work Issues
3
rd
Party Issues
Training
Maintenance
As-Built Records
Payments
V.O.s
Claims
Design
Construction/Installation
Testing and
Commissioning
Defects
CONVENORS CONVENORS CONVENORS CONVENORS
(AS APPLICABLE) (AS APPLICABLE) (AS APPLICABLE) (AS APPLICABLE)
The Employer
The Contract Administrator
The Contractor
The Sub-Contractors
FIG. 3-10 : SITE RECORDS AN OVERVIEW
HSKS
SITE RECORDS: AN OVERVIEW
PURPOSE PURPOSE PURPOSE PURPOSE METHODS METHODS METHODS METHODS EVIDENTIAL VALUE EVIDENTIAL VALUE EVIDENTIAL VALUE EVIDENTIAL VALUE
From Date of Commencement /
Site Possession to
Completion of works
Normally up to Practical
Completion only
OFFICIAL OFFICIAL OFFICIAL OFFICIAL
REPORT REPORT REPORT REPORT
OFFICIAL WORK OFFICIAL WORK OFFICIAL WORK OFFICIAL WORK
Contractors Scope
NSCs/DSCs Scope
Extension of Time
Additional Work
Direct loss and/or
expense
Miscellaneous matters
REVIEW WORK REVIEW WORK REVIEW WORK REVIEW WORK
EVALUATE EVALUATE EVALUATE EVALUATE
CONTRACTOR CONTRACTOR CONTRACTOR CONTRACTOR S S S S
CLAIMS TO CLAIMS TO CLAIMS TO CLAIMS TO
PERMIT PERMIT PERMIT PERMIT
DECISION MAKING DECISION MAKING DECISION MAKING DECISION MAKING
PROVIDE NECESSARY PROVIDE NECESSARY PROVIDE NECESSARY PROVIDE NECESSARY
INFORMATION/ EVIDENCE INFORMATION/ EVIDENCE INFORMATION/ EVIDENCE INFORMATION/ EVIDENCE
TO TO TO TO
SITE DIARY SITE DIARY SITE DIARY SITE DIARY
DULY SIGNED/ DULY SIGNED/ DULY SIGNED/ DULY SIGNED/
ENDORSED RECORDS ENDORSED RECORDS ENDORSED RECORDS ENDORSED RECORDS
ACKNOWLEDGEMENT ACKNOWLEDGEMENT ACKNOWLEDGEMENT ACKNOWLEDGEMENT
OF RECEIPT RECORDS OF RECEIPT RECORDS OF RECEIPT RECORDS OF RECEIPT RECORDS
Best evidential value Some evidential value
FIG. 3-11 : OFFICIAL WORK RECORDS AN OVERVIEW
HSKS
TIMING OF TIMING OF TIMING OF TIMING OF
OFFICIAL WORK RECORDS: AN OVERVIEW
RECORD OF RECORD OF RECORD OF RECORD OF
SITE INFORMATION SITE INFORMATION SITE INFORMATION SITE INFORMATION
PURPOSE PURPOSE PURPOSE PURPOSE CONTENTS CONTENTS CONTENTS CONTENTS
FOR CONTRACT FOR CONTRACT FOR CONTRACT FOR CONTRACT
ADMINISTRATION ADMINISTRATION ADMINISTRATION ADMINISTRATION
SIGNING OR SIGNING OR SIGNING OR SIGNING OR
ENDORSEMENT ENDORSEMENT ENDORSEMENT ENDORSEMENT
TIME OF TIME OF TIME OF TIME OF
ENTRY ENTRY ENTRY ENTRY
FOR BASIS FOR BASIS FOR BASIS FOR BASIS
OF OFFICIAL OF OFFICIAL OF OFFICIAL OF OFFICIAL
PROGRESS REPORT PROGRESS REPORT PROGRESS REPORT PROGRESS REPORT
Planned
Undertaken
SAFE SAFE SAFE SAFE
KEEPING KEEPING KEEPING KEEPING
DAILY DAILY DAILY DAILY WEEKLY WEEKLY WEEKLY WEEKLY FORTNIGHTLY FORTNIGHTLY FORTNIGHTLY FORTNIGHTLY
USE OF USE OF USE OF USE OF
DESIGNATED DESIGNATED DESIGNATED DESIGNATED
STAFF FOR STAFF FOR STAFF FOR STAFF FOR
SITE WORK/ SITE WORK/ SITE WORK/ SITE WORK/
ACTIVITIES ACTIVITIES ACTIVITIES ACTIVITIES
RECORD RECORD RECORD RECORD
OF WORKERS OF WORKERS OF WORKERS OF WORKERS
RECORD OF RECORD OF RECORD OF RECORD OF
PLANT/MACHINER PLANT/MACHINER PLANT/MACHINER PLANT/MACHINER
Y YY Y
WEATHER WEATHER WEATHER WEATHER
PROBLEMS PROBLEMS PROBLEMS PROBLEMS
ENCOUNTERED ENCOUNTERED ENCOUNTERED ENCOUNTERED
INSTRUCTIONS INSTRUCTIONS INSTRUCTIONS INSTRUCTIONS MISCELLANEOUS MISCELLANEOUS MISCELLANEOUS MISCELLANEOUS
Skilled
Unskilled
Design
Site
Coordination
Due to 3
rd
Parties
Received
Carried Out
Outstanding
Site/ Factory
Visits
Inspections
Preparing
Maintaining
Submitting
Daily
By authorized
Person(s)
S.O/ Contract
Administrator
On site
By S.O./Contract
administrator
Up to lapse of
period of
limitation
Affecting work
Delaying site
operations
FIG. 3-12 : SITE DIARY AN OVERVIEW
HSKS
NATURE NATURE NATURE NATURE
SITE DIARY: AN OVERVIEW
CONTENTS CONTENTS CONTENTS CONTENTS
Undertaken
PRESENTATION PRESENTATION PRESENTATION PRESENTATION
ON REQUEST/ ON REQUEST/ ON REQUEST/ ON REQUEST/
DEMAND DEMAND DEMAND DEMAND
CHECKING / CHECKING / CHECKING / CHECKING /
ENDORSEMENT ENDORSEMENT ENDORSEMENT ENDORSEMENT
SAFE KEEPING/ SAFE KEEPING/ SAFE KEEPING/ SAFE KEEPING/
CUSTODY CUSTODY CUSTODY CUSTODY
ENTRIES ON ENTRIES ON ENTRIES ON ENTRIES ON
DAILY BASIS DAILY BASIS DAILY BASIS DAILY BASIS
SITE WORK/ SITE WORK/ SITE WORK/ SITE WORK/
ACTIVITIES ACTIVITIES ACTIVITIES ACTIVITIES
PROBLEMS PROBLEMS PROBLEMS PROBLEMS
ENCOUNTERED ENCOUNTERED ENCOUNTERED ENCOUNTERED
INSTRUCTIONS INSTRUCTIONS INSTRUCTIONS INSTRUCTIONS RECORD OF RECORD OF RECORD OF RECORD OF MISCELLANEOUS MISCELLANEOUS MISCELLANEOUS MISCELLANEOUS ATTACHMENTS ATTACHMENTS ATTACHMENTS ATTACHMENTS
As to Site Work
Coordination
Site/ factory visits
Weather conditions
Disruption to site
activities
As-Built sketches,
drawings, diagrams,
etc.
As-erected/ As-
Installed Work/ plant,
etc.
By Employers
Representative/
Designated
person
Accuracy of
entries
By S.O./ contract
administrator
Up to lapse of
period of
limitation
Preferably kept by
each and every site
personnel
Personal record of site
activities
Otherwise by
designated site
supervision team
member
Issued to Contractors
Carried out by
Contractor
Contractors
defaults
/omissions
From commencement of
work on site until
completion
If necessary until the end
of the contract
By designated
person
By Employer/
S.O./ any
interested party
HSKS
SUPERVISION OF WORKS/
CONTRACT ADMINISTRATION
HSKS
4.0 SUPERVISION OF WORKS/CONTRACT ADMINISTRATION
1.0 1.0 1.0 1.0 CONTRACT ADMINISTRATION CONTRACT ADMINISTRATION CONTRACT ADMINISTRATION CONTRACT ADMINISTRATION
PURPOSE
DESIGNATION
ROLES
SOURCES OF DUTIES AND POWERS
REPRESENTATIVE/ASSISTANTS
PRINCIPAL DUTIES
LIABILITY
2.0 2.0 2.0 2.0 SUPERVISION SUPERVISION SUPERVISION SUPERVISION
FORMS
DURATION
LEVEL
LIABILITIES
3.0 3.0 3.0 3.0 DISCUSSION OF CASE LAW DISCUSSION OF CASE LAW DISCUSSION OF CASE LAW DISCUSSION OF CASE LAW
HSKS
CONTRACT
ADMINISTRATION:
PRIMARY PURPOSES
FIG. 4-1 : CONTRACT ADMINISTRATION PRIMARY PURPOSES
ENSURE THAT CONTRACTOR
FULFILLS HIS OBLIGATIONS
UNDER THE CONTRACT
ENSURE THAT EMPLOYERS
POSITION ADEQUATELY
PROTECTED AGAINST VARIOUS
CLAIMS
ENSURE WORKS
SATISFACTORILY
COMPLETED WITHIN
ORIGINAL CONTRACT PERIOD
AND PRICE
ENSURE THAT EMPLOYER
FULFILLS HIS OBLIGATIONS
UNDER THE CONTRACT
ENSURE THAT NEEDS/
OBLIGATIONS OF CONTRACT
ADMINISTRATOR UNDER
CONTRACT/STATUTE
ADEQUATELY FULFILLED
ENSURE THAT EMPLOYER
FULFILS HIS
STATUTORY/LOCAL
AUTHORITY REQUIREMENTS
FIG. 4-2 : CONTRACT ADMINISTRATORS COMMON DESIGNATIONS
HSKS
CONTRACT
ADMINISTRATORS:
COMMON
DESIGNATIONS
SUPERINTENDING
OFFICER/ S.O.
CONSTRUCTION
MANAGER
EMPLOYERS
REPRESENTATIVE
ENGINEER
ARCHITECT
PROJECT DIRECTOR
HSKS
CONTRACT
ADMINISTRATOR:
RANGE OF ROLES
PERFORMED
WITH EXPRESS
AUTHORITY
AS AN AGENT
OF THE EMPLOYER
AS AN ADVISOR
TO THE EMPLOYER
AS AN INDEPENDENT
CONTRACTOR
AS AN INDEPENDENT/
IMPARTIAL
ADJUDICATOR
WITH IMPLIED/
OSTENSIBLE
AUTHORITY
WHERE SUCH
WORK
IS REQUIRED
POST-
CONTRACT
FOR MAINLY
DESIGN/
DETAILING
WORK
AS TO MATTERS
OF COST
AS TO OTHER
MATTERS
AS TO
RIGHTS/ DUTIES UNDER
THE CONTRACT
AS TO DISPUTE
RESOLUTION
AS TO
CERTIFICATION
FIG. 4-3 : CONTRACT ADMINISTRATOR RANGE OF ROLES PERFORMED
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CONTRACT ADMINISTRATOR: SOURCES OF DUTIES AND POWERS
TERMS OF
REFERENCE OF
APPOINTMENT
IN-HOUSE EMPLOYEE EXTERNAL BODY/PERSON
CONDITIONS
OF CONTRACT
BEING
ADMINISTERED
CONDITIONS
OF
ENGAGEMENT/
SERVICES
AGREEMENT
CONDITIONS OF
CONTRACT
BEING
ADMINISTERED
FIG. 4-4 : CONTRACT ADMINISTRATOR SOURCES OF DUTIES AND POWERS
HSKS
FIG. 4-5 : CONTRACT ADMINISTRATORS REPRESENTATIVES/ASSISTANTS - TYPICAL
EXAMPLES
CONTRACT ADMINISTRATORS
REPRESENTATIVES/ ASSISTANTS:
TYPICAL EXAMPLES
ARCHITECT
ELECTRICAL ENGINEER
PROJECT MANAGER
STRUCTURAL ENGINEER
SPECIALIST
CONSULTANT CIVIL ENGINEER
QUANTITY SURVEYOR MECHANICAL ENGINEER
HSKS
FIG. 4-6: CONTRACT ADMINISTRATORS PRINCIPAL DUTIES FOR TRADITIONAL GENERAL
CONTRACTS
CONTRACT ADMINISTRATORS PRINCIPAL DUTIES FOR
TRADITIONAL GENERAL CONTRACTS
OVERSEEING TRAINING OF EMPLOYERS
O & M PERSONNEL
PROGRESS MONITORING
ADVISING EMPLOYER
ORDERING VARIATIONS
PARTICIPATING IN PREPARATION OF MIGRATION/
FACILITIES MANAGEMENT PLANS
CLOSING-OFF CONTRACT
PARTICIPATING IN TESTING AND COMMISSIONING
ISSUING INFORMATION,
DRAWINGS, DETAILS, ETC.
ADMINISTRATION OF PAYMENTS
OVERALL SUPERVISION
GRANTING APPROVALS, CONSENTS, ETC.
NOMINATING SUB-CONTRACTORS, ETC.
ISSUING RELEVANT INSTRUCTIONS
INSPECTIONS OF WORKS
MONITORING
RECTIFICATION OF DEFECTS
OVERSEEING COMPLETION &
HANDING OVER OF WORKS
PREPARING FINAL ACCOUNT
CHECKING AND APPROVING O & M MANUALS &
AS-BUILT DRAWINGS
ISSUING NECESSARY REPORTS
MONITORING SERVICING AND MAINTENANCE
HSKS
FIG. 4-7 : FORMS OF SUPERVISION COMMON LABELS
FORMS OF SUPERVISION:
COMMON LABELS
FULL-TIME SUPERVISION
PART-TIME SUPERVISION
NOMINAL SUPERVISION
STANDING
SUPERVISION
PERIODIC SUPERVISION CONSTANT SUPERVISION
FIG. 4-8 : SUPERVISION/INSPECTIONS OVERVIEW (PART I)
HSKS
TYPICAL TYPICAL TYPICAL TYPICAL
CLAUSES IN CLAUSES IN CLAUSES IN CLAUSES IN
AGREEMENTS AGREEMENTS AGREEMENTS AGREEMENTS
CLAUSES IN CLAUSES IN CLAUSES IN CLAUSES IN
AGREEMENTS AGREEMENTS AGREEMENTS AGREEMENTS
SUPERVISION/INSPECTIONS: OVERVIEW (PART I)
AND MEANING AND MEANING AND MEANING AND MEANING
AND MEANING AND MEANING AND MEANING AND MEANING
PURPOSES PURPOSES PURPOSES PURPOSES
PURPOSES PURPOSES PURPOSES PURPOSES
PROVISIONS IN PROVISIONS IN PROVISIONS IN PROVISIONS IN
BY BY BY BY- -- -LAWS LAWS LAWS LAWS
PROVISIONS IN PROVISIONS IN PROVISIONS IN PROVISIONS IN
BY BY BY BY- -- -LAWS LAWS LAWS LAWS
Terms used synonymously
See Newey Js definition
Distinction: Inspection imposes a
lesser duty: William Tompkinson
v St. Michael in the Hamlet.
In absence of express provisions
to contrary courts imply a duty of
supervision: Alexander Corfield v
David Grant.
Malaysia: Statutory provisions
necessitate supervision
Building (Federal Territory of
Kuala Lumpur) By-Laws 1985:
1. By-Law 6: Supervision of
Works
2. By-Law 23(1): Certificate For
Occupation
By-Law 5(1) City of Kuala
Lumpur (Earthworks) By-Laws
1975
Engineers Agreement:
1. Clause 8.1 and 8.7 BEM
Form (1999)
Architects Agreement
1. Clause 5(4)(iv) Part II:
Architects (Scale of
Minimum Fees)
(Amendment) Rules 1992
2. Clause 9 Conditions of
Engagement of Architect
See Keatings definition in
Building Contracts
Three fold purpose:
1. To ensure contractor
carries out work in
accordance with contract.
2. To enable contract
administrator to discharge
his obligations to employer.
3. To enable contract
administrator to meet his
statutory obligations
FIG. 4-9 : SUPERVISION/INSPECTIONS OVERVIEW (PART II)
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SUPERVISION/INSPECTIONS: OVERVIEW (PART II)
RESIDENT RESIDENT RESIDENT RESIDENT
SITE STAFF SITE STAFF SITE STAFF SITE STAFF
RESIDENT RESIDENT RESIDENT RESIDENT
SITE STAFF SITE STAFF SITE STAFF SITE STAFF
LIABILITIES LIABILITIES LIABILITIES LIABILITIES
LIABILITIES LIABILITIES LIABILITIES LIABILITIES
LEVEL OF LEVEL OF LEVEL OF LEVEL OF
SUPERVISION SUPERVISION SUPERVISION SUPERVISION
REQUIRED REQUIRED REQUIRED REQUIRED
LEVEL OF LEVEL OF LEVEL OF LEVEL OF
SUPERVISION SUPERVISION SUPERVISION SUPERVISION
REQUIRED REQUIRED REQUIRED REQUIRED
Necessity for Resident Site
Staff (RSS)
Typical examples:
1. Resident architect/engineer
2. Clerk-of-works.
3. Other relevant staff
Engagement:
1. By employer; or
2. By contract administrator
Powers and duties determined
by engineering/construction
contract being administered
and/or letter of delegation of
power.
Responsibilities of:
1. RSS
2. Contract Administrator
Determined by:
1. Conditions of engagement
2. Applicable statutory
provisions e.g. By-Laws
Prevailing Forms:
1. Category I: Full-
time/Standing/ Constant
supervision
2. Category II: Part-
Time/Periodic Supervision
3. Category III: Nominal
Supervision
Legal Position:
1. Must be reasonable for
works involved
2. Must be sufficient to check
the important elements
3. Adequate to meet statutory
requirements
4. Sufficient to meet
obligations of engagement
Determining factors:
1. Nature of works under
contract
2. Conditions of engagement
Normal periods:
1. Up to issue of Practical
Completion; or
2. Up to application of certificate
for occupation; or
3. Up to issue of Certificate of
Making Good Defects
Common practice is up to issue of
Certificate of Making Good
Defects
Primary responsibility for
supervision: contractors.
See East Ham Corp. v
Bernard Sunley.
Heads of liabilities of contract
administrator for defaults/
breaches:
1. Contractual
2. In tort
3. Statutory
Position of contract
administrators who are
professional engineers,
architects, etc.
FIG. 4-10 : CONTRACT ADMINISTRATORS LIABILITIES AN OVERVIEW (PART I)
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HEADS OF LIABILITIES HEADS OF LIABILITIES HEADS OF LIABILITIES HEADS OF LIABILITIES
HEADS OF LIABILITIES HEADS OF LIABILITIES HEADS OF LIABILITIES HEADS OF LIABILITIES
CONTRACT ADMINISTRATORS LIABILITIES: AN OVERVIEW (PART I)
LEGAL KNOWLEDGE LEGAL KNOWLEDGE LEGAL KNOWLEDGE LEGAL KNOWLEDGE
AND PERSONAL DUTY AND PERSONAL DUTY AND PERSONAL DUTY AND PERSONAL DUTY
LEGAL KNOWLEDGE LEGAL KNOWLEDGE LEGAL KNOWLEDGE LEGAL KNOWLEDGE
AND PERSONAL DUTY AND PERSONAL DUTY AND PERSONAL DUTY AND PERSONAL DUTY
STANDARD OF CARE STANDARD OF CARE STANDARD OF CARE STANDARD OF CARE
STANDARD OF CARE STANDARD OF CARE STANDARD OF CARE STANDARD OF CARE
GENERAL POSITION GENERAL POSITION GENERAL POSITION GENERAL POSITION
General position: Required to have
knowledge of all legal matters
relating to work being undertaken
Nature of matters.
Consequences of failure
Duty is personal and non-delegable
Action by employer under terms
of contract of engagement
If no express terms, implied by
law
Contract of engagement:
1. Standard forms, or
2. Bespoke Forms
Three main categories:
1. Contractual
2. Tortious
3. Statutory
Characteristics:
1. Not distinct/mutually exclusive
2. Concurrent/complementary
3. Choice of option on aggrieved part
CONTRACTUAL CONTRACTUAL CONTRACTUAL CONTRACTUAL
Prove no valid
express/implied contract
of engagement
If there is such valid
contract prove:
1. Contract didnt impose
particular duty breach
of which claimed, or
2. Service actually
rendered was of the
standard reasonably
expected under the
circumstances
EFFECT OF BREACH EFFECT OF BREACH EFFECT OF BREACH EFFECT OF BREACH
EFFECT OF BREACH EFFECT OF BREACH EFFECT OF BREACH EFFECT OF BREACH
Two options available to
employer:
1. Rescind contract and sue for
damages; or
2. Affirm contract and sue for
damages
Right of election of option
belongs to employer
Duty of care owed to employer
Usually to use reasonable skill
and care
Duty and standard of care either:
1. Expressed in contract of
engagement, or
2. Implied by law
DEFENCES DEFENCES DEFENCES DEFENCES
FIG. 4-11 : CONTRACT ADMINISTRATORS LIABILITIES AN OVERVIEW (PART II)
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TORTIOUS LIABILITY TORTIOUS LIABILITY TORTIOUS LIABILITY TORTIOUS LIABILITY
REASONABLE REASONABLE REASONABLE REASONABLE
SKILL & CARE SKILL & CARE SKILL & CARE SKILL & CARE
BASIC BASIC BASIC BASIC
ELEMENTS ELEMENTS ELEMENTS ELEMENTS
OF CARE OF CARE OF CARE OF CARE
ESTABLISHING ESTABLISHING ESTABLISHING ESTABLISHING
LIABILITY TO LIABILITY TO LIABILITY TO LIABILITY TO
3 33 3
RD RD RD RD
Laid down in
Donoghue v
Stevenson
Neighbourhood
principle
Important elements:
1. Causation
2. Forseeability
D owed P duty of
care
D breached this duty
Consequence: P
suffered
loss/damage
Loss/damage
suffered not remote
CONTRACT ADMINISTRATORS LIABILITIES: AN OVERVIEW (PART II)
Duty of care in tort of negligence concurrent
with contractual duty: Brown v Boorman
Common Forms:
1. Acts/omissions
2. Mis-statements
GENERAL POSITION GENERAL POSITION GENERAL POSITION GENERAL POSITION NEGLIGENCE NEGLIGENCE NEGLIGENCE NEGLIGENCE
Application of the
Bolam Test
Use of Reasonable
Man test
Use by Malaysian
Courts
2 Categories:
1. Reasonable
skill & care
2. Fitness for
purpose
Criterion: Objective
Less onerous
Use of standards
prevailing at time of
default
Proscribe use of
hindsight
See Eckersly v
Binnie & Partners
Per Hunter v
Henley
1. There is a usual
and normal
practice
2. D did not adopt
the practice
3. Practice
adopted by D
would not be
adopted by
another
reasonable D
Need to satisfy all 3
element on balance
of probabilities
Only 3 types:
1. Deny existence of
duty of care
2. Prove claim made
not of type
currently
recognized
3. Show service
rendered meets
Bolam Test
No immunity to suit:
Sutcliffe v Thackrah
Situation per Pure
Economic Loss
No liability to
contractor
Possible
exceptions:
See Para 5.9B5.
FIG. 4-12 : CONTRACT ADMINISTRATORS LIABILITIES AN OVERVIEW (PART III)
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STATUTORY LIABILITY STATUTORY LIABILITY STATUTORY LIABILITY STATUTORY LIABILITY
For professional contract
administrator
Under specific Acts of
Parliament
Possible sanctions:
1. Fine
2. Suspension
3. Cancellation of
registration
Liability under various By-
Laws e.g. UBBL, etc.
Penalties/sanctions stipulated
in the By-Laws
CONTRACT ADMINISTRATORS LIABILITIES: AN OVERVIEW (PART III)
Various Acts of Parliament
applicable
Principal example: S71 Street,
Drainage & Building Act 1974
Penalty for mis-supervision, etc.
GENERAL POSITION GENERAL POSITION GENERAL POSITION GENERAL POSITION DIRECT DIRECT DIRECT DIRECT
DIRECT DIRECT DIRECT DIRECT
In addition to Contractual and
Tortious Liability
Various sub-heads:
1. Direct statutory liability
2. Under delegated legislation
3. Professional liability
LIABILITIES UNDER LIABILITIES UNDER LIABILITIES UNDER LIABILITIES UNDER
DELEGATED DELEGATED DELEGATED DELEGATED
LEGISLATION LEGISLATION LEGISLATION LEGISLATION
LIABILITIES UNDER LIABILITIES UNDER LIABILITIES UNDER LIABILITIES UNDER
DELEGATED DELEGATED DELEGATED DELEGATED
LEGISLATION LEGISLATION LEGISLATION LEGISLATION
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PAYMENTS/
COMMERCIAL MATTERS
5.0 PAYMENTS/COMMERCIAL MATTERS
LEGAL OBLIGATION OF EMPLOYER LEGAL OBLIGATION OF EMPLOYER LEGAL OBLIGATION OF EMPLOYER LEGAL OBLIGATION OF EMPLOYER
PAYMENT TO MAIN CONTRACTOR/TURNKEY CONTRACTOR PAYMENT TO MAIN CONTRACTOR/TURNKEY CONTRACTOR PAYMENT TO MAIN CONTRACTOR/TURNKEY CONTRACTOR PAYMENT TO MAIN CONTRACTOR/TURNKEY CONTRACTOR
PAYMENT TO SUB PAYMENT TO SUB PAYMENT TO SUB PAYMENT TO SUB- -- -CONTRACTORS CONTRACTORS CONTRACTORS CONTRACTORS
BACK TO BACK BACK TO BACK BACK TO BACK BACK TO BACK PAYMENTS PAYMENTS PAYMENTS PAYMENTS
BREACHES IN PAYMENT OBLIGATIONS BREACHES IN PAYMENT OBLIGATIONS BREACHES IN PAYMENT OBLIGATIONS BREACHES IN PAYMENT OBLIGATIONS
SUTCLIFFE V THACKRAH [1974] 1 ALL ER 319
* CROUDACE LTD. V THE LONDON BOROUGH OF LAMBETH [1986] 33 BLR 20
* 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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PAYMENT: ASPECTS OF CONTRACTORS
ENTITLEMENTS/EMPLOYERS OBLIGATIONS
TIMING ENFORCEMENT/HONOURI
NG
PROCEDURES AND CONDITIONS
PRECEDENT
QUANTUM/AMOUNT SET-OFF/DEDUCTIONS
FIG. 5-1: PAYMENTS ASPECTS OF CONTRACTORS ENTITLEMENT/EMPLOYERS OLIGATIONS
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FIG. 5-2 : TIMING OF PAYMENT TO CONTRACTOR PRINCIPAL SCHEMES/SCHEDULES
PERIODIC SCHEDULE PERIODIC SCHEDULE PERIODIC SCHEDULE PERIODIC SCHEDULE
DURING CURRENCY DURING CURRENCY DURING CURRENCY DURING CURRENCY
OF THE CONTRACT OF THE CONTRACT OF THE CONTRACT OF THE CONTRACT
TIMING OF PAYMENT TO CONTRACTOR: PRINCIPAL SCHEMES/SCHEDULES
STAGES/MILESTONE STAGES/MILESTONE STAGES/MILESTONE STAGES/MILESTONE
PAYMENT PAYMENT PAYMENT PAYMENT
ADVANCE PAYMENT ADVANCE PAYMENT ADVANCE PAYMENT ADVANCE PAYMENT
PERIODIC SCHEDULE PERIODIC SCHEDULE PERIODIC SCHEDULE PERIODIC SCHEDULE
AFTER COMPLETION/ AFTER COMPLETION/ AFTER COMPLETION/ AFTER COMPLETION/
END OF CONTRACT END OF CONTRACT END OF CONTRACT END OF CONTRACT
AFTER COMPLETION/ AFTER COMPLETION/ AFTER COMPLETION/ AFTER COMPLETION/
END OF CONTRACT END OF CONTRACT END OF CONTRACT END OF CONTRACT
AFTER ISSUE OF AFTER ISSUE OF AFTER ISSUE OF AFTER ISSUE OF
FINAL CERTIFICATE FINAL CERTIFICATE FINAL CERTIFICATE FINAL CERTIFICATE
AFTER AFTER AFTER AFTER
ISSUE OF CPC ISSUE OF CPC ISSUE OF CPC ISSUE OF CPC
FINANCIAL FINANCIAL FINANCIAL FINANCIAL PHYSICAL WORKS PHYSICAL WORKS PHYSICAL WORKS PHYSICAL WORKS
OF WHOLE OF WHOLE OF WHOLE OF WHOLE
CONTRACT SUM CONTRACT SUM CONTRACT SUM CONTRACT SUM
OF PART OF OF PART OF OF PART OF OF PART OF
CONTRACT SUM CONTRACT SUM CONTRACT SUM CONTRACT SUM
AFTER ISSUE AFTER ISSUE AFTER ISSUE AFTER ISSUE
OF CPC OF CPC OF CPC OF CPC
AFTER ISSUE OF AFTER ISSUE OF AFTER ISSUE OF AFTER ISSUE OF
FINAL CERTIFICATE FINAL CERTIFICATE FINAL CERTIFICATE FINAL CERTIFICATE
MISCELLANEOUS/ MISCELLANEOUS/ MISCELLANEOUS/ MISCELLANEOUS/
Are they included
in the Project Procedures
Manual?
No
START
Contract administrator to issue
formal record of issues agreed
upon by all relevant parties
A
Yes
Contract administrator to
resolve all preliminary issues
Have these been
sorted- out following award of
contract?
Yes
Yes
Have these
been formalized by all the
parties?
No
No
Are the preliminary
matters expressly stipulated
in the contract?
Yes
No
All relevant parties
to take necessary steps to
implement issues
Contract administrator
to take necessary
action forthwith
FIG. 5-3: FLOWCHART ON GENERAL PROCEDURE FOR PROCESSING OF PAYMENTS (PART I)
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Has he
executed any physical
work?
Yes
C
No
Establish if the contractor
has fulfilled his first
pre-condition to payment
not obliged to initiate
the progress payment
Has he
delivered materials to
site?
Yes
Yes
Does the contract
contain an express term
thereto?
No
Has the contractor
commenced with the work
under the contract?
No
Yes
Prima facie, contractor
may be entitled to payment
Establish if it is necessary
for the contractor to apply for
the required payment
A
Contractor not
entitled to any
payment
D
No
B
FIG. 5-4: FLOWCHART ON GENERAL PROCEDURE FOR PROCESSING OF PAYMENTS (PART II)
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D C B
G E
F
Has the
method for valuation been
confirmed?
Yes
Have the
parties involved been
identified?
Yes
Yes
Have the
relevant pre-conditions been
fulfilled?
Yes
Contract administrator to proceed
with the next stage i.e. valuation
Has the
date of valuation been
reached?
Yes
Is it mandatory?
No
Contractor may
not be entitled to
payment until
he satisfies
pre-conditions
Has
contractor complied with
requirements?
Yes
No
Contractor not
obliged to apply
No Deficiencies/omissions
to be addressed
forthwith to enable
process to continue
obliged to initiate
process on his own
volition
No
No
Prima facie, valuation
may not be initiated
until achievement
of necessary
requirements
No
FIG. 5-5: FLOWCHART ON GENERAL PROCEDURE FOR PROCESSING OF PAYMENTS (PART III)
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F G
I H K
E
J
Valuation of works to be carried
out jointly by the relevant parties
Valuers to prepare a valuation report
Does the
contractor agree with the valuation?
Does he officially
register his protest with
valuers?
Do the valuers
consider the objections
protest?
Do they
agree with the
objections?
Valuers may revise/amend
the valuation as necessary
Valuers to endorse/sign off
the valuation report prepared
Does he
sign off the
valuation report?
Valuation deemed to have
been accepted by the
contractor
Contractor may protest to
the certifier if necessary
Does the
Contractor
protest to the
certifier?
Yes
Yes
Yes
Yes
Yes
Yes
No
No
No
No
No
No
FIG. 5-6: FLOWCHART ON GENERAL PROCEDURE FOR PROCESSING OF PAYMENTS (PART IV)
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M
K
O
J H I
N
L
Valuation report together with
all other necessary documents to
be submitted to the certifier
Certifier to carry out preliminary reviews
Is the valuation
report complete, sufficient and
accurate?
Has the
contractor any valid grounds
for objecting?
Certifier not to consider
objections any further
Is the date
for certification
imminent?
Has the stipulated
minimum value of work been exceeded?
Certifier to proceed with the
necessary certification procedures
Certifier to take
objections into
consideration before
undertaking certification
Certifier may exercise
his discretion in
undertaking certification
Should in
his discretion a
certificate be
issued?
Certifier to clarify/
discuss deficiencies/
omissions with the
valuers
Deficiencies/
omissions may
compromise the
certification
Certifier has no discretion to
carry out certification
Yes
Yes
Yes
Yes
Yes
No
No
No
No
No
FIG. 5-7: FLOWCHART ON GENERAL PROCEDURE FOR PROCESSING OF PAYMENTS
(PART V)
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O
S P T Q
M L N
-
R
Is the 1st Interim Certificate due?
Have all
the stipulated pre-conditions been met?
Is the
subsequent Interim Certificate
due?
Have all
the relevant pre-conditions been met?
Certifier to proceed with
preparation of Interim Certificate
Is there a
standard form of certificate prescribed?
Has a bespoke form been generated?
Certifier to develop an ad hoc form
meeting the necessary criteria/contents
requirements
Utilize the form
unless found
not suitable
Prima facie,
certificate cannot
be issued
Use the
standard form
as prescribed
No
No
No
No
No
No
Yes
Yes
Yes
Yes
Yes
Yes
FIG. 5-8: FLOWCHART ON GENERAL PROCEDURE FOR PROCESSING OF PAYMENTS (PART VI)
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X
T
U V
R P S Q
W
Certifier to fill in all details
completely, sufficiently and
correctly in certificate
Are there
any NSCs/Nominated
Suppliers?
Are
there any official
assignees?
Are
all procedural requirements met?
Are
all formal requirements
met?
Is the signatory an
authorized person under the
contract?
Have all the
relevant checks for errors,
etc. been undertaken?
Certificate may be
challenged as invalid and
unenforceable, if and
when issued
Amount certified
for such parties
to be indicated
separately in certificate
Deficiencies/ errors may
compromise validity of
certificate
Yes
Yes
Yes
Yes
Yes
Yes
No
No
No
No
No
No
FIG. 5-9: FLOWCHART ON GENERAL PROCEDURE FOR PROCESSING OF PAYMENTS (PART VII)
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AB
X
Y AA
V U
Z
W
issue relevant certificate
Is there a
certification period stipulated
in the contract?
Is certificate
issued within the said
period?
Is the recipient
of the original copy
stipulated?
Is the certificate
issued to the stipulated
person?
Are copies
issued to the relevant
parties?
Is the service
of certificate formally
evidenced?
Prima facie, employer may
be in breach of contract.
Contractor may take
appropriate action for
employers breach
Contractor to
be furnished with
original copy
CA to rectify
deficiencies/errors
as soon as possible
Certificate to be issued
within a reasonable time
of application/ valuation
Default in service may
constitute a breach of
contract on employers part.
To be corrected/ rectified
forthwith
Relevant parties have a
right to demand the
necessary copies from
contract administrator
No
No
No
No
No
No
Yes
Yes
Yes
Yes
Yes
Yes
FIG. 5-10: FLOWCHART ON GENERAL PROCEDURE FOR PROCESSING OF PAYMENTS (PART VIII)
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AB
-
AA Y
AF AC AE AD
Z
Establish the specific post-
certification requirements
Do the
recipients formally
acknowledge receipt of
document?
Is presentation
of certificate stipulated in the
contract?
Is there a
period stipulated for the
presentation?
Is presentation
formally effected within this
period?
Does employer
formally acknowledges receipt
of the certificate from
contractor?
Employer to review
certificate for validity
Contractor
may present
certificate within
a reasonable
period of receipt
Omission to
acknowledge may
lead to future evidential
problems
to procure said
acknowledgements as
soon as possible
Delay may postpone
employers obligation to
honour certificate
Omission to acknowledge may
lead to future evidential
problems and may affect the
honouring of certificate
Contractor to procure
said acknowledgement
as soon as possible
No
No
No
No
No
Yes
Yes
Yes
Yes
Yes
FIG. 5-11: FLOWCHART ON GENERAL PROCEDURE FOR PROCESSING OF PAYMENTS (PART IX)
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AF
-
AE
-
AC AD
Are
there grounds for
challenging validity of
certificate?
Employer to proceed with honouring
certificate issued/ presented (as
applicable)
Are there any
set-offs/deductions to be
made?
Are these
expressly permitted by the
contract?
Has the
amount certified less the set-
offs/ deduction been
established?
Has the final
sum due been paid to the
contractor?
Has this been done in the
stipulated honouring
period?
STOP
Employer must
pay amount
as certified
to the contractor
Employer to determine amount
due before the stipulated
honouring period lapses
Employer may challenge
certificate and refuse to
honour it citing the
relevant grounds
Employer culpable
of breach of contract.
Contractor to take
appropriate action.
No
No
No
No
No
No
Yes
Yes
Yes
Yes
Yes
Yes
FIG. 5-12: FLOWCHART ON GENERAL PROCEDURE FOR PROCESSING OF PAYMENTS (PART X)
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DEFAULT IN PAYMENT:
TYPICAL CONTRACTUAL
REMEDIES
FIG. 5-13 : DEFAULT IN PAYMENT - TYPICAL CONTRACTUAL REMEDIES
RECOVERY OF THE UNPAID
AMOUNT
RIGHT TO SUSPEND WORK
MISCELLANEOUS
REMEDIES
INTEREST ON THE
UNPAID AMOUNT
RIGHT TO DETERMINE
EMPLOYMENT UNDER
CONTRACT
RIGHT TO REDUCE RATE
OF EXECUTING WORK
INTERIM CERTIFICATES:
TYPICAL CHALLENGES
CERTIFICATE WRONG ON ITS FACE
CERTIFICATE FUNDAMENTALLY INACCURATE
CERTIFICATE NOT IN CORRECT FORM
CERTIFICATE ISSUED BY UNAUTHORISED PERSON
CERTIFICATE ISSUED IN UNAUTHORISED MANNER
CERTIFICATE ISSUED OUT OF TIME
CERTIFIER ACTING ULTRA VIRES
CERTIFIER IMPROPERLY PRESSURIZED/INFLUENCED
CERTIFICATE SUBJECT TO FRAUD/COLLUSION
FRAUD, DISHONESTY/FRAUDULENT CONCEALMENT BY CONTRACTOR
MISCELLANEOUS CHALLENGES
FIG. 5-14: INTERIM CERTIFICATES TYPICAL CHALLENGES
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PAYMENT TO SUB-CONTRACTORS:
PRINCIPAL METHODS
DIRECT PAYMENT BY THE
EMPLOYER
PAYMENT UPON CERTIFICATION CONTINGENT PAYMENT
FIG. 5-15 : PAYMENT TO SUB-CONTRACTORS PRINICPAL METHODS
-
A
-
START
Sub-Contractor (SC) forwards details of amount
claimed to Main Contractor (MC) officially
Is it within
the prescribed time
limits?
MC to include
SCs details in his claim
MC to submit consolidated claim
to the Contract Administrator (CA)
CA to carry out the necessary valuation
CA to issue interim
payment certificate to MC
Employer to pay certified amount to
MC within the Honouring Period
Establish if there is a
Contingent Payment Type II
clause in the sub-contract
SC to make fresh submission in the
next application
Does the
MC accept the
submission?
Yes
Yes
No
No
FIG. 5-16: FLOWCHART ON GENERAL PROCEDURE FOR TYPE II CONTINGENT PAYMENT (PART I)
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A
STOP
Is there
such a clause in the
contract?
Is the
period for payment
stated?
Does the MC
pay the SC within the
said period?
SC to pursue the remedies
available under the contract
Are there
any contractual remedies
available?
Is there
an arbitration
agreement?
SC to pursue his common
law remedies if necessary
MC may pay SC within
a reasonable time of receipt of
monies from the Employer
SC to initiate the contractual
remedies as applicable
SC to initiate the Arbitration
process if necessary
Yes
Yes
Yes
Yes
Yes
No
No
No
No
No
FIG. 5-17: FLOWCHART ON GENERAL PROCEDURE FOR TYPE II CONTINGENT PAYMENTS
(PART II)
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CONTRACT SUM
ANALYSIS
CONTRACT SUM
ANALYSIS
PAYMENT IN PACKAGE DEAL TYPES OF CONTRACTS: AN OVERVIEW
QUANTITIES
QUANTITIES MEASUREMENT
MEASUREMENT
For Tender Analysis
For Interim Payment
Valuation of
Changes/
Provisional Sums
For any Price
Adjustment
SITUATIONS
WHERE USED
SITUATIONS
WHERE USED
ACCURACY
ACCURACY
PURPOSE
PURPOSE
DRAFTING
DRAFTING
Normally by
Contractor
Samples may be
given by Employer
in Employers
Requirements
ERRORS/
OMISSIONS
ERRORS/
OMISSIONS
PREPARATION
PREPARATION
Contractor responsible
If Employer prepares,
risk for errors/omissions
normally passed on to
Contractor
EXPRESS
PROVISIONS
EXPRESS
PROVISIONS
STRUCTURE
STRUCTURE
Given in some Forms
e.g. JCT 98, PWD
Form DB/T, etc.
Required for:
1. Overall Works
2. Sections or
Phases
GENERAL
POSITION
GENERAL
POSITION
Effect of
measurement
expressly
stipulated in
some forms
Mostly deals with
patent errors
As based on
Lump Sum and
due to nature of
contract
No requirement
for measurement
Changes/V.O.s
Unforeseen
Conditions
Included in most
Standard Forms
E.g. Clause 55(1) ICE,
Clause 13.1(d) FIDIC, etc.
Risk on Contractor
E.g. Clause 55(2) ICE
Form
GENERAL
POSITION
GENERAL
POSITION
Whenever used, effect
not similar to TGC
Are deemed to be only
estimates
FIG. 5-18 : PAYMENT IN PACKAGE DEAL TYPES OF CONTRACTS: AN OVERVIEW
HSKS
FINAL ACCOUNT: PRINCIPAL CONTENTS
FINAL AMOUNT TO WHICH
CONTRACTOR ENTITLED TO UNDER
THE CONTRACT
FINAL ADJUSTMENTS TO
THE CONTRACT SUM
FINAL AMOUNT (SET OFFS/
DEDUCTIONS) TO WHICH
EMPLOYER ENTITLED TO UNDER
THE CONTRACT
FIG. 5-19 : FINAL ACCOUNT PRINCIPAL CONTENTS
HSKS
APPROVED VARIATIONS
TO THE CONTRACT
ADJUSTMENT TO THE
CONTRACT SUM: TYPICAL
HEADS/ITEMS
REMEASUREMENT OF
PROVISIONAL
ITEMS/WORK
ADJUSTMENT FOR PRICE
FLUCTUATION, ETC.
PERMITTED COSTS FOR
TESTING, OPENING UP OF
WORK, ETC.
MISCELLANEOUS
ADJUSTMENTS
APPROVED
CONTRACTORS CLAIMS
ADJUSTMENT FOR P.C.
SUMS/ PROVISIONAL
SUMS
FEES AND CHARGES FOR
PERMANENT
CONNECTIONS
FIG. 5-20 : ADJUSTMENT TO THE CONTRACT SUM TYPICAL HEADS/ITEMS
HSKS
VARIATIONS/CHANGES
6.0 VARIATIONS/CHANGES
WHAT CONSTITUTES WHAT CONSTITUTES WHAT CONSTITUTES WHAT CONSTITUTES VARIATIONS/CHANGES VARIATIONS/CHANGES VARIATIONS/CHANGES VARIATIONS/CHANGES
ISSUES AS TO VALIDITY ISSUES AS TO VALIDITY ISSUES AS TO VALIDITY ISSUES AS TO VALIDITY
PROBLEMS WITH VARIATIONS PROBLEMS WITH VARIATIONS PROBLEMS WITH VARIATIONS PROBLEMS WITH VARIATIONS
INVALID VARIATION ORDERS AND EFFECTS INVALID VARIATION ORDERS AND EFFECTS INVALID VARIATION ORDERS AND EFFECTS INVALID VARIATION ORDERS AND EFFECTS
LIMITATIONS OF VARIATIONS LIMITATIONS OF VARIATIONS LIMITATIONS OF VARIATIONS LIMITATIONS OF VARIATIONS
* SHARPE V SAN PAULO RAILWAY [1873] L.R. 8 CH. APP. 597
* RE CHITTICK & TAYLOR [1954] 12 WWR 653
* MITSUI CONSTRUCTION CO. LTD. V A.G. OF HONG KONG [1986] 33 BLR 1
* CARR V JA BERRIMAN PTY LTD. [1953] 27 A.L.J.R. 273
* 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 MAJESTYS WORKS
AND PUBLIC BUILDINGS [1950] 1 ALL ER 2008
* ANTARA ELEKTRIK SDN. BHD. V BELL & ORDER BHD [2002] 3 MLJ 321, HC.
HSKS
HSKS
FIG. 6-1: VARIATIONS: OVERVIEW
VARIATIONS
TYPES
FACTORS DETERMINING
A VALID V.O.
OMISSION ADDITION
FORMALITIES
ISSUE BY
DESIGNATED
OFFICER
PROCEDURAL
REQUIREMENTS
EXPRESS CONTRACT
CONDITIONS
APPLICABLE
HYBRID
LEGAL NATURE OF
PROPOSED CHANGE
APPLICABLE
COMMON
LAW RULES
HSKS
CHANGES/VARIATIONS: BASIC ELEMENTS
CHANGE TO BE IN RELATION
TO SCOPE OF THE WORK
A CHANGE BEING EFFECTED
SCOPE OF WORK BEING
CHANGED MUST BE AS
EXPRESSLY OR IMPLIEDLY
CONTAINED IN CONTRACT
DOCUMENTS
FIG. 6-2 : CHANGES/VARIATIONS BASIC ELEMENTS
FIG. 6-3: VARIATIONS - TYPICAL EXAMPLES
HSKS
INCREASE/
DECREASE
QUANTITY OF
WORK
OMIT
WORK
CHANGE
DIMENSIONS OF
WORK
CHANGE
SEQUENCE OF
WORK
CHANGE
CHARACTER OF
WORK
CHANGE
KIND OF WORK
CHANGE POSITION
OF WORK
CHANGE TIMING
OF WORK
ACTIVITIES
EXECUTE
ADDITIONAL WORK
OF ANY KIND
VARIATIONS: VARIATIONS: VARIATIONS: VARIATIONS:
EXAMPLES EXAMPLES EXAMPLES EXAMPLES
CHANGE QUALITY
OF WORK
CHANGE LEVELS
OF WORK
ACCORDING TO IDENTITY
OF INITIATOR OF CHANGE
ACCORDING TO
CONSEQUENCES/EFFECT
OF THE CHANGE
ACCORDING TO NATURE
OF THE CHANGE
EMPLOYER
CONTRACT
ADMINISTRATOR
FINANCIAL
CONSIDERATIONS
COMBINATION
OF BOTH
TIME IMPLICATIONS
ADDITIONS HYBRID
OMISSIONS
CONTRACTOR
NSC
FIG. 6-4: TYPES OF VARIATIONS MAIN METHODS OF CLASSIFICATION
HSKS
TYPES OF VARIATIONS:
MAIN METHODS OF CLASSIFICATION
HSKS
CHANGES IN
EMPLOYERS
REQUIREMENTS
DEFECTIVE
DRAWINGS
WRONG/
NEGLIGENT ADVICE
FROM CONTRACT
ADMINISTRATOR
MAL-
ADMINISTRATION
OF CONTRACT
DEFECTIVE
SPECIFICATIONS
CHANGES DUE
TO STATUTORY/
LEGISLATIVE
CHANGES
INTEFERENCE
BY EMPLOYER
ITEMS
CONSTITUTING
VARIATIONS
DEFECTIVE
CONTRACT
DOCUMENTS
DIFFERENCES
BETWEEN BILLED
AND ACTUAL
QUANTITIES
FIG. 6-5: ITEMS CONSTITUTING VARIATIONS
HSKS
WHAT CONSTITUTES VARIATION WORKS
CONTRACTS BASED ON CONTRACTS BASED ON CONTRACTS BASED ON CONTRACTS BASED ON
DRAWINGS DRAWINGS DRAWINGS DRAWINGS
AND SPECIFICATIONS AND SPECIFICATIONS AND SPECIFICATIONS AND SPECIFICATIONS
CONTRACTS BASED ON CONTRACTS BASED ON CONTRACTS BASED ON CONTRACTS BASED ON
DRAWINGS DRAWINGS DRAWINGS DRAWINGS
AND SPECIFICATIONS AND SPECIFICATIONS AND SPECIFICATIONS AND SPECIFICATIONS
VARIATION TEST VARIATION TEST VARIATION TEST VARIATION TEST
PER RE: PER RE: PER RE: PER RE:
CHITTICK & TAYLOR
VARIATION TEST VARIATION TEST VARIATION TEST VARIATION TEST
PER RE: PER RE: PER RE: PER RE:
CHITTICK & TAYLOR
BASED ON BASED ON BASED ON BASED ON
BILL OF QUANTITIES BILL OF QUANTITIES BILL OF QUANTITIES BILL OF QUANTITIES
BASED ON BASED ON BASED ON BASED ON
BILL OF QUANTITIES BILL OF QUANTITIES BILL OF QUANTITIES BILL OF QUANTITIES
1. Rule: Contract requires:
a) Not only work set out in
drawings and/or
specifications
b) But also all work incidental or
necessarily required whether
set out in the drawings and/or
described in specifications or
not
2. Effect: Difficult to claim extra
work [Re: Sharpe v Sao Paulo
Railway]
1. Rule: All items intended to be
executed by Contractor must
be provided for in the
Contract.
2. All items not provided for in
Contract are extras.
3. Literal interpretation/ strict
construction.
1. Test: What is the intention of
the parties at time of
contracting
2. Extras: Work not
contemplated by parties when
contracting and not provided
in Contract.
3. Works which are
indispensably necessary to
give effect to parties
intentions: Not extra
1. Item specifically provided for
in Contract: Not Extra
2. If Contractor varies, contract
without an instruction:
Cannot Claim for Extra
3. If Contractor instructed by
C.A. to change contract: has
basis for claim for Extra
FIG. 6-6 : WHAT CONSTITUTES VARIATION WORKS
HSKS
VALID VARIATION ORDER: PRINCIPAL ELEMENTS
WORKS CHANGED MUST BE
DEFINED IN CONTRACT
DOCUMENTS
THERE MUST BE AN
INSTRUCTION
FIG. 6-7 : VALID VARIATION ORDER PRINCIPAL ELEMENTS
INSTRUCTION MUST EFFECT A
CHANGE TO THE WORKS
INSTRUCTION TO BE ISSUED BY
CONTRACT ADMINISTRATOR OR
BY AUTHORISED PERSON
HSKS
VALIDITY OF VARIATION ORDERS:
PRINCIPAL FACTORS DETERMINING
COMPLIANCE WITH THE
RELEVANT EXPRESS CONTRACT
PROCEDURES
EXISTENCE OF EXPRESS
CONTRACTUAL PROVISION
PERMITING VARIATION OF WORK
UNDER THE CONTRACT
FIG. 6-8 : VALIDITY OF VARIATION ORDERS PRINCIPAL FACTORS DETERMINING
ISSUE OF VARIATION ORDER BY
DESIGNATED PERSON
COMPLIANCE WITH THE
APPLICABLE COMMON LAW
RULES IN RELATION TO
VARIATIONS WORKS
HSKS
FIG. 6-9 : LIMITATIONS TO VARIATIONS
LIMITATIONS TO VARIATIONS
CARDINAL CHANGES CARDINAL CHANGES CARDINAL CHANGES CARDINAL CHANGES
CARDINAL CHANGES CARDINAL CHANGES CARDINAL CHANGES CARDINAL CHANGES
1. Power to vary work
confined to genuine
omissions
2. If effect of omission is
to give omitted work to
3
rd
Parties: Invalid
Omission
1. Changes which render the
works substantially different
from that contracted for by
the parties
2. Constitutes a fundamental
change in the scope of the
Contract
EXERCISE OF POWER EXERCISE OF POWER EXERCISE OF POWER EXERCISE OF POWER
BY CONTRACT BY CONTRACT BY CONTRACT BY CONTRACT
EXERCISE OF POWER EXERCISE OF POWER EXERCISE OF POWER EXERCISE OF POWER
BY CONTRACT BY CONTRACT BY CONTRACT BY CONTRACT
SCOPE OF WORK SCOPE OF WORK SCOPE OF WORK SCOPE OF WORK
SCOPE OF WORK SCOPE OF WORK SCOPE OF WORK SCOPE OF WORK
1. Power to vary confined
to scope of works
contemplated by parties
at time of contracting.
2. If effect of variation is to
substantially change
scope of work (Cardinal
Change): Invalid
Variation
1. A Single change
2. A large number of
otherwise small permissible
changes.
TESTS TESTS TESTS TESTS
TESTS TESTS TESTS TESTS
EFFECTS EFFECTS EFFECTS EFFECTS
EFFECTS EFFECTS EFFECTS EFFECTS
1. Was it in the reasonable
contemplation of the
parties when
contracting?
2. Although not included,
can it be considered an
indispensable part of
the Contract?
3. Functionally is it similar
to the intended work or
some other work
required by the
Contract?
1. General Rule:
Invalid
2. Contractor cannot
be compelled to
carry it out
3. If compelled,
breach of contract
4. If Contractor
carries out work,
Contract rates not
applicable
FORM FORM FORM FORM
FORM FORM FORM FORM
1. Physical work changes
2. Financial Changes
HSKS
FIG. 6-10 : PAYMENT FOR VARIED WORK GENERAL PRINCIPLES/METHODS
VARIED WORK WITHIN CONTRACT VARIED WORK WITHIN CONTRACT VARIED WORK WITHIN CONTRACT VARIED WORK WITHIN CONTRACT
VARIED WORK WITHIN CONTRACT VARIED WORK WITHIN CONTRACT VARIED WORK WITHIN CONTRACT VARIED WORK WITHIN CONTRACT
PAYMENT FOR VARIED WORK:
GENERAL PRINCIPLES/METHODS
FORMULA VALID FORMULA VALID FORMULA VALID FORMULA VALID
AND APPLICABLE AND APPLICABLE AND APPLICABLE AND APPLICABLE
FORMULA VALID FORMULA VALID FORMULA VALID FORMULA VALID
AND APPLICABLE AND APPLICABLE AND APPLICABLE AND APPLICABLE
FORMULA INVALID AND/OR FORMULA INVALID AND/OR FORMULA INVALID AND/OR FORMULA INVALID AND/OR
INAPPLICABLE INAPPLICABLE INAPPLICABLE INAPPLICABLE
FORMULA INVALID AND/OR FORMULA INVALID AND/OR FORMULA INVALID AND/OR FORMULA INVALID AND/OR
INAPPLICABLE INAPPLICABLE INAPPLICABLE INAPPLICABLE
VARIED WORK OUTSIDE CONTRACT VARIED WORK OUTSIDE CONTRACT VARIED WORK OUTSIDE CONTRACT VARIED WORK OUTSIDE CONTRACT
VARIED WORK OUTSIDE CONTRACT VARIED WORK OUTSIDE CONTRACT VARIED WORK OUTSIDE CONTRACT VARIED WORK OUTSIDE CONTRACT
ABSENCE OF EXPRESS ABSENCE OF EXPRESS ABSENCE OF EXPRESS ABSENCE OF EXPRESS
FORMULA IN CONTRACT FORMULA IN CONTRACT FORMULA IN CONTRACT FORMULA IN CONTRACT
ABSENCE OF EXPRESS ABSENCE OF EXPRESS ABSENCE OF EXPRESS ABSENCE OF EXPRESS
EXISTENCE OF EXPRESS EXISTENCE OF EXPRESS EXISTENCE OF EXPRESS EXISTENCE OF EXPRESS
EXISTENCE OF EXPRESS EXISTENCE OF EXPRESS EXISTENCE OF EXPRESS EXISTENCE OF EXPRESS
Use the formula for valuation
and payment
No right of election
Mutually agree upon a formula/rate;
or
Be paid a reasonable sum i.e. on
quantum meruit basis, etc.
NOT A NOT A NOT A NOT A CARDINAL CARDINAL CARDINAL CARDINAL CHANGE i.e. CHANGE i.e. CHANGE i.e. CHANGE i.e.
DOES NOT FUNDAMENTALLY DOES NOT FUNDAMENTALLY DOES NOT FUNDAMENTALLY DOES NOT FUNDAMENTALLY
ALTER CONTRACT ALTER CONTRACT ALTER CONTRACT ALTER CONTRACT
NOT A NOT A NOT A NOT A CARDINAL CARDINAL CARDINAL CARDINAL CHANGE i.e. CHANGE i.e. CHANGE i.e. CHANGE i.e.
DOES NOT FUNDAMENTALLY DOES NOT FUNDAMENTALLY DOES NOT FUNDAMENTALLY DOES NOT FUNDAMENTALLY
ALTER CONTRACT ALTER CONTRACT ALTER CONTRACT ALTER CONTRACT
A A A A CARDINAL CARDINAL CARDINAL CARDINAL CHANGE CHANGE CHANGE CHANGE
i.e. FUNDAMENTALLY i.e. FUNDAMENTALLY i.e. FUNDAMENTALLY i.e. FUNDAMENTALLY
ALTERS CONTRACT ALTERS CONTRACT ALTERS CONTRACT ALTERS CONTRACT
A A A A CARDINAL CARDINAL CARDINAL CARDINAL CHANGE CHANGE CHANGE CHANGE
i.e. FUNDAMENTALLY i.e. FUNDAMENTALLY i.e. FUNDAMENTALLY i.e. FUNDAMENTALLY
ALTERS CONTRACT ALTERS CONTRACT ALTERS CONTRACT ALTERS CONTRACT
Any contractual formula rendered
invalid /inapplicable
Whole works to be paid on
measure and value basis and on
altered or adjusted rates
Portion of works within scope of
contract to be paid according to
the contract formula (if
applicable)
Remaining works falling outside
scope of contract to be paid at a
reasonable rate
Mutually agree upon a formula/rate;
or
Be paid a reasonable sum i.e. on a
quantum meruit basis, etc.
HSKS
PRINCIPAL CONTRACTUAL CONSEQUENCES
OF VARIATION OF WORK UNDER CONTRACT
COST OF VARIED WORK
e.g.
Additions
Omissions
DELAY AND DISRUPTION
TO CONTRACT
Extension of time to
Contract Period, etc.
COST OF DELAY AND
DISRUPTION
Direct loss and/or
expense
Extended
Preliminaries
FINANCIAL EFFECTS TIME EFFECTS
FIG. 6-11 : PRINCIPAL CONTRACTUAL CONSEQUENCES OF VARIATION OF WORK
UNDER THE CONTRACT
HSKS
WHERE THERE ARE WHERE THERE ARE WHERE THERE ARE WHERE THERE ARE
RATES/ PRICES IN THE RATES/ PRICES IN THE RATES/ PRICES IN THE RATES/ PRICES IN THE
WHERE THERE ARE WHERE THERE ARE WHERE THERE ARE WHERE THERE ARE
RATES/ PRICES IN THE RATES/ PRICES IN THE RATES/ PRICES IN THE RATES/ PRICES IN THE
VALUATION OF VARIATIONS:
COMMON COMPUTATIONAL METHODS
WHERE WORK CANNOT WHERE WORK CANNOT WHERE WORK CANNOT WHERE WORK CANNOT
BE MEASURED BE MEASURED BE MEASURED BE MEASURED
WHERE WORK CANNOT WHERE WORK CANNOT WHERE WORK CANNOT WHERE WORK CANNOT
BE MEASURED BE MEASURED BE MEASURED BE MEASURED
WHERE NO RATES/ WHERE NO RATES/ WHERE NO RATES/ WHERE NO RATES/
PRICES IN CONTRACT PRICES IN CONTRACT PRICES IN CONTRACT PRICES IN CONTRACT
WHERE NO RATES/ WHERE NO RATES/ WHERE NO RATES/ WHERE NO RATES/
PRICES IN CONTRACT PRICES IN CONTRACT PRICES IN CONTRACT PRICES IN CONTRACT
Use of Quotation Method
Use of Negotiated/Agreed
Rates
Payment on quantum meruit
basis or a reasonable sum
Use of B.Q. rates
Use of Schedule of Unit Rates
Use of Adjusted Contract Rates
Use of Contract Prices in:
a) Contract Bills; or
b) Summary of Prices; or
c) Contract Sum Analysis
Use of Fair Valuation principles
Use of Negotiated/Agreed
Rates
Use of Quotation Method
Payment of a reasonable sum
Use of Daywork Rates in Contract
On a cost-reimbursible basis
FIG. 6-12 : VALUATION OF VARIATIONS COMMON COMPUTATIONAL METHODS
Has the valuation
stage been satisfactorily
completed?
Is there a
contract provision prescribing
the same?
Yes
Yes
No
START
Contract administrator to prepare
certificate of variation of works
Are its
requirements clear and
complete?
Have the
requirements been agreed to by
the parties?
Yes
B C
No
No
Establish if the conditions
precedent have been satisfied
Prima facie, premature
to prepare and issue
certificate concerned
No
Yes
Has measurement
stage been satisfactorily
completed?
D
No
Yes
A
FIG. 6-13: FLOWCHART ON THE GENERAL PROCEDURE FOR THE CERTIFICATION OF
VALUATION (PART I)
HSKS
VALUATION (PART II)
F
Has it been
signed by the authorized
person?
No
Yes
E G
Is the
V.O./instruction
attached?
Have the
requirements been complied
with?
Yes
Yes
Have the
particulars been completely and
properly filled in?
Are the
measurement and valuation
details endorsed?
No
Yes
Yes
No
No
B
C D
to address omissions
/deficiencies forthwith
Omissions/deficiencies
may render certificate
invalid
Has the certificate
been checked for sufficiency and
accuracy?
A
Yes
No
No
HSKS
I
Does it
comply with any prescribed
requirements?
No
Yes
J H
Has it been
prepared within a
reasonable/ prescribed period of
completion of measurement
and valuation?
Yes
Is the
certificate sufficient and
accurate?
No
F G
Prima facie,
certificate is invalid
Yes
Has it been
signed by the authorized
person?
E
issue certificate to the contractor
Contractor to check and
undertake necessary action
Yes
No
No
VALUATION (PART III)
HSKS
to review contractors notice
and make decision
M
Does the
contractor agree with the
content?
No
Does he notify
the contract administrator officially
of his dissent?
Yes
Yes
No
I
H
K
No
No
L
Has the
contractor met the time
requirements?
Yes
Are the
full particulars/details
given?
Yes
Is there a
period stipulated for the giving of
the notice?
Yes
Contractor obliged
to give notice
within reasonable
period only
No
J
Contractor deemed
to have accepted
the measurement
and valuation
Contractor
to formally signify
acceptance
VALUATION (PART IV)
HSKS
Has the contractor
been asked to furnish further
details?
Has he complied with the request?
Yes
Yes
Yes
Yes
Yes
L K
No
Does the
contractor wish to proceed with
dispute resolution?
No
Reject the contractors application/notice
Communicate decision to the contractor
Is the
notice sufficient and
accurate?
No
No
Is the contractors stand
reasonable?
Is there any
reason not to reject the contractors
application?
No
No
Yes
M
Contract
administrator to
undertake necessary
amendments/
revisions
N
N
STOP
Contractor to give
necessary notice. Contract
administrator to use valuation
set out in the interim period
FIG. 6-17: FLOWCHART ON THE GENERAL PROCEDURE FOR CERTIFICATION OF VALUATION (PART V)
HSKS
HSKS
EXPRESS EXPRESS EXPRESS EXPRESS
STIPULATIONS STIPULATIONS STIPULATIONS STIPULATIONS
STIPULATIONS STIPULATIONS STIPULATIONS STIPULATIONS
VARIATIONS: PRINCIPAL REQUIREMENTS FOR PACKAGE DEAL
TYPE OF CONTRACTS
VARIATIONS VARIATIONS VARIATIONS VARIATIONS
IN WRITING IN WRITING IN WRITING IN WRITING
IN WRITING IN WRITING IN WRITING IN WRITING
In most Standard
Forms
Stipulate Extent,
Procedure, etc.
Enshrined in
all Standard
Forms
Prior to ordering
V.O.
Get Contractors
view on effect of
V.O. on
programme
NECESSITY FOR NECESSITY FOR NECESSITY FOR NECESSITY FOR
WRITTEN WRITTEN WRITTEN WRITTEN
INSTRUCTIONS INSTRUCTIONS INSTRUCTIONS INSTRUCTIONS
NECESSITY FOR NECESSITY FOR NECESSITY FOR NECESSITY FOR
WRITTEN WRITTEN WRITTEN WRITTEN
ORAL INSTRUCTIONS ORAL INSTRUCTIONS ORAL INSTRUCTIONS ORAL INSTRUCTIONS
ORAL INSTRUCTIONS ORAL INSTRUCTIONS ORAL INSTRUCTIONS ORAL INSTRUCTIONS
Most Standard Forms have
express clauses
Issued by E.R./ P.D.
RECOVERY WITHOUT RECOVERY WITHOUT RECOVERY WITHOUT RECOVERY WITHOUT
RECOVERY WITHOUT RECOVERY WITHOUT RECOVERY WITHOUT RECOVERY WITHOUT
Generally no
Situations where permitted:
1. If contract expressly allows
2. Under Waiver/Estoppel
3. Under concept of
Constructive Change
Only if contract expressly
allows
Need for written confirmation
Duty of confirmation either on:
1. Contractor or
2. Employer
Requirement for Writing
Includes:
1. Letters
2. Minutes of Meetings
3. Drawings
EFFECT OF EFFECT OF EFFECT OF EFFECT OF
PROCEDURE PROCEDURE PROCEDURE PROCEDURE
Permissible if only
expressly allowed
by contract
Some Standard
Forms do allow e.g.
ICE, FIDIC, etc.
Others are silent
e.g. JKR, etc.
Formal V.O.
Instruction from
E.R./P.D. condition
precedent to recovery
of payment
Failure of Contractor
to observe procedure/
formalities may
compromise recovery
Be pro-active
Not to unreasonably
withhold consent, etc.
IN DLP/DCP IN DLP/DCP IN DLP/DCP IN DLP/DCP
IN DLP/DCP IN DLP/DCP IN DLP/DCP IN DLP/DCP
RIGHT TO VARY RIGHT TO VARY RIGHT TO VARY RIGHT TO VARY
EMPLOYER EMPLOYER EMPLOYER EMPLOYER S S S S
EMPLOYER EMPLOYER EMPLOYER EMPLOYER S S S S
NEED FOR NEED FOR NEED FOR NEED FOR
CONSULTATION CONSULTATION CONSULTATION CONSULTATION
NEED FOR NEED FOR NEED FOR NEED FOR
CONSULTATION CONSULTATION CONSULTATION CONSULTATION
Permitted expressly
in most Standard
Forms
Due to:
1. Value
engineering
2. Buidability
3. Safety
4. Legal/Physical
impossibility
FIG. 6-18: VARIATIONS PRINCIPAL REQUIREMENTS FOR PACKAGE DEAL TYPE OF CONTRACT
HSKS
DELAY AND
EXTENSION OF TIME
7.0 DELAY AND EXTENSION OF TIME
OPTIONS AVAILABLE TO EMPLOYER OPTIONS AVAILABLE TO EMPLOYER OPTIONS AVAILABLE TO EMPLOYER OPTIONS AVAILABLE TO EMPLOYER
EXTENSION OF TIME ISSUES EXTENSION OF TIME ISSUES EXTENSION OF TIME ISSUES EXTENSION OF TIME ISSUES
ACCELERATION OF WORKS ACCELERATION OF WORKS ACCELERATION OF WORKS ACCELERATION OF WORKS
DRAFTING OF DELAY AND DISRUPTION CLAIMS DRAFTING OF DELAY AND DISRUPTION CLAIMS DRAFTING OF DELAY AND DISRUPTION CLAIMS DRAFTING OF DELAY AND DISRUPTION CLAIMS
* PEAK CONSTRUCTION (LIVERPOOL) LTD. V MCKINNEY FOUNDATION LTD. [1970] 1 BLR 114
* MILLER V L.C.C. [1934] 50 T.L.R. 479, 482
* MERTON LONDON BOROUGH V STANLEY HUGH LEACH [1985] 32 BLR 55
* WESTMINSTER CITY COUNCIL V JARVIS & SONS LTD. [1970] 7 BLR 64
SYARIKAT TAN KIM BENG DAN RAKAN-RAKAN V PULAI JAYA SDN. BHD. [1992] 1 MLJ 42
HSKS
HSKS
FIG. 7-1 : CONSEQUENCES OF DELAY AN OVERVIEW
BY EMPLOYER BY EMPLOYER BY EMPLOYER BY EMPLOYER
(ACTS OF PREVENTION) (ACTS OF PREVENTION) (ACTS OF PREVENTION) (ACTS OF PREVENTION)
CONSEQUENCES OF DELAY: AN OVERVIEW
BY CONTRACTOR BY CONTRACTOR BY CONTRACTOR BY CONTRACTOR
GRANT OF GRANT OF GRANT OF GRANT OF
EXTENSION OF TIME EXTENSION OF TIME EXTENSION OF TIME EXTENSION OF TIME
INSTRUCT CONTRACTOR INSTRUCT CONTRACTOR INSTRUCT CONTRACTOR INSTRUCT CONTRACTOR
TO ACCELERATE WORKS TO ACCELERATE WORKS TO ACCELERATE WORKS TO ACCELERATE WORKS
Only if contract expressly permits
To meet original contract deadline
Contractor to be compensated for
reasonable expenses incurred
DUE TO DUE TO DUE TO DUE TO
NEUTRAL EVENTS NEUTRAL EVENTS NEUTRAL EVENTS NEUTRAL EVENTS
DUE TO CONTRACTOR DUE TO CONTRACTOR DUE TO CONTRACTOR DUE TO CONTRACTOR S S S S
OWN ACTS AND/OR OR OWN ACTS AND/OR OR OWN ACTS AND/OR OR OWN ACTS AND/OR OR
OMISSIONS OMISSIONS OMISSIONS OMISSIONS
Contractor entitled to E.O.T. but
not to extended preliminaries or
other claims
If asked to accelerate works,
entitled to reasonable expenses
incurred therefrom
DUE TO CONTRACTOR DUE TO CONTRACTOR DUE TO CONTRACTOR DUE TO CONTRACTOR S S S S
SUB SUB SUB SUB- -- -CONTRACTORS/ CONTRACTORS/ CONTRACTORS/ CONTRACTORS/
SUPPLIERS SUPPLIERS SUPPLIERS SUPPLIERS
Contractor vicariously liable to
Employer
May seek indemnity from the
culpable party e.g. Sub-
contractor, Supplier, etc.
Only if contract expressly permits
Contractor may be entitled to:
1. Extended Preliminaries
2. Direct Loss and/or Expense
Contractor culpable
May be liable for:
1. Liquidated Damages, or
2. Unliquidated Damages
caused to Employer
HSKS
EXTENSION OF TIME: COMMON
RELEVANT EVENTS
FORCE MAJEURE
CONTRACTORS INABILITY TO SECURE LABOUR, GOODS, MATERIALS, ETC.
LOSS OR DAMAGE TO THE WORKS OCCASIONED BY SPECIFIED PERILS
EXCEPTIONALLY INCLEMENT WEATHER
CIVIL COMMOTION, STRIKES, LOCK-OUT, ETC.
VARIATIONS AND EXTRA WORKS
EXECUTION OF WORK NOT FORMING PART OF THE CONTRACT
LATE SUPPLY OF MATERIALS BY THE EMPLOYER
OTHER SPECIAL CIRCUMSTANCES
DELAY ON PART OF NOMINATED SUB-CONTRACTORS/SUPPLIERS
DELAY IN THE SUPPLY OF INFORMATION/INSTRUCTIONS
FIG. 7-2 : EXTENSION OF TIME COMMON RELEVANT EVENTS
COMPLIANCE WITH CONTRACT ADMINISTRATORS INSTRUCTIONS
FAILURE OF EMPLOYER TO GIVE POSSESSION/ACCESS IN TIME
CARRYING OUT OF WORK BY STATUTORY UNDERTAKERS
EXERCISE BY GOVERNMENT OF ANY POWER WHICH DIRECTLY AFFECTS THE WORKS
HSKS
ACTS OF PREVENTION:
TYPICAL EXAMPLES
FIG. 7-3 : ACTS OF PREVENTION TYPICAL EXAMPLES
DEFERMENT/POSTPONEMENT
IN GIVING SITE POSSESSION
EXECUTION OF WORK NOT
FORMING PART OF THE
CONTRACT
OTHER ACTS OF PREVENTION
EXPRESSLY PERMITTED BY
THE CONDITIONS OF
CONTRACT
LATE SUPPLY OF
INFORMATION, DRAWINGS,
INSTRUCTIONS, ETC.
LATE SUPPLY OF MATERIALS
BY THE EMPLOYER
COMPLIANCE WITH
CONTRACT
ADMINISTRATORS
INSTRUCTIONS, DIRECTIONS,
ETC.
HSKS
NEUTRAL EVENTS:
TYPICAL EXAMPLES
FIG. 7-4 : NEUTRAL EVENTS TYPICAL EXAMPLES
FORCE MAJEURE
LOSS/DAMAGE TO THE WORKS
OCCASIONED BY SPECIFIED
PERILS
OR CONTINGENCIES
DELAYS BY NOMINATED SUB-
CONTRACTORS/SUPPLIERS
FOR THE SAID NEUTRAL
EVENTS
EXCEPTIONALLY INCLEMENT/
ADVERSE WEATHER
CONTRACTORS IN ABILITY
TO SECURE LABOUR, GOOD,
MATERIALS AND/OR OTHER
RESOURCES
CIVIL COMMOTION, STRIKES,
LOCK OUTS INDUSTRIAL
ACTION, EMBARGOES, ETC.
HSKS
CAUSE OF THE DELAY
APPLICATION FOR
EXTENSION OF TIME:
TYPICAL CONTENTS
STEPS TAKEN/PROPOSED
TO MINIMIZE/AVOID DELAY
SCHEDULING
DOCUMENTATION
DETAILS OF EFFECT OF
DELAY ON WORK
PROGRAMME
ALL OTHER SUPPORTING
RECORDS, DETAILS, ETC.
APPROPRIATE
CONTRACT
REFERENCES TO SUCH
EVENT OF DELAY
ESTIMATE OF THE
EXTENSION OF TIME
REQUIRED
ESTIMATED LENGTH
OF THE DELAY
FIG. 7-5 : APPLICATION FOR EXTENSION OF TIME TYPICAL CONTENTS
HSKS
EXTENSION OF TIME
APPLICATION: TYPICAL
SOURCES OF INFORMATION
OFFICIAL WORK RECORDS
MEMORANDA
LETTERS, INSTRUCTIONS, ETC.
OFFICIAL PROGRESS REPORTS
SITE DIARIES
WORK PROGRAMMES, ETC.
PROCUREMENT RECORDS, INVOICES, ETC.
DELIVERY ORDERS
OTHER MISCELLANEOUS RECORDS, DOCUMENTS, ETC.
SHIPPING/AIRFREIGHT RECORDS, ETC.
OFFICIAL MINUTES OF MEETING
FIG. 7-6 : EXTENSION OF TIME APPLICATION TYPICAL SOURCES OF INFORMATION
RECORDS/REPORTS FROM AUTHORITIES/INDEPENDENT BODIES, ETC.
FACSIMILE TRANSMISSIONS, ETC.
DRAWINGS, ETC.
Yes
B
Initiate notification
of the delay procedure
No
Is progress
delayed or is likely to be
delayed?
Does the
delaying event constitute
one of the relevant events /grounds
under the provisions of the
contract?
Is the
notice given in writing?
Yes
Proceed with the
application of the extension
of time process
Is the notice
given within the period expressly
stipulated?
Yes
A
No
Yes
START
Is the
notice a condition
precedent?
Has an
extension been
granted by the contract
administrator?
No
No
No Yes
Yes
No
FIG. 7-7: FLOWCHART ON THE GENERAL PROCEDURE FOR CLAIMING EXTENSION OF TIME (PART I)
HSKS
Yes
A
Establish whether contractor
has done all that is reasonably
required of him
Yes
No
Is the
application made within
the period expressly
stipulated?
Has the contractor
used his best endeavours to
minimize the delay?
Is the application
complete/sufficient and
accurate?
Return to contractor
for resubmission
or reject application
as appropriate
Yes
Contract Administrator to
check application made
STOP
Contract Administrator to
proceed with further assessment
for the possible grant of
extension of time
Prima facie no
extension of time
can be granted
B
Is the
application given in
writing?
Is the
application a condition
precedent?
Has an
extension been
granted by the contract
administrator?
No
No Yes
Yes
No
Is the
requirement as to
sufficiency, etc. a condition
precedent?
Has the
contract administrator
requested for information,
details, etc.?
No Yes
Yes
No
No
No
Yes
FIG. 7-8: FLOWCHART ON THE GENERAL PROCEDURE FOR CLAIMING EXTENSION OF TIME (PART II)
HSKS
HSKS
FIG. 7-9 : PROCEDURES FOR CLAIMING EXTENSION OF TIME AN OVERVIEW (PART I)
EXPRESS CONTRACT EXPRESS CONTRACT EXPRESS CONTRACT EXPRESS CONTRACT
EXPRESS CONTRACT EXPRESS CONTRACT EXPRESS CONTRACT EXPRESS CONTRACT
PROCEDURES FOR CLAIMING EXTENSION OF TIME: AN OVERVIEW (PART I)
APPLICATION APPLICATION APPLICATION APPLICATION
APPLICATION APPLICATION APPLICATION APPLICATION
NOTIFICATION NOTIFICATION NOTIFICATION NOTIFICATION
NOTIFICATION NOTIFICATION NOTIFICATION NOTIFICATION
CONTENTS OF CONTENTS OF CONTENTS OF CONTENTS OF
THE NOTICE THE NOTICE THE NOTICE THE NOTICE
CATEGORIZATION CATEGORIZATION CATEGORIZATION CATEGORIZATION
CATEGORIZATION CATEGORIZATION CATEGORIZATION CATEGORIZATION
Included in most standard
forms of contract
FORM OF FORM OF FORM OF FORM OF
2 broad steps:
1. Notification of
the delay; and
2. Making the
application
REQUIREMENT REQUIREMENT REQUIREMENT REQUIREMENT
Expressly stipulated
in conditions of
contract of contract;
or
Implied by law
Either a:
1. Single exercise,
or
2. Two separate
processes
Depends upon
express/ implied
requirements
Various formulae used e.g.:
1. Use of specific phrases
2. Stipulation of express time
periods
Legal effect of provisions on time:
1. Whether notification/application
is a condition precedent to
entitlement
2. If affirmative, the effect of the
breach of the condition
precedent
3. Application to acts of
prevention/neutral events
Review of applicable case-law
Usually stipulated in the
conditions of contract.
Important to comply with the
express requirements
As a minimum must inform
the contract administrator of
the occurrence of the delay
which is likely to affect the
progress or has delayed
progress
Otherwise must include:
1. Occurrence of the delay
2. Cause of the delay
3. Relevant events causing
the delay; and
4. Contractors intention to
make a claim
TYPES OF WRITTEN NOTICES TYPES OF WRITTEN NOTICES TYPES OF WRITTEN NOTICES TYPES OF WRITTEN NOTICES
/NOTICES IN WRITING /NOTICES IN WRITING /NOTICES IN WRITING /NOTICES IN WRITING
TYPES OF WRITTEN NOTICES TYPES OF WRITTEN NOTICES TYPES OF WRITTEN NOTICES TYPES OF WRITTEN NOTICES
/NOTICES IN WRITING /NOTICES IN WRITING /NOTICES IN WRITING /NOTICES IN WRITING
EXPRESS REQUIREMENTS EXPRESS REQUIREMENTS EXPRESS REQUIREMENTS EXPRESS REQUIREMENTS
EXPRESS REQUIREMENTS EXPRESS REQUIREMENTS EXPRESS REQUIREMENTS EXPRESS REQUIREMENTS
GENERAL RULE GENERAL RULE GENERAL RULE GENERAL RULE
GENERAL RULE GENERAL RULE GENERAL RULE GENERAL RULE EVIDENTIAL VALUE EVIDENTIAL VALUE EVIDENTIAL VALUE EVIDENTIAL VALUE
EVIDENTIAL VALUE EVIDENTIAL VALUE EVIDENTIAL VALUE EVIDENTIAL VALUE
Included in most standard forms
Usually stipulated as:
1. Written notice or
2. Notice in writing
Correspondence
Facsimile transmissions
Entries in official records
Entries in site diaries
Official Progress reports
Where the form is expressly
stipulated, it must be complied with
Where not expressly stipulated, may
be implied
A written notice/notice in writing is
of immense evidential value
Therefore, even if not expressly
required, must try to give written
notice
HSKS
FIG. 7-10 : PROCEDURES FOR CLAIMING EXTENSION OF TIME AN OVERVIEW (PART II)
THE APPLICATION THE APPLICATION THE APPLICATION THE APPLICATION
PROCEDURES FOR CLAIMING EXTENSION OF TIME:
AN OVERVIEW (PART II)
Similar to Form of the Notice
Preferably to be in writing
Compliance to any express
requirements
Where specific time periods have
been specified these should be
adhered to
If not practicable, requirement for
express consent for deferment
Otherwise within a reasonable
period of notification/delay
forms
Formulae include:
1. Specific time
periods
2. Within a reasonable
period
Dictated by express stipulations in
contract
Otherwise by necessary implication.
Typical list includes:
1. Cause of delay
2. Appropriate contract
reference
3. Details of effect of delay on
programme/progress
4. Estimated length of delay
5. Steps taken to
mitigate/prevent delay
6. Scheduling documentation
7. Miscellaneous details,
records, documents, etc.
HSKS
FIG. 7-11 : PROCEDURES FOR CLAIMING EXTENSION OF TIME AN OVERVIEW (PART III)
PROCEDURES FOR CLAIMING EXTENSION OF TIME:
AN OVERVIEW (PART III)
NATURE OF INFORMATION REQUIRED NATURE OF INFORMATION REQUIRED NATURE OF INFORMATION REQUIRED NATURE OF INFORMATION REQUIRED
NATURE OF INFORMATION REQUIRED NATURE OF INFORMATION REQUIRED NATURE OF INFORMATION REQUIRED NATURE OF INFORMATION REQUIRED
ADEQUACY OF INFORMATION SUPPLIED ADEQUACY OF INFORMATION SUPPLIED ADEQUACY OF INFORMATION SUPPLIED ADEQUACY OF INFORMATION SUPPLIED
ADEQUACY OF INFORMATION SUPPLIED ADEQUACY OF INFORMATION SUPPLIED ADEQUACY OF INFORMATION SUPPLIED ADEQUACY OF INFORMATION SUPPLIED
Official work records
Official progress reports
Site diaries
Correspondence
Instructions
Drawings, etc.
Official minutes of meetings,
discussions, etc.
Work programmes
3
rd
party reports/records
Procurement records, etc.
Delivery orders
Shipping/airfreight records
Miscellaneous
records/documents
CONSEQUENCES WHERE CONSEQUENCES WHERE CONSEQUENCES WHERE CONSEQUENCES WHERE
PROVISION IS A CONDITION PROVISION IS A CONDITION PROVISION IS A CONDITION PROVISION IS A CONDITION
PRECEDENT PRECEDENT PRECEDENT PRECEDENT
PROVISION IS A CONDITION PROVISION IS A CONDITION PROVISION IS A CONDITION PROVISION IS A CONDITION
PRECEDENT PRECEDENT PRECEDENT PRECEDENT
PROVISION IS NOT A PROVISION IS NOT A PROVISION IS NOT A PROVISION IS NOT A
CONDITION PRECEDENT CONDITION PRECEDENT CONDITION PRECEDENT CONDITION PRECEDENT
PROVISION IS NOT A PROVISION IS NOT A PROVISION IS NOT A PROVISION IS NOT A
CONDITION PRECEDENT CONDITION PRECEDENT CONDITION PRECEDENT CONDITION PRECEDENT
FAILURE TO RESPOND FAILURE TO RESPOND FAILURE TO RESPOND FAILURE TO RESPOND
AFTER EXTENSION AFTER EXTENSION AFTER EXTENSION AFTER EXTENSION
FAILURE TO RESPOND FAILURE TO RESPOND FAILURE TO RESPOND FAILURE TO RESPOND
AFTER EXTENSION AFTER EXTENSION AFTER EXTENSION AFTER EXTENSION
Contractor must furnish
enough information to
enable contract
administrator to undertake
assessment satisfactorily
Information to be:
1. Sufficient/ complete
2. Accurate
3. Relevant
Breach of condition may be
fatal to claim depending on
its nature and seriousness
Contract administrator can:
1. Request for further
information
2. Set a new deadline for
contractor to respond
Should contractor fail to
respond by:
1. Deadline set, or
2. Within reasonable period
of request
Contract administrator may not
proceed further with
assessment
PRINCIPAL SOURCES PRINCIPAL SOURCES PRINCIPAL SOURCES PRINCIPAL SOURCES
PRINCIPAL SOURCES PRINCIPAL SOURCES PRINCIPAL SOURCES PRINCIPAL SOURCES
DETERMINING FACTORS DETERMINING FACTORS DETERMINING FACTORS DETERMINING FACTORS
DETERMINING FACTORS DETERMINING FACTORS DETERMINING FACTORS DETERMINING FACTORS
Type of relevant event
Nature of relevant event
Particular requirements of applicable
express provisions
Evidential value of information
FIG. 7-12: ASSESSMENT OF THE APPLICATION AN OVERVIEW (PART I)
HSKS
ASSESSMENT OF THE APPLICATION: AN OVERVIEW (PART I)
DERELICTION DERELICTION DERELICTION DERELICTION
OF DUTY: OF DUTY: OF DUTY: OF DUTY:
CONSEQUENCES CONSEQUENCES CONSEQUENCES CONSEQUENCES
DERELICTION DERELICTION DERELICTION DERELICTION
OF DUTY: OF DUTY: OF DUTY: OF DUTY:
CONSEQUENCES CONSEQUENCES CONSEQUENCES CONSEQUENCES
THE CONTRACT THE CONTRACT THE CONTRACT THE CONTRACT
ADMINISTRATOR ADMINISTRATOR ADMINISTRATOR ADMINISTRATOR S DUTY S DUTY S DUTY S DUTY
THE CONTRACT THE CONTRACT THE CONTRACT THE CONTRACT
ADMINISTRATOR ADMINISTRATOR ADMINISTRATOR ADMINISTRATOR S DUTY S DUTY S DUTY S DUTY
POST APPLICATION POST APPLICATION POST APPLICATION POST APPLICATION
PROCEDURES PROCEDURES PROCEDURES PROCEDURES
POST APPLICATION POST APPLICATION POST APPLICATION POST APPLICATION
DUTY TO DUTY TO DUTY TO DUTY TO
DUTY TO DUTY TO DUTY TO DUTY TO
forms of conditions of contract
PRELIMINARY PRELIMINARY PRELIMINARY PRELIMINARY
Positive duty vis--vis
acts of prevention
Satisfaction of:
1. Reasonableness
Test and
2. Fairness Test
Help employer:
1. Preserve right to LAD
2. Stave off claims from
contractor
TO WHOM TO WHOM TO WHOM TO WHOM
OWED OWED OWED OWED
TO WHOM TO WHOM TO WHOM TO WHOM
OWED OWED OWED OWED
To Employer
To Contractor
To Nominated Sub-
contractors/Suppliers
May compromise
employers position
liable to actions in:
1. Breach of contract
2. Tort of negligence
Upon occurrence of delaying
event, independently
undertake own assessment
especially for acts of
prevention
Must take an active role
Issue an interim extension to
contractor if one due on facts
Contractor can later apply for
reassessment based on
additional information
NATURE OF ROLE NATURE OF ROLE NATURE OF ROLE NATURE OF ROLE
NATURE OF ROLE NATURE OF ROLE NATURE OF ROLE NATURE OF ROLE
WHO UNDERTAKES WHO UNDERTAKES WHO UNDERTAKES WHO UNDERTAKES
WHO UNDERTAKES WHO UNDERTAKES WHO UNDERTAKES WHO UNDERTAKES
ADDITIONAL DUTY ADDITIONAL DUTY ADDITIONAL DUTY ADDITIONAL DUTY
ADDITIONAL DUTY ADDITIONAL DUTY ADDITIONAL DUTY ADDITIONAL DUTY
Delegated by the employer
to authorized person
Usually it is the contract
administrator
As an independent adjudicator
Decision making function
Must act fairly, reasonably and
impartially
Per John Baker Construction v
London Protman Hotel Ltd.
Must adhere to governing
express contractual
procedures in addition
PRELIMINARY CHECKS PRELIMINARY CHECKS PRELIMINARY CHECKS PRELIMINARY CHECKS
TO ESTABLISH TO ESTABLISH TO ESTABLISH TO ESTABLISH
MATTERS SUCH AS MATTERS SUCH AS MATTERS SUCH AS MATTERS SUCH AS
PRELIMINARY CHECKS PRELIMINARY CHECKS PRELIMINARY CHECKS PRELIMINARY CHECKS
TO ESTABLISH TO ESTABLISH TO ESTABLISH TO ESTABLISH
MATTERS SUCH AS MATTERS SUCH AS MATTERS SUCH AS MATTERS SUCH AS
INSUFFICIENT INSUFFICIENT INSUFFICIENT INSUFFICIENT
INFORMATION: OPTIONS INFORMATION: OPTIONS INFORMATION: OPTIONS INFORMATION: OPTIONS
AVAILABLE TO CONTRACT AVAILABLE TO CONTRACT AVAILABLE TO CONTRACT AVAILABLE TO CONTRACT
INSUFFICIENT INSUFFICIENT INSUFFICIENT INSUFFICIENT
INFORMATION: OPTIONS INFORMATION: OPTIONS INFORMATION: OPTIONS INFORMATION: OPTIONS
AVAILABLE TO CONTRACT AVAILABLE TO CONTRACT AVAILABLE TO CONTRACT AVAILABLE TO CONTRACT
Verification of occurrence
of delay
Sufficiency, accuracy,
relevancy, etc.
Compliance with pre-
conditions, procedural
requirements, etc.
Assessment of evidential
value
Assessment whether delay
in principle entitles
contractor to extension
Request contractor to
submit more details, etc. or
If delaying event of a
continuing nature:
1. Proceed with interim
assessment
2. Grant an interim
extension
FIG. 7-13: ASSESSMENT OF THE APPLICATION AN OVERVIEW (PART II)
HSKS
BASIS OF ASSESSMENT BASIS OF ASSESSMENT BASIS OF ASSESSMENT BASIS OF ASSESSMENT
BASIS OF ASSESSMENT BASIS OF ASSESSMENT BASIS OF ASSESSMENT BASIS OF ASSESSMENT
ASSESSMENT OF THE APPLICATION: AN OVERVIEW (PART II)
THE ASSESSMENT THE ASSESSMENT THE ASSESSMENT THE ASSESSMENT
PROCESS PROCESS PROCESS PROCESS
THE ASSESSMENT THE ASSESSMENT THE ASSESSMENT THE ASSESSMENT
PROCESS PROCESS PROCESS PROCESS
TIMING FOR TIMING FOR TIMING FOR TIMING FOR
GRANTING EXTENSION GRANTING EXTENSION GRANTING EXTENSION GRANTING EXTENSION
GRANTING EXTENSION GRANTING EXTENSION GRANTING EXTENSION GRANTING EXTENSION
Multiple extensions
Review of prior decisions/ certificates
Concurrent delay: effects
Extensions during culpable delay
Extension of time and omissions
Acceleration in lieu of extension
Extension of time and claims
FACTORS DICTATING FACTORS DICTATING FACTORS DICTATING FACTORS DICTATING
FACTORS DICTATING FACTORS DICTATING FACTORS DICTATING FACTORS DICTATING
PRINCIPAL ISSUES PRINCIPAL ISSUES PRINCIPAL ISSUES PRINCIPAL ISSUES
PRINCIPAL ISSUES PRINCIPAL ISSUES PRINCIPAL ISSUES PRINCIPAL ISSUES
TIME PERIOD TIME PERIOD TIME PERIOD TIME PERIOD
TIME PERIOD TIME PERIOD TIME PERIOD TIME PERIOD
Factors dictating the timing
of the grant
Express stipulations as to
time period for granting
Prospective/Retrospective
granting of extension
The need to preserve the LAD
provisions for the benefit of
the employer
To allow contractor
opportunity to reprogramme
his works
Various formulae:
1. Use of specific time
period stipulations
2. Within reasonable time
Effect of failure to comply
Situation of continuing delay
Basic principles
Overriding requirements:
Satisfaction of:
1. Reasonableness Test
2. Fairness Test
3. Procedural requirements
Important exceptions
1. Contractor not to be culpable
2. Contractor to mitigate/prevent
delay
Definition of best endeavours
Factors to be taken into
consideration:
1. Previous extensions granted
2. Effect of omissions
3. Effect of concurrent delays
Sources and types of information
used
Concluding decision:
1. Rejection of claim; or
2. Grant of extension of time
PROSPECTIVE/ PROSPECTIVE/ PROSPECTIVE/ PROSPECTIVE/
RETROSPECTIVE GRANTING RETROSPECTIVE GRANTING RETROSPECTIVE GRANTING RETROSPECTIVE GRANTING
OF EXTENSION OF EXTENSION OF EXTENSION OF EXTENSION
PROSPECTIVE/ PROSPECTIVE/ PROSPECTIVE/ PROSPECTIVE/
RETROSPECTIVE GRANTING RETROSPECTIVE GRANTING RETROSPECTIVE GRANTING RETROSPECTIVE GRANTING
OF EXTENSION OF EXTENSION OF EXTENSION OF EXTENSION
Where expressly permitted
Where implied
Courts approach:
1. Previous strict interpretation
2. Current liberal approach
Circumstances where
retrospective granting permitted
FIG. 7-14: CHALLENGING CERTIFICATE OF EXTENSION OF TIME COMMON GROUNDS
(PER EGGLESTON)
HSKS
CHALLENGING CERTIFICATE
OF EXTENSION OF TIME:
COMMON GROUNDS
CERTIFICATE NOT GIVEN
ON TIME
DECISIONS IMPROPERLY
DELEGATED
CONTRACTUAL
PROCEDURES NOT
FOLLOWED
CERTIFICATE GIVEN
BY UNAUTHORIZED
PERSON
OTHER MATERIAL
BREACHES
CERTIFICATE NOT IN
CORRECT FORM
CERTIFICATE NOT
GIVEN FAIRLY
NO NAMED
CERTIFIER
FIG. 7-15: DELAY AND EXTENSION OF TIME FOR NOMINATED SUB-CONTRACTORS
AN OVERVIEW
HSKS
DELAY AND EXTENSION OF TIME FOR NOMINATED SUB-CONTRACTORS:
AN OVERVIEW
Main steps involved are:
1. Occurrence of delaying event
2. Notification of the delay
3. Review by the contractor
4. Contractor forwards application
to contract administrator
5. Contract administrator assesses
application
6. Contract administrator
communicates decision to
contractor
7. Contractor informs sub-
contractor
8. Receipt and acknowledgement
The rules in the preparation and
issuance of the certificate of
extension of time similar to that of
Main Contract
The principles and general requirements
similar to that of Main Contract
Principal difference only in some
procedural requirements
Applicable only to:
1. Nominated Sub-Contractors and
2. Nominated Suppliers
Does not encompass:
1. Domestic Sub-Contractors and
2. Domestic Suppliers
Extension of time under contract can
only be validly granted if:
1. Delaying event is one of the
relevant events/grounds under
the conditions of sub-contract
2. The express formalities or
procedures are strictly complied
with
The general contractual position
similar to Main Contract
PAM 1998 PAM 1998 PAM 1998 PAM 1998
SUB SUB SUB SUB- -- -CONTRACT CONTRACT CONTRACT CONTRACT
FORM FORM FORM FORM
PAM 1998 PAM 1998 PAM 1998 PAM 1998
SUB SUB SUB SUB- -- -CONTRACT CONTRACT CONTRACT CONTRACT
FORM FORM FORM FORM
JKR 203N FORM JKR 203N FORM JKR 203N FORM JKR 203N FORM
(REV. 10/83) (REV. 10/83) (REV. 10/83) (REV. 10/83)
JKR 203N FORM JKR 203N FORM JKR 203N FORM JKR 203N FORM
(REV. 10/83) (REV. 10/83) (REV. 10/83) (REV. 10/83)
IEM.CES.1/90 FORM IEM.CES.1/90 FORM IEM.CES.1/90 FORM IEM.CES.1/90 FORM
IEM.CES.1/90 FORM IEM.CES.1/90 FORM IEM.CES.1/90 FORM IEM.CES.1/90 FORM
Clause 26: Delay and
Extension of Time
(a): Notice of delay
(b): Extension of time
(c): Dispute on failure of S.O. to
grant extension of time
PUTRAJAYA PUTRAJAYA PUTRAJAYA PUTRAJAYA
CONDITIONS OF CONDITIONS OF CONDITIONS OF CONDITIONS OF
NOMINATED SUB NOMINATED SUB NOMINATED SUB NOMINATED SUB- -- -
PUTRAJAYA PUTRAJAYA PUTRAJAYA PUTRAJAYA
CONDITIONS OF CONDITIONS OF CONDITIONS OF CONDITIONS OF
NOMINATED SUB NOMINATED SUB NOMINATED SUB NOMINATED SUB- -- -
Extension of Time
(a): Notice of delays
(b): Extension of time
(c): Dispute on failure of
Engineer to grant extension
of time
Extension of Time
Clause 8.0: Extension of Time
8.1:Notifying of events causing
delay
8.2:Relevant events causing
delay for which extension of
time may be given
8.3:A Fair and Reasonable
extension of time
8.4:Failure of architect to give
written consent for extension
of time
HSKS
NON-COMPLETION
AND DAMAGES
HSKS
8.0 NON COMPLETION AND DAMAGES
COMMON LAW POSITION COMMON LAW POSITION COMMON LAW POSITION COMMON LAW POSITION
CONTRACTUAL FORMULAE CONTRACTUAL FORMULAE CONTRACTUAL FORMULAE CONTRACTUAL FORMULAE
RIGHTS TO IMPOSE RIGHTS TO IMPOSE RIGHTS TO IMPOSE RIGHTS TO IMPOSE
CHALLENGES CHALLENGES CHALLENGES CHALLENGES
MALAYSIAN POSITION MALAYSIAN POSITION MALAYSIAN POSITION MALAYSIAN POSITION
* DUNLOP PNEUMATIC TYRE CO. LTD. V NEW GARAGE & MOTOR COMPANY LTD. [1915]
AC 79
* TEMLOC LTD. V ERRIL PROPERTIES LTD.
* GILBERT-ASH (NORTHERN) LTD. V MODERN ENGINEERING (BRISTOL) LTD. [1974] AC
689
* SIM CHIO HUAT V WENG TED FUI [1983] 1 MLJ 151
* LION ENGINEERING SDN. BHD. V PAUCHUAN DEVELOPMENT SDN. BHD. [1997] 4 AMR
3315
* MANIAM V STATE OF PERAK [1957] MLJ 75
* WEARNE BROTHERS (M) LTD. V JACKSON [1966] 2 MLJ 155
* 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
HSKS
LIQUIDATED DAMAGES:
PRINCIPAL CHARACTERISTICS
RECOVERY/PAYMENT
TRIGGERED BY OCCURRENCE
OF SPECIFIED DEFAULT/BREACH
SUM OF MONEY AGRRED
BY THE PARTIES
FIG. 8-1 : LIQUIDATED DAMAGES PRINCIPAL CHARACTERISTICS
SUM STIPULATED IN THE
CONTRACT
GENUINE PRE-ESTIMATE OF THE
LOSS
HSKS
LIQUIDATED DAMAGES: AN OVERVIEW
BASIC BASIC BASIC BASIC
CHARACTERISTICS CHARACTERISTICS CHARACTERISTICS CHARACTERISTICS
ADVANTAGES ADVANTAGES ADVANTAGES ADVANTAGES
LIQUIDATED LIQUIDATED LIQUIDATED LIQUIDATED
DAMAGES AND DAMAGES AND DAMAGES AND DAMAGES AND
PENALTIES PENALTIES PENALTIES PENALTIES
DISTINGUISHED DISTINGUISHED DISTINGUISHED DISTINGUISHED
Four basic characteristics:
1. Sum of money
agreed/fixed in
advance by parties
2. Sum is a genuine
pre-estimate of
likely loss
3. Sum is stipulated in
the contract
4. Recovery of sum is
triggered by
contractors breach
e.g. non-completion
DISADVANTAGES DISADVANTAGES DISADVANTAGES DISADVANTAGES
EXAMPLES OF EXAMPLES OF EXAMPLES OF EXAMPLES OF
PENALTY CLAUSES PENALTY CLAUSES PENALTY CLAUSES PENALTY CLAUSES
LEGAL EFFECTS LEGAL EFFECTS LEGAL EFFECTS LEGAL EFFECTS
OF PENALTIES OF PENALTIES OF PENALTIES OF PENALTIES
DISTINGUISHING DISTINGUISHING DISTINGUISHING DISTINGUISHING
BETWEEN THE BETWEEN THE BETWEEN THE BETWEEN THE
TWO TERMS TWO TERMS TWO TERMS TWO TERMS
Prof. Vincent Powell-
Smiths definition
Per Eggleston
Per Robinson and Lavers
Common view
Reiteration in Philips
Hong Kong Ltd. v AG
of Hong Kong.
Advantages to:
1. Employer
2. Contractor
3. Sub-contractor
Common view
Disadvantages to:
1. Employer
2. Contractor
3. Sub-contractor
PENALTY: DEFINITION PENALTY: DEFINITION PENALTY: DEFINITION PENALTY: DEFINITION GENERAL GENERAL GENERAL GENERAL
Use of terms
interchangeably
Distinct difference
Position in Malaysia post
Selvakumar v Thiagarajah
Per Prof. Vincent Powell-
Smith
Per Lord Dunedin in
Dunlop Pneumatic Tyre
Co. Ltd. v New Garage &
Motor Co. Ltd.
Penalty: Invalid and
unenforceable
Legal effect per Watts,
Watts & Co. Ltd. v Mitsui
& Co. Ltd.
See Keatings view
Mere labeling is inclusive
Depends on construction
afforded to term by the
courts
Lord Dunedins proposed
tests.
Elicited from the
relevant case-law
FIG. 8-2 : LIQUIDATED DAMAGES AN OVERVIEW
HSKS
INCLUSION OF EXPRESS PROVISION IN
CONTRACT PERMITTING DEDUCTION
OF THE LIQUIDATED DAMAGES
IMPOSITION OF
LIQUIDATED DAMAGES:
TYPICAL PRE-CONDITIONS
DEFINITE DATE FIXED
CONTRACTUALLY FROM WHICH
DAMAGES CAN RUN
EMPLOYER HAS NOT
WAIVED HIS RIGHT TO
DEDUCT LIQUIDATED
DAMAGES
THE EXPRESS
LIQUIDATED DAMAGES
CLAUSE IS VALID AND
ENFORCEABLE
SPECIFIED
CONTRACTUAL
PROCEDURES HAVE
BEEN STRICTLY
COMPLIED WITH
DETAILS ON LIQUIDATED
DAMAGES CLEARLY AND
PROPERLY FILLED IN
FIG. 8-3 : IMPOSITION OF LIQUIDATED DAMAGES TYPICAL PRE-CONDITIONS
HSKS
DEDUCTION OF
LIQUIDATED DAMAGES:
COMMON CONDITIONS
PRECEDENTS USED
FIG. 8-4 : DEDUCTION OF LIQUIDATED DAMAGES COMMON CONDITIONS PRECEDENTS
USED
CONTRACTOR SHALL FAIL
TO COMPLETE ON TIME
THE CONTRACT ADMINISTRATOR
SHALL ISSUE A CERTIFICATE OF
NON-COMPLETION
MISCELLANEOUS
PRE-CONDITIONS
THE CONTRACT
ADMINISTRATOR SHALL
DETERMINE AND ISSUE
ANY EXTENSIONS OF
TIME DUE TO
CONTRACT
THE CONTRACT
ADMINISTRATOR SHALL
CERTIFY THAT NO
FURTHER EXTENSIONS
OF TIME ARE DUE TO
CONTRACTOR
THE EMPLOYER SHALL
GIVE WRITTEN NOTICE
TO THE CONTRACTOR
OF HIS INTENTION TO
DEDUCT LAD
HSKS
PROCEDURAL REQUIREMENTS FOR RECOVERY OF LIQUIDATED DAMAGES:
AN OVERVIEW
GENERAL RULE FOR GENERAL RULE FOR GENERAL RULE FOR GENERAL RULE FOR
IMPOSITION OF LIQUIDATED DAMAGES IMPOSITION OF LIQUIDATED DAMAGES IMPOSITION OF LIQUIDATED DAMAGES IMPOSITION OF LIQUIDATED DAMAGES
GENERAL PROCEDURE GENERAL PROCEDURE GENERAL PROCEDURE GENERAL PROCEDURE
DETERMINE IF DETERMINE IF DETERMINE IF DETERMINE IF
EMPLOYER HAS EMPLOYER HAS EMPLOYER HAS EMPLOYER HAS
WAIVED HIS WAIVED HIS WAIVED HIS WAIVED HIS
RIGHTS TO LAD RIGHTS TO LAD RIGHTS TO LAD RIGHTS TO LAD
DETERMINE DETERMINE DETERMINE DETERMINE
IF RELEVANT IF RELEVANT IF RELEVANT IF RELEVANT
CERTIFICATES/ CERTIFICATES/ CERTIFICATES/ CERTIFICATES/
NOTICES HAVE NOTICES HAVE NOTICES HAVE NOTICES HAVE
BEEN ISSUED BEEN ISSUED BEEN ISSUED BEEN ISSUED
ESTABLISH ESTABLISH ESTABLISH ESTABLISH
EXISTENCE AND EXISTENCE AND EXISTENCE AND EXISTENCE AND
VALIDITY OF VALIDITY OF VALIDITY OF VALIDITY OF
LAD CLAUSE LAD CLAUSE LAD CLAUSE LAD CLAUSE
Recovery of LAD must be in accordance with the
contract
Procedural requirements/conditions precedent
must be strictly followed
Effect of the application of the contra proferantum
rule
Need to satisfy general rule
Six principal pre-conditions:
1. Existence of express contractual provision on
LAD
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
ESTABLISH ESTABLISH ESTABLISH ESTABLISH
DEFAULT OF DEFAULT OF DEFAULT OF DEFAULT OF
BASIC STEPS BASIC STEPS BASIC STEPS BASIC STEPS
Five basic steps
See Figures 6-11
to 6-13 on the
flowcharts
Triggering event:
failure of
contractor to
complete on time
Certificate of Non-
Completion (CNC)
Notice of Intention to
deduct LAD
Crucial to
enforceability
of provision
and recovery of
LAD
2 forms of waiver:
1. Express
2. Implied
Was there
consideration in
return?
RECOVERS THE RECOVERS THE RECOVERS THE RECOVERS THE
LIQUIDATED LIQUIDATED LIQUIDATED LIQUIDATED
DAMAGES DAMAGES DAMAGES DAMAGES
Conditions precedent
Decision as to recovery
Timing
POST LAD POST LAD POST LAD POST LAD
DEDUCTION DEDUCTION DEDUCTION DEDUCTION
Effect of further
E.O.T.
See Fig. 6-14 & 6-
15 for flowchart
FIG. 8-5 : PROCEDURAL REQUIREMENTS FOR RECOVERY OF LIQUIDATED DAMAGES AN
OVERVIEW
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GENERAL POSITION
GENERAL POSITION
NON-COMPLETION AND DAMAGES IN NOMINATED
SUB-CONTRACTS: AN OVERVIEW
EXPRESS CONTRACTUAL
PROVISIONS
EXPRESS CONTRACTUAL
PROVISIONS
NSCS LIABILITY FOR DAMAGES
NSCS LIABILITY FOR DAMAGES
EXPRESS
CONTRACTUAL FORMULA
EXPRESS
CONTRACTUAL FORMULA
DAMAGES FOR
BREACH OF CONTRACT
DAMAGES FOR
BREACH OF CONTRACT
Legal principles similar to Main Contractor
Liability for 2 types of damages:
1. Liquidated damages, or
2. Unliquidated/general damages
Clause 7.0: PAM 98 Sub-Contract Form
Clause 27: JKR 203N (Rev. 10/83)
Clause 27: IEM.CES 1/90 Form
Clause 25: Putrajaya Conditions of Nominated Sub-Contract
EFFECT OF
NSCS DEFAULT
EFFECT OF
NSCS DEFAULT
Effect of default in completing
works in time: breach of contract
Consequences of the said breach
- Employer entitled to damages
i.e., either:
1. LAD as stipulated in the sub-
contract, or
2. General damages
enforceable through
arbitration/court action
GENERAL
OBSERVATIONS
GENERAL
OBSERVATIONS
Necessity for parties to agree
upon and arrive at a genuine pre-
estimate
Need to clearly stipulate
conditions precedent to recovery
.
Prudent to cap maximum limit
If LAD clause stepped down into
sub-contract, sub-contractor
bound irrespective of value of the
sub-contract
Governing Provision: S 74
Contracts Act 1950 (Rev. 1974) -
Compensation for loss or damage
caused by breach of contract
Three main heads of damage per
Eggleston:
1. Main Contractors liability to
pay LAD to employer of NSCs
default
2. Main Contractors own loss
consequent to NSCs default
3. Third party claims due to NSCs
default
Called the Financial Contractual
Remedy
Usually an LAD clause
Express stipulations as to:
1. Rate
2. Scope of coverage
3. Maximum limit
4. Pre-conditions, etc.
Issues pertaining to the
stepping down of the Main
Contractors LAD clauses
FIG. 8-6: NON-COMPLETION AND DAMAGES IN NOMINATED SUB-CONTRACTS AN OVERVIEW
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FIG. 8-7: LIQUIDATED DAMAGES TYPICAL GROUNDS FOR CHALLENGING
LIQUIDATED DAMAGES:
TYPICAL GROUNDS FOR
CHALLENGING
CONTRACTUAL PROVISION IS A PENALTY CLAUSE
EXTENSIONS OF TIME GRANTED INSUFFICIENT
NO DATE STIPULATED FOR THE COMMENCEMENT OF THE CONTRACT
MISCELLANEOUS CHALLENGES/DEFENCES
NO CONTRACTUAL PROVISION TO EXTEND TIME FOR ACT OF PROVISION IN QUESTION
PRACTICAL COMPLETION ACHIEVED EARLIER THAN CERTIFIED
CONTRACTUAL PROVISION IS UNCERTAIN/INCONSISTENT
CONTRACT IS AT LARGE
EMPLOYER HAS WAIVED LIQUIDATED DAMAGES
CERTIFICATES OF EXTENSION OF TIME
AND/OR PRACTICAL COMPLETION NOT VALID
CONDITIONS PRECEDENT NOT OBSERVED
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EFFECT OF S75 CONTRACTS EFFECT OF S75 CONTRACTS EFFECT OF S75 CONTRACTS EFFECT OF S75 CONTRACTS
ACT 1950 (REV. 1974) ACT 1950 (REV. 1974) ACT 1950 (REV. 1974) ACT 1950 (REV. 1974)
EFFECT OF S75 CONTRACTS EFFECT OF S75 CONTRACTS EFFECT OF S75 CONTRACTS EFFECT OF S75 CONTRACTS
ACT 1950 (REV. 1974) ACT 1950 (REV. 1974) ACT 1950 (REV. 1974) ACT 1950 (REV. 1974)
LAD: MALAYSIAN LEGAL POSITION AN OVERVIEW
EFFECT OF EFFECT OF EFFECT OF EFFECT OF SELVAKUMAR V V V V
THIAGARAJAH [1995] [1995] [1995] [1995]
EFFECT OF EFFECT OF EFFECT OF EFFECT OF SELVAKUMAR V V V V
THIAGARAJAH [1995] [1995] [1995] [1995]
CIRCUMVENTING CIRCUMVENTING CIRCUMVENTING CIRCUMVENTING SELVAKUMAR
V V V V THIAGARAJAH
CIRCUMVENTING CIRCUMVENTING CIRCUMVENTING CIRCUMVENTING SELVAKUMAR
V V V V THIAGARAJAH
1. Parties of equal bargaining strength.
2. Free to agree on any terms between
themselves.
3. Philips HK Ltd. v AG of Hong Kong.
UNDER DOCTRINE UNDER DOCTRINE UNDER DOCTRINE UNDER DOCTRINE
OF FREEDOM TO OF FREEDOM TO OF FREEDOM TO OF FREEDOM TO
UNDER DOCTRINE UNDER DOCTRINE UNDER DOCTRINE UNDER DOCTRINE
OF FREEDOM TO OF FREEDOM TO OF FREEDOM TO OF FREEDOM TO
MUTUAL MUTUAL MUTUAL MUTUAL
AGREEMENT AGREEMENT AGREEMENT AGREEMENT
MUTUAL MUTUAL MUTUAL MUTUAL
AGREEMENT AGREEMENT AGREEMENT AGREEMENT
1. By parties on circumventing decision
in Selvakumar v Thiagarajah.
2. Can draft appropriate clause
1. No difference between penalty and liquidated
damages clauses.
2. All liquidated damages clauses to be treated
as penalty clauses under English law.
CLAUSE 22.2: CLAUSE 22.2: CLAUSE 22.2: CLAUSE 22.2:
PAM CONTRACT 2006 PAM CONTRACT 2006 PAM CONTRACT 2006 PAM CONTRACT 2006
CLAUSE 22.2: CLAUSE 22.2: CLAUSE 22.2: CLAUSE 22.2:
PAM CONTRACT 2006 PAM CONTRACT 2006 PAM CONTRACT 2006 PAM CONTRACT 2006
1. Contractor confirms that by
entering into the Contract
2. He agrees to pay such sums
3. Which become due
4. Without Employer having to
prove his actual loss/damage
1. Employer cannot recover simpliciter sum fixed
in contract, whether as a penalty or liquidated
damages.
2. Must prove actual damages/reasonable
compensation per Hadley v Baxendale.
3. Figure stipulated in Contract is the ceiling
amount recoverable.
FIG. 8-8 : LAD MALAYSIAN LEGAL POSITION AN OVERVIEW
Employer can proceed to
recover simpliciter the sum
fixed in the contract as LAD
Have all
the conditions precedents
been fulfilled?
Matter to be resolved
through arbitration/litigation
Yes
A B
Is the
contractor liable to pay
LAD?
Yes
No
START
No
Prima facie, employer
cannot recover liquidated
damages (LAD)
Is there an
express clause circumventing
rule in Selvakumar
Thiagarajah?
Does the
contractor challenge the
employers deduction of the
LAD?
Yes
can deduct the stipulated
LAD amount
Yes
No
No
FIG. 8-9: FLOWCHART ON THE RECOVERY OF LIQUIDATED DAMAGES - THE MALAYSIAN
POSITION POST SELVAKUMAR V THIAGARAJAH (PART I)
HSKS
A B
STOP
No
Yes
Yes
No
Employer must prove the actual damages or
reasonable compensation per rule in Hadley v
Baxendale / S74 Contracts Act
Is
employer able to
prove damages as
required?
Are the
damages more than the sum stipulated in the
contract
as LAD?
Employer can recover only his actual damages or
reasonable compensation as decided by the arbitral
forum or the court
Employer may not be
able to recover any damages at all
can deduct the stipulated
LAD amount
FIG. 8-10: FLOWCHART ON THE RECOVERY OF LIQUIDATED DAMAGES - THE MALAYSIAN
POSITION POST SELVAKUMAR V THIAGARAJAH (PART II)
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COMPLETION AND
HANDING-OVER
9.0 COMPLETION AND HANDING-OVER
PROBLEMS WITH DEFINITIONS AND TERMINOLOGY PROBLEMS WITH DEFINITIONS AND TERMINOLOGY PROBLEMS WITH DEFINITIONS AND TERMINOLOGY PROBLEMS WITH DEFINITIONS AND TERMINOLOGY
CONDITIONS PRECEDENT CONDITIONS PRECEDENT CONDITIONS PRECEDENT CONDITIONS PRECEDENT
NON NON NON NON- -- -ISSUE BY CONTRACT ADMINISTRATOR ISSUE BY CONTRACT ADMINISTRATOR ISSUE BY CONTRACT ADMINISTRATOR ISSUE BY CONTRACT ADMINISTRATOR
CHALLENGES TO CPC CHALLENGES TO CPC CHALLENGES TO CPC CHALLENGES TO CPC
PROBLEMS ARISING FROM CPC ISSUES PROBLEMS ARISING FROM CPC ISSUES PROBLEMS ARISING FROM CPC ISSUES PROBLEMS ARISING FROM CPC ISSUES
SECTIONAL COMPLETION, PARTIAL POSSESSION AND CONDITIONAL CPC SECTIONAL COMPLETION, PARTIAL POSSESSION AND CONDITIONAL CPC SECTIONAL COMPLETION, PARTIAL POSSESSION AND CONDITIONAL CPC SECTIONAL COMPLETION, PARTIAL POSSESSION AND CONDITIONAL CPC
* WESTMINSTER CITY COUNCIL V JARVIS & SONS LTD. [1970] 7 BLR 64
* H.W. NEVILL (SUNBLEST) LTD. V WILLIAM PRESS & SONS LTD. [1981] 20 BLR 78
* P & M KAYE LTD. V HOSIER DICKINSON LTD. [1972] 1 WLR 64
* EMSON EASTERN (IN RECEIVERSHIP) V EME DEVELOPMENTS LTD. [1991] 55 BLR 114
* BRUNO ZORNOW (BUILDERS LTD.) V BEECHCROFT DEVELOPMENTS LTD. [1990] 51 BLR 16
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GUIDELINES TO DETERMINE PRACTICAL
COMPLETION PER KEATING
CONTRACT ADMINISTRATOR
HAS DISCRETION TO ISSUE
C.P.C. WHERE MINOR WORKS
ARE LEFT TO BE DONE ON A DE
MINIMIS BASIS
C.P.C. CAN BE ISSUED
NOTWITHSTANDING PRESENCE
OF LATENT DEFECTS
FIG. 9-1 : GUIDELINES TO DETERMINE PRACTICAL COMPLETION PER KEATING
PRACTICAL COMPLETION MEANS
COMPLETION OF ALL WORK THAT
HAS TO BE DONE
C.P.C. CANNOT BE ISSUED IF
THERE ARE PRESENT PATENT
DEFECTS
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FUNCTIONAL TEST
ESTABLISHING PRACTICAL
COMPLETION:
PRINICPAL TESTS
INCONVENIENCE TEST
MISCELLANEOUS TESTS
COMPLETENESS TEST
AUTHORITIES TEST SAFETY TEST
FIG. 9-2 : ESTABLISHING PRACTICAL COMPLETION PRINICPAL TESTS
HSKS
ISSUE OF THE CERTIFICATE
OF PRACTICAL COMPLETION:
PRINCIPAL EFFECTS
MARKS END OF CONSTRUCTION PERIOD
EMPLOYER TO RELEASE ONE MOIETY OF RETENTION SUM
CERTIFICATION OF INTERIM PAYMENT ENDS
CONTRACTORS RIGHT TO POSSESSION OF SITE CEASES
CONTRACTORS LIABILITY FOR CARE, SECURITY, ETC., ENDS
FIG. 9-3 : ISSUE OF THE CERTIFICATE OF PRACTICAL COMPLETION PRINCIPAL EFFECTS
TRIGGERS COMMENCEMENT OF PERIOD OF FINAL MEASUREMENT
AND VALUATION OF THE WORKS
CONTRACTORS LIABILITY FOR FURTHER LAD ENDS
CONTRACT ADMINISTRATORS POWER TO ORDER VARIATIONS CEASES
ENDS RESTRICTION ON OPENING OF ARBITRATION
CONTRACTORS LIABILITY TO INSURE WORKS ENDS
FREE SERVICE AND MAINTENANCE PERIOD STARTS
DEFECT LIABILITY PERIOD COMMENCES
HSKS
SECTIONAL COMPLETION:
PRINICPAL ISSUES/EFFECTS
FIG. 9-4 : SECTIONAL COMPLETION PRINCIPAL ISSUES/EFFECTS
CERTIFICATE OF PRACTICAL
COMPLETION FOR EACH SECTION
SEPARATE DEFECT LIABILITY
PERIOD FOR EACH SECTION
OBLIGATION TO INSURE
FOR EACH SECTION
ENDS WITH CPC
(DEPENDING ON
CONTRACT PROVISION)
SEPARATE EXTENSION
OF TIME CERTIFICATION
FOR EACH SECTION
RELEASE OF ONE
MOIETY OF RETENTION
SUM FOR EACH SECTION
SEPARATE LIQUIDATED
AND ASCERTAINED
DAMAGES FOR EACH
SECTION
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PARTIAL POSSESION/
OCCUPATION:
PRINICPAL ISSUES/EFFECTS
FIG. 9-5 : PARTIAL POSSESSION/OCCUPATION PRINCIPAL ISSUES/EFFECTS
ISSUE OF CERTIFICATE OF
PARTIAL OCCUPATION OF
RELEVANT PART WITHIN
STIPULATED PERIOD
RELEASE OF A PROPORTION OF
FIRST HALF OF RETENTION SUM IN
RESPECT OF RELEVANT PART
WITHIN STIPULATED PERIOD
RELEASE OF
PERFORMANCE BOND
AND FINAL PAYMENT
UNAFFECTED
COMMENCEMENT OF
DEFECT LIABILITY
PERIOD FOR RELEVANT
PART ON DATE OF
POSSESSION/
OCCUPATION
CESSATION/REDUCTION
OF INSURANCES
CORRESPONDINGLY (IF
EXPRESSLY PERMITTED)
PROPORTIONING DOWN
OF LIQUIDATED AND
ASCERTAINED DAMAGES
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LITERAL MEANING/ LITERAL MEANING/ LITERAL MEANING/ LITERAL MEANING/
INTERPRETATION INTERPRETATION INTERPRETATION INTERPRETATION
COMPLETION OF WORKS UNDER THE CONTRACT
SECTIONAL SECTIONAL SECTIONAL SECTIONAL
COMPLETION COMPLETION COMPLETION COMPLETION
PARTIAL PARTIAL PARTIAL PARTIAL
Situation where Employer takes
over/resumes possession of:
a)Whole works, or
b) Part of works
before Contract Completion Date
Pre-Conditions:
a)With consent of Contractor
b) Consent not to be
unreasonably withheld
Procedural aspects:
a)Issue of Certificate of Partial
Occupation (CPO) within 7
days of possession.
b) Certificate to identify:
i) Relevant part possessed
ii) Its estimated value
c)DLP/DNP starts on date of
possession
d) LAD rate reduced pro-
rata for unoccupied
part/portion
Strict View
Absence of any patent
defects; and
Absence of any outstanding
works however trifling
Rarely used in practice
Has been abandoned in
favour of a more expedient
approach
PRACTICAL PRACTICAL PRACTICAL PRACTICAL
COMPLETION COMPLETION COMPLETION COMPLETION
Also termed Substantial
Completion in some cases
Adopts an expedient view
Connotates a state of
readiness for use or
occupation by Employer
Formalized by issue of
Certificate of Practical
Completion (CPC) or Taking
Over Certificate (TOC)
More common in practice
Provided for expressly in
many Standard Forms
Envisages completion in
sections/ stages/phases
Intention must be
agreed/expressed at time of
contracting.
Contract Documents must
identify/ define:
a) Each Section
b) The Completion dates
c) The Corresponding LAD
Each section has separate:
a) Certificate of Practical
Completion (CPC)/TOC
or Defect Notification
Period (DNP)
b) Defects Liability Period
(DLP)
c) Liquidated and
Ascertained Damages
(LAD)
FIG. 9-6 : COMPLETION OF WORKS UNDER THE CONTRACT AN OVERVIEW
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TEST ON COMPLETION: AN OVERVIEW
RESPONSIBILITY RESPONSIBILITY RESPONSIBILITY RESPONSIBILITY FAILURES FAILURES FAILURES FAILURES
FAILURES FAILURES FAILURES FAILURES
Active participant and
certifier of Final Testing and
Commissioning.
Default/negligence in
certification does not relieve
Contractors obligations.\
Normally undertaken
by Contractor on his
own.
Prior to Final Tests on
Completion.
Is a necessary prelude
to the Final Tests
Contractually, responsible for:
a) Preliminary and Final
Testing and
Commissioning.
b) Satisfactory Completion
PURPOSE PURPOSE PURPOSE PURPOSE
FINAL FINAL FINAL FINAL
FINAL FINAL FINAL FINAL
Normally undertaken by
either:
a) Contractor in the
presence of
Contract
Administrator (or)
b) Independent 3
rd
Party Specialists
Is usually a pre-
condition to issue of
CPC.
INDEPENDANT TESTER INDEPENDANT TESTER INDEPENDANT TESTER INDEPENDANT TESTER
INDEPENDANT TESTER INDEPENDANT TESTER INDEPENDANT TESTER INDEPENDANT TESTER
Scope as expressly stipulated
in Contract.
Eg. SIRIM, DNV, Lloyds, TV,
Statutory authorities, etc.
May also be required under
statute.
To show compliance with the
Performance Specification/
Contract Requirements
To meet applicable statutory
requirements.
As a pre-condition to issue of
CPC
As a pre-condition to
certification by Independent 3
rd
Party Specialist.
FIG. 9-7 : TEST ON COMPLETION AN OVERVIEW
HSKS
FIG. 9-8 : OPERATION AND MAINTENANCE MANUALS AN OVERVIEW
OPERATION AND MAINTENANCE MANUALS: AN OVERVIEW
TYPES/ NATURE TYPES/ NATURE TYPES/ NATURE TYPES/ NATURE
TYPES/ NATURE TYPES/ NATURE TYPES/ NATURE TYPES/ NATURE UPDATING UPDATING UPDATING UPDATING
UPDATING UPDATING UPDATING UPDATING
ACCURACY ACCURACY ACCURACY ACCURACY
ACCURACY ACCURACY ACCURACY ACCURACY
In Contract and Tort
Primary responsibility
for errors, omissions,
etc.
AS AS AS AS- -- -BUILT/ BUILT/ BUILT/ BUILT/
AS AS AS AS- -- -CONSTRUCTED/ CONSTRUCTED/ CONSTRUCTED/ CONSTRUCTED/
AS AS AS AS- -- -INSTALLED DRAWINGS INSTALLED DRAWINGS INSTALLED DRAWINGS INSTALLED DRAWINGS
AS AS AS AS- -- -BUILT/ BUILT/ BUILT/ BUILT/
AS AS AS AS- -- -CONSTRUCTED/ CONSTRUCTED/ CONSTRUCTED/ CONSTRUCTED/
AS AS AS AS- -- -INSTALLED DRAWINGS INSTALLED DRAWINGS INSTALLED DRAWINGS INSTALLED DRAWINGS
OPERATION & OPERATION & OPERATION & OPERATION &
MAINTENANCE MANUALS/ MAINTENANCE MANUALS/ MAINTENANCE MANUALS/ MAINTENANCE MANUALS/
HANDBOOKS HANDBOOKS HANDBOOKS HANDBOOKS
OPERATION & OPERATION & OPERATION & OPERATION &
MAINTENANCE MANUALS/ MAINTENANCE MANUALS/ MAINTENANCE MANUALS/ MAINTENANCE MANUALS/
HANDBOOKS HANDBOOKS HANDBOOKS HANDBOOKS
RECORDS/ DOCUMENTS RECORDS/ DOCUMENTS RECORDS/ DOCUMENTS RECORDS/ DOCUMENTS
RECORDS/ DOCUMENTS RECORDS/ DOCUMENTS RECORDS/ DOCUMENTS RECORDS/ DOCUMENTS
PROFESSIONAL PROFESSIONAL PROFESSIONAL PROFESSIONAL S S S S
RESPONSBILITY RESPONSBILITY RESPONSBILITY RESPONSBILITY
PROFESSIONAL PROFESSIONAL PROFESSIONAL PROFESSIONAL S S S S
Contractors
responsibility at least
during Limitation Period
for:
a) O & M manuals due
to product
improvement.
b)Errors/
inaccuracies
Professionals to update
on safety issues and
errors detected.
RECORDS OF FINAL RECORDS OF FINAL RECORDS OF FINAL RECORDS OF FINAL
MEASUREMENT MEASUREMENT MEASUREMENT MEASUREMENT
RECORDS OF FINAL RECORDS OF FINAL RECORDS OF FINAL RECORDS OF FINAL
MEASUREMENT MEASUREMENT MEASUREMENT MEASUREMENT
Permanent record of works
Suitably detailed for future
reference.
Contents, etc. to express
contract stipulations/industry
practice.
To enable Works to be operated and
maintained efficiently and safely.
Contents, etc. to express contract
stipulations/industry practice.
Undertaken by Contract
Administrator jointly with
Contractor.
To facilitate preparation of Final
Account.
In Tort, on joint and
several basis
Especially so for
signing-off/
endorsing Qualified
Person.
Must comply with express
Contract stipulations.
Normal practice is:
a) Before TOC
b) After TOC
c) Before Performance
Certificate
Usual requirements include
draft copies for approval
prior to finalization.
Final testing and commissioning
records
Servicing and Maintenance
records
O & M Training records, etc.
Must follow express
Contract stipulations as
to:
a) Type/Nature
b) Contents
c) Quantity
d) Timing for
Submission
Most Contracts have
incorporated such
stipulations
FIG. 9-9: TAKING OVER OF COMPLETED WORKS BY EMPLOYER TYPICAL PRE-CONDITIONS
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IDENTIFICATION OF PATENT
DEFECTS
& OUTSTANDING WORKS
ISSUE OF RELEVANT
COMPLETION CERTIFICATE
HANDOVER OF APPROVALS/
CLEARANCES FROM
STATUTORY AUTHORITIES
HANDOVER OF
ALL NECESSARY TOOLS
HANDOVER OF ALL
KEYS
HANDOVER OF
ALL AS-BUILT DOCUMENTS/
RECORDS
TRAINING OF
EMPLOYERS OPERATION
& MAINTENANCE PERSONNEL
HANDOVER OF ALL
NECESSARY SPARES
COMPLETION
OF TESTING &
COMMISSIONING
TAKING OVER:
TYPICAL PRE-
CONDITIONS
HSKS
IDENTIFICATION OF THE TYPES AND
DETAILS OF NECESSARY INSPECTIONS
TAKING OVER OF
COMPLETED WORKS:
PROCEDURAL ISSUES
ESTABLISHMENT OF THE
RELEVANT DELIVERABLES
IDENTIFICATION OF THE
MODE OF FORMALIZING
THE TAKING OVER
IDENTIFICATION OF
THE SEQUENCE OF
TAKING-OVER
SETTING UP OF THE
PROCEDURES FOR
RECORDING
ESTABLISHMENT OF
TAKING-OVER
PROGRAMME
FIG. 9-10 : TAKING OVER OF COMPLETED WORKS PROCEDURAL ISSUES
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DEFECTS
10.0 DEFECTS
PROBLEMS WITH DEFINITIONS AND TERMINOLOGY
DEFECTS FOR WHICH CONTRACTOR RESPONSIBLE
PROBLEMS WITH DEFECT RECTIFICATION
CERTIFICATION DELAY, NON-ISSUE, ETC.
LIABILITY UNDER LIMITATION ACT
RECENT DEVELOPMENTS
RELEVANT CASES
* HII SOO CHIONG V BOARD OF MANAGEMENT YEE TING PRIMARY SCHOOL [1973] 2 MLJ 204
* LEO TENG CHOY V BEETILE CONSTRUCTION [1982] 2 MLJ 304
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
* BAGOT V STEVEN SCANLON & CO. [1996] 1 QB 197
* 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
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DEFECTS: PRINCIPAL TYPES AND NATURE
PATENT DEFECT
TYPES
TYPES
NATURE
NATURE
LATENT DEFECT
QUALITY OF
MATERIAL
STANDARD
OF DESIGN
STANDARD OF
WORKMANSHIP
FIG. 10-1 : DEFECTS PRINCIPAL TYPES AND NATURE
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FIG. 10-2 : DEFECTS FOR WHICH CONTRACTOR IS GENERALLY RESPONSIBLE
TRADITIONAL GENERAL TRADITIONAL GENERAL TRADITIONAL GENERAL TRADITIONAL GENERAL
TRADITIONAL GENERAL TRADITIONAL GENERAL TRADITIONAL GENERAL TRADITIONAL GENERAL
DEFECTS FOR WHICH CONTRACTOR IS GENERALLY RESPONSIBLE
MANAGEMENT FEE MANAGEMENT FEE MANAGEMENT FEE MANAGEMENT FEE
MANAGEMENT FEE MANAGEMENT FEE MANAGEMENT FEE MANAGEMENT FEE
PACKAGE DEAL PACKAGE DEAL PACKAGE DEAL PACKAGE DEAL TYPES TYPES TYPES TYPES
OF CONTRACTS OF CONTRACTS OF CONTRACTS OF CONTRACTS
PACKAGE DEAL PACKAGE DEAL PACKAGE DEAL PACKAGE DEAL TYPES TYPES TYPES TYPES
OF CONTRACTS OF CONTRACTS OF CONTRACTS OF CONTRACTS
WHOLLY EMPLOYER WHOLLY EMPLOYER WHOLLY EMPLOYER WHOLLY EMPLOYER
DESIGNED CONTRACT DESIGNED CONTRACT DESIGNED CONTRACT DESIGNED CONTRACT
PARTLY EMPLOYER PARTLY EMPLOYER PARTLY EMPLOYER PARTLY EMPLOYER
Quality of Materials
Standard of Workmanship
Standard of Design (For elements of
design in contractors scope of work)
Standard of Design
Standard of Design (For
elements of design in
contractors scope of work)
HSKS
ARISING FROM
FAIR WEAR AND TEAR
DEFECTS FOR WHICH
CONTRACTOR IS GENERALLY
NOT RESPONSIBLE
OUT OF TIME OR STATUTE
BARRED
HAVING NUMBER OF
CAUSES, CONTRACTORS
PORTION BEING MINOR
ARISING FROM MISUSE/
ABUSE BY USERS /
EMPLOYER
WAIVED BY EMPLOYER ARISING FROM WORK
WHICH IS NOT
CONTRACTORS
RESPONSIBILITY
FIG. 10-3 : DEFECTS FOR WHICH CONTRACTOR IS GENERALLY NOT RESPONSIBLE
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CONTRACTORS LIABILITY FOR DEFECTS:
PRINCIPAL STAGES OF CONTRACT
PRE-COMPLETION STAGE
Or Pre-Handing Over Stage
Or During Currency of
Construction, Installation,
etc.
POST-CMGD STAGE
Or Post-Certification of
Completion of Making Good
Defects
Or During Limitation Period
POST-COMPLETION STAGE
Or Post-Handing Over Stage
Or During Defects Liability Period, etc.
FIG. 10-4 : CONTRACTORS LIABILITY FOR DEFECTS PRINCIPAL STAGES OF CONTRACT
FIG. 10-5: EMPLOYERS PRINCIPAL REMEDIES FOR CONTRACTORS DEFAULT IN
RECTIFYING REPORTED DEFECTS AT PRE-CONTRACT COMPLETION STAGE
HSKS
EMPLOYERS PRINCIPAL REMEDIES FOR CONTRACTORS
DEFAULT IN RECTIFYING REPORTED DEFECTS AT PRE-
CONTRACT COMPLETION STAGE
DETERMINATION OF
CONTRACTORS EMPLOYMENT
UNDER THE CONTRACT
THIRD PARTY ACTION TO MAKE
GOOD DEFECTS
POSTPONEMENT/NON-
CERTIFICATION OF COMPLETION
OF WORKS
EMPLOYER MAY UNDERTAKE
RECTIFICATION WORKS HIMSELF
HSKS
LIMITATION: RELEVANT
STATUTORY ENACTMENTS
FIG. 10-6 : LIMITATION RELEVANT STATUTORY ENACTMENTS
LIMITATION ACT 1953 (REV.
1981) - WEST MALAYSIA
LIMITATION ACT (CAP 14)
REVISED EDN. 2000 -
BRUNEI
MISCELLANEOUS ACTS
E.G. RAILWAYS ACT
1991 (SECTION 97) CIVIL
LAW ACT 1965 (SECTION
7(5), ETC.
LIMITATION ORDINANCE
1959 (REPRINT 1965) -
SARAWAK
PUBLIC AUTHORITIES
PROTECTION ACT 1948
(REV. 1978)
LIMITATION ORDINANCE
1952 (REPRINT 1966) -
SABAH
HSKS
FIG. 10-7 : EXPIRY OF PERIOD FOR RECTIFYING DEFECTS OPTIONS AVAILABLE TO
ALL DEFECTS SATISFACTORILY ALL DEFECTS SATISFACTORILY ALL DEFECTS SATISFACTORILY ALL DEFECTS SATISFACTORILY
MADE GOOD/RECTIFIED MADE GOOD/RECTIFIED MADE GOOD/RECTIFIED MADE GOOD/RECTIFIED
ALL DEFECTS SATISFACTORILY ALL DEFECTS SATISFACTORILY ALL DEFECTS SATISFACTORILY ALL DEFECTS SATISFACTORILY
MADE GOOD/RECTIFIED MADE GOOD/RECTIFIED MADE GOOD/RECTIFIED MADE GOOD/RECTIFIED
EXPIRY OF PERIOD FOR RECTIFYING DEFECTS:
OPTIONS AVAILABLE TO CONTRACT ADMINISTRATOR
DEFECTS REMAINING OUTSTANDING DEFECTS REMAINING OUTSTANDING DEFECTS REMAINING OUTSTANDING DEFECTS REMAINING OUTSTANDING
AND/OR UNRECTIFIED AND/OR UNRECTIFIED AND/OR UNRECTIFIED AND/OR UNRECTIFIED
DEFECTS REMAINING OUTSTANDING DEFECTS REMAINING OUTSTANDING DEFECTS REMAINING OUTSTANDING DEFECTS REMAINING OUTSTANDING
AND/OR UNRECTIFIED AND/OR UNRECTIFIED AND/OR UNRECTIFIED AND/OR UNRECTIFIED
TAKE 3
RD
PARTY ACTION
TAKE 3
RD
PARTY ACTION
EMPLOYER TO UNDERTAKE
WORKS HIMSELF I.E.
DEPARTMENTALLY
EMPLOYER TO UNDERTAKE
WORKS HIMSELF I.E.
DEPARTMENTALLY
Deduct costs involved from:
a) money due to contractor and/or
b) Performance bond and/or
c) as a liquidated demand
Contract administrator to:
a) Prepare and
b) Issue
the Performance Certificate forthwith.
See express clauses under ICTAD/SBD/02
DEFECTS ARE EITHER:
minor or not material
Impracticable or inconvenient
for contractor to make good
DEFECTS ARE EITHER:
minor or not material
Impracticable or inconvenient
for contractor to make good
Deduct costs involved from:
a) money due to contractor and/or
b) Performance bond and/or
c) as a liquidated demand
DEFECTS ARE EITHER:
Serious and/or
Material
DEFECTS ARE EITHER:
Serious and/or
Material
Contract administrator to:
Carry out diminution in value; and
Prepare and Issue Certificate of Making Good Defects
FIG. 10-8: ISSUE OF CERTIFICATE OF MAKING GOOD OF DEFECTS PRINCIPAL EFFECTS
ON PARTIES
HSKS
OFFICIALLY ENDS THE
DEFECT LIABILITY PERIOD
(DLP)
ISSUE OF CERTIFICATE
MAKING GOOD OF
DEFECTS: PRINCIPAL
EFFECTS ON PARTIES
EMPLOYER HAS TO
RELEASE SECOND MOIETY
OF RETENTION SUM THAT
IS WITHHELD
CONTRACTORS LIABILITY
FOR LATENT AND PATENT
DEFECTS CONTINUES FOR
THE STATUTORY PERIOD OF
LIMITATION
MARKS THE BEGINING OF
THE CONTRACTUAL PERIOD
FOR PREPARATION OF FINAL
ACCOUNT
PARTIES OUTSTANDING
OBLIGATIONS UNDER THE
CONTRACT ARE NOT
RELIEVED
DISCHARGES
CONTRACTORS RIGHTS
UNDER CONTRACT TO
PHYSICALLY ATTEND TO
DEFECTS
DISCHARGES LIABILITY OF
GUARANTORS, INSURERS,
ETC. UNDER THE
CONTRACT
MARKS THE
COMMENCEMENT OF THE
CONTRACTUAL PERIOD
FOR CONTRACT
ADMINISTRATOR TO ISSUE
FINAL CERTIFICATE
HSKS
POST-COMPLETION
AND
FINAL ACCOUNT
11.0 POST COMPLETION AND FINAL ACCOUNT
LIABILITIES ARISING FROM DEFAULTS/OMISSIONS IN: LIABILITIES ARISING FROM DEFAULTS/OMISSIONS IN: LIABILITIES ARISING FROM DEFAULTS/OMISSIONS IN: LIABILITIES ARISING FROM DEFAULTS/OMISSIONS IN:
* TRAINING
* O & M MANUALS
* AS-BUILT DRAWINGS
FINALISATION OF ACCOUNT ISSUES FINALISATION OF ACCOUNT ISSUES FINALISATION OF ACCOUNT ISSUES FINALISATION OF ACCOUNT ISSUES
FINAL CERTIFICATE ISSUES FINAL CERTIFICATE ISSUES FINAL CERTIFICATE ISSUES FINAL CERTIFICATE ISSUES
POST POST POST POST- -- -FINAL CERTIFICATE PROBLEMS FINAL CERTIFICATE PROBLEMS FINAL CERTIFICATE PROBLEMS FINAL CERTIFICATE PROBLEMS
* FAIRWEATHER LTD. V ASDEN SECURITIES LTD. [1979] 12 BLR 40
* 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
* TOKEN CONSTRUCTION CO. LTD. V CHARLTON ESTATES LTD. [1973] 1 BLR 48
* SHEN YUAN PAI V DATO WEE HOOD TECK & ORS [1976] 1 MLJ 16
HSKS
HSKS
FIG. 11-1 : SERVICING AND MAINTENANCE AN OVERVIEW
SERVICING & MAINTENANCE: AN OVERVIEW
FOR FOR FOR FOR
MONITORING MONITORING MONITORING MONITORING
FOR FOR FOR FOR
MONITORING MONITORING MONITORING MONITORING
PREVALENT PREVALENT PREVALENT PREVALENT
PRACTICE PRACTICE PRACTICE PRACTICE
PREVALENT PREVALENT PREVALENT PREVALENT
PRACTICE PRACTICE PRACTICE PRACTICE
FREQUENCY FREQUENCY FREQUENCY FREQUENCY
FREQUENCY FREQUENCY FREQUENCY FREQUENCY
EXTENT EXTENT EXTENT EXTENT
EXTENT EXTENT EXTENT EXTENT
FAILURE FAILURE FAILURE FAILURE
FAILURE FAILURE FAILURE FAILURE
Must follow express
Contract stipulations
Most Contracts e.g.
M&E have such
provisions in the
specifications.
IMPLIED IMPLIED IMPLIED IMPLIED
IMPLIED IMPLIED IMPLIED IMPLIED
Per stipulations in:
a) Contract and/or
b) O & M Manuals
Implied from:
a) Statutory
requirements
b) Trade usage
c) Local practice
To ensure Contractor
meets contractual
obligations
Not to nullify equipment
warranties.
To minimize defects and
downtime and prolong
lifetime and efficiency.
To carry out and/or
erroneous/negligent
servicing.
P.C. may not be issued
Period may be extended
Use of 3
rd
Parties at
Contractors Cost
Warranties may be
compromised.
Possible action in contract,
tort, statute, etc.
Daily
Weekly
Monthly
Quarterly
Yearly
As stipulated:
a) In Contract
b) In Manufacturers
Warranties/
recommendations
c) In O & M Manuals
Generally, most contracts
require contractor to do
monthly/ quarterly
servicing.
In absence of express
stipulations implied
from:
a) Trade usage
b) Local practice
c) Statute
General implication is
that Employer will
undertake daily and
weekly servicing and
maintenance.
DUTY DUTY DUTY DUTY
DUTY DUTY DUTY DUTY
Proper and effective
record keeping of:
a) Compliances
b) Deviations
c) Unusual
observations
Timely recording and
signing-off.
Monitoring of
Contractors work
Signing-off the
records
Reporting to
Employer of unusual
observations
Undertaking of routine
servicing and
maintenance e.g. daily,
weekly, etc.
Affording Contractor
proper access to work
being serviced.
Attending to unusual
observations reported.
EMPLOYERS EMPLOYERS EMPLOYERS EMPLOYERS
OBLIGATIONS OBLIGATIONS OBLIGATIONS OBLIGATIONS
EMPLOYERS EMPLOYERS EMPLOYERS EMPLOYERS
OBLIGATIONS OBLIGATIONS OBLIGATIONS OBLIGATIONS
ADMINISTRATOR ADMINISTRATOR ADMINISTRATOR ADMINISTRATOR S S S S
ADMINISTRATOR ADMINISTRATOR ADMINISTRATOR ADMINISTRATOR S S S S
HSKS
COMMON LABELS FOR RECORDS/
DRAWINGS OF COMPLETED WORKS
PLANS OF COMPLETED WORKS
PLANS OF COMPLETED WORKS
AS-BUILT DRAWINGS
AS-BUILT DRAWINGS
FIG. 11-2 : COMMON LABELS FOR RECORDS/DRAWINGS OF COMPLETED WORKS
AS-INSTALLED DRAWINGS
AS-INSTALLED DRAWINGS AS-CONSTRUCTED DRAWINGS
AS-CONSTRUCTED DRAWINGS
HSKS
GENERAL
POSITION
AS-BUILT DRAWINGS: AN OVERVIEW
TIMING FOR
SUBMISSION
TYPES/ NATURE UPDATING ACCURACY
Must follow express
Contract stipulations
as to:
a) Type/Nature
b) Contents
c) Quantity
d) Timing for
Submission
Most Contracts have
express provisions
incorporated.
In Contract and
Tort
Primary
responsibility for
errors,
omissions, etc.
PROFESSIONALS
RESPONSBILITY
CONTRACTORS
RESPONSBILITY
Contractors
responsibility at least
during Limitation Period
for:
a) Revisions due to
product
improvement.
b) Errors/ inaccuracies
Professionals to update
on safety issues and
errors detected.
AS-BUILT/
AS-CONSTRUCTED/
AS-INSTALLED DRAWINGS
OPERATION &
MAINTENANCE SCHEMATICS
/DIAGRAMMES
RECORDS OF FINAL
MEASUREMENT
Permanent record of works
Suitably detailed for future
reference.
practice.
To supplement O&M Manuals
practice.
Undertaken by Contract Administrator
jointly with Contractor.
To facilitate preparation of Final
Account.
In Tort, on joint
and several basis
Especially so for
signing-off/
endorsing
Qualified
Person.
Must comply with express
contract stipulations.
Normal practice is:
a) Before CPC
b) After CPC
c) Before CMGD
Usual requirements include
draft copies for approval
prior to finalization.
FIG. 11-3: AS-BUILT DRAWINGS AN OVERVIEW
HSKS
FINAL CERTIFICATE
CERTIFICATION UPON EXPIRY
OF CONTRACT PERIOD:
COMMON LABELS
FINAL PAYMENT
CERTIFICATE
MISCELLANEOUS
LABELS
FINAL ACCOUNT
CERTIFICATE
PERFORMANCE
CERTIFICATE
ULTIMATE CERTIFICATE
FIG. 11-4 : CERTIFICATION UPON EXPIRY OF CONTRACT PERIOD COMMON LABELS
HSKS
ISSUED UPON EXPIRY OF THE
CONTRACT PERIOD
FINALCERTIFICATE:
PRINCIPAL
CHARACTERISTICS
PRIMA FACIE, SIGNIFIES
DISCHARGE OF THE CONTRACT
BY PERFORMANCE
ACTUAL EFFECT DICTATED
BY THE PRECISE TERMS OF
THE APPLICABLE
CONDITIONS OF CONTRACT
ISSUED BY THE CONTRACT
ADMINISTRATOR
RENDERS THE CONTRACT
ADMINISTRATOR FUNCTUS
OFFICO
LAST OF THE VARIOUS
CERTIFICATES ISSUED
DURING CONTRACT PERIOD
FIG. 11-5 : FINAL CERTIFICATE PRINCIPAL CHARACTERISTICS
HSKS
ISSUE OF PERFORMANCE
CERTIFICATE (P.C.)
TYPICAL PRE-CONDITIONS TO
THE ISSUE OF THE
FINAL CERTIFICATE
PREPARATION AND
FINALIZATION OF THE FINAL
ACCOUNT
SATISFACTION OF ALL
OTHER OBLIGATIONS/DUTIES
UNDER CONTRACT
EXPIRY OF DEFECT
NOTIFICATION PERIOD (DNP)
FORMAL APPLICATION FOR
THE FINAL PAYMENT
CERTIFICATE
CERTIFICATION OF
COMPLETION OF SERVICING
AND MAINTENANCE
FIG. 11-6 : TYPICAL PRE-CONDITIONS TO THE ISSUE OF THE FINAL PAYMENT CERTIFICATE
HSKS
EFFECT OF ISSUE OF FINAL PAYMENT CERTIFICATE
PRINCIPAL MATTERS FOR WHICH CERTIFICATE PROVIDES
CONCLUSIVE EVIDENCE
THAT ALL THE CONTRACTORS
FINANCIAL CLAIMS HAVE BEEN
PROPERLY ACCOUNTED FOR
SATISFACTION OF THE COMPLETION
CRITERIA AS SPELT OUT IN THE
CONTRACT AND WHERE IT IS
STIPULATED TO BE TO THE
REASONABLE SATISFACTION OF THE
FIG. 11-7 : EFFECT OF ISSUE OF FINAL PAYMENT CERTIFICATE PRINCIPAL MATTERS FOR
WHICH CERTIFICATE PROVIDES CONCLUSIVE EVIDENCE
THAT ALL EXTENSIONS OF TIME
OFFICIALLY GRANTED ARE CORRECT
THAT EXCEPT FOR ANY COMPUTING
ERRORS, ETC. ALL RELEVANT
ADJUSTMENTS (ADDITIONS/
DEDUCTIONS) HAVE BEEN MADE TO
THE CONTRACT SUM
HSKS
FINAL CERTIFICATE:
TYPICAL CHALLENGES TO
CONCLUSIVENESS/FINALITY
FRAUD/DISHONESTY/FRAUDULENT CONCEALMENT BY CONTRACTOR
CERTIFIER IMPROPERLY PRESSURIZED/INFLUENCED
CERTIFICATE EMBODIES WRONG DECISION ON A POINT OF LAW
THE EFFECT OF THE PRESENCE OF AN ARBITRATION CLAUSE
CERTIFICATE NOT GIVEN ON TIME
MISCELLANEOUS CHALLENGES/GROUNDS FOR CHALLENGING
CERTIFICATE NOT GIVEN IN CORRECT FORM
UNDISCOVERED DEFECTS E.G. LATENT DEFECTS, ETC.
FRAUD/COLLUSION BETWEEN CERTIFIER AND OTHER PARTY
COMPUTATIONAL ERRORS, ACCIDENTAL INCLUSIONS/EXCLUSIONS, ETC.
CERTIFIER ACTING ULTRA VIRES
CERTIFICATE NOT GIVEN BY AUTHORIZED PERSON
FIG. 11-8: FINAL PAYMENT CERTIFICATE TYPICAL CHALLENGES TO CONCLUSIVENESS/
FINALITY
THANK YOU
HSKS

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