Introduction

There are many factors which finally cause to a contractual dispute between two parties. Especially in
construction contract which is a very complex yet not fully understood by one or both parties. One of these
factors is the interpretation of implied terms in construction contract. Before we move further to discuss
the implied duties of the employer under construction contract, it will be much better to know more about
type of terms in a contract.
Figure 1. Type of Contract Terms
Implied Duties of the Employer
Under Construction Contract & Their Limitations
Seng Hansen
Master Student of Construction Contract Management UTM
Email: hansen_zinck@yahoo.co.id
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According to Oxford Dictionary of Law 7
th
Ed. (2009), implied term is a provision of a contract not agreed to
by the parties in words but either regarded by the courts as necessary to give effect to their presumed
intentions or introduced into the contract by statute (as in the case of contracts for the sale of goods).
While express term is defined as a provision of a contract, agreed to by the parties, that is either written or
spoken.
Moreover, if we look at the definition of contract in Contract Act 1950 s. 2(h) which stated An agreement
enforceable by law is a contract and s. 9 which stated So far as the proposal or acceptance of any promise
is made in words, the promise is said to be express. So far as the proposal or acceptance is made otherwise
than in words, the promise is said to be implied, we can conclude that in Malaysia and other
commonwealth countries which follow the Common Law, contract can be made in writing, in verbal ways or
by conduct. Terms which are written or spoken expressly by both parties are considered as express terms,
otherwise are implied terms. Even according to Common Law, a contract can be made orally. However this
is not in the case of construction contract. Though it is already made in writing, there are still implied terms
which need rule of interpretation. If both parties cannot settle their implied terms satisfactorily, this can
end up in a contractual dispute.
Implied terms can be about conditions and warranties. Unfortunately we cannot find the definitions of
these terms in the Contract Act 1950. But we can borrow the definitions of conditions and warranties from
the Sale of Goods Act 1957 s. 12 which reads: A condition is a stipulation essential to the main purpose of
a contract, the breach of which gives rise to a right to treat the contract as repudiated, and a warranty is a
stipulation collateral to the main purpose of the contract, the breach of which gives rise to a claim for
damages but not to a right to reject the goods and treat the contract as repudiated.
Implied terms also can be divided into 2 categories; i.e. implied rights and implied duties. From the above
explanation, we can simply define an implied duty as a duty which is not expressly written or agreed under
contract, but is still necessary for business efficacy. The scope of this essay will only discuss about the
employers implied duties under construction contract.
Implied Duties of the Employer
There are some implied duties that should be done by the employer. These duties are important for the
sake of the success of a project. Therefore it is necessary for both parties to have the knowledge of this kind
of duty. Below are some implied duties of the employer under construction contract.
1. Implied duty to cooperate
In the case of London Borough of Merton v Stanley Hugh Leach (1988) 32 BLR 51 it was held that,
generally, if it is necessary for the employer to cooperate with the contractor, a term will be implied (in the
absence of express terms) requiring the employer to do all that is necessary to allow the contractor to
complete his work. In Hannen & Cubitts v WHTSO, it was conceded that the building owner would do all
things necessary to enable the contractor to carry out the work. Also Lawton LJ in Martin Grant & Co Ltd v
Sir Lindsay Parkinson & Co Ltd (1984) 29 BLR 31 (CA) said: There is by implication of law, an obligation
to co-operate with one another. And Humphrey Lloyd J in Floods of Queensferry said: A term as to co-
operation arises as a matter of law .
2. Implied duty to obtain all necessary permits
As in the Canada case of Ellis-Don Ltd v The Parking Authority of Toronto (1978) 28 BLR 106, it was held
that whether or not the employer has an implied duty to obtain all necessary permits will depend upon the
particular terms of the contract and the circumstances of the contract.
3. Implied duty to appoint competent consultants
In the case of Croudace Ltd v London Borough of Lambeth [1986] 33 BLR 20, it was held that an employer In the case of Croudace Ltd v London Borough of Lambeth [1986] 33 BLR 20, it was held that an employer
is under an obligation to appoint the architect/engineer to carry out the administrative functions under the
contract and to appoint a replacement if the Architect/Engineer is unable to act. Furthermore, in London
Borough of Merton v Stanley Hugh Leach (1988) 32 BLR 51, the employer also impliedly warrant that the
architect/engineer is reasonably competent and will exercise reasonable skill, care and diligence in carrying
out his duties under the contract.
This decision is similar with the case of Hiap Hong & Company Pte Ltd v Hong Huat Development Co (Pte)
Ltd where the court held that it was an employer who entered into a construction contract with a
contractor and therefore he owed an implied contractual obligation to the contractor to ensure the proper
discharge by the architect of his certifying function. The case of Perini Corporation v Commonwealth of
Australia also had held that a term must be implied into a construction contract binding the employer to
ensure that the certifier under the contract. While in Russell v Sa da Banderra [1862] 13 CB (NS) 149, it
was held that the employer is liable for delay caused by his representatives or agents.
In the case of Roberts v Bury Commisioners [1870] LR 5 CP 310 and Neodox v Swinton and Pendlebury
Borough Council [1958] 5 BLR 38, it was held that if instructions, nominations, information, plans or details
are required, then they must be supplied at reasonable times.
4. Implied duty to give possession of site
Especially for construction contract, the employer has an implied duty to give the contractor such
possession, occupation or use of site as is necessary to enable the contractor to perform the contract, as in
the case of The London Borough of Hounslow v Twickenham Gardens Development (1970) 78 BLR 89. It is
similar with the case of Freeman v Hensler (1900) where it was held that it is an employers duty (of co-
operation) to give the contractor possession of the site within reasonable time to enable him to carry out
and complete the work on the completion date. For a new project, the site should be given to the
contractor within a reasonable time and with a sufficient uninterrupted possession to allow the contractor
to perform his obligations, as in the case of Penvidic Contracting Co Ltd v International Nickel Co. of
Canada Ltd [1975]53 DLR 748.
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In Robert v Bury Commissioners (1870) LR 4 CP 755, it was held that outright refusal to give possession of
site is a repudiatory breach. It is similar with the case of Carr v J.A. Berriman (1953) 89 CLR 327. While
delay in giving possession of site is a breach of contract that entitles the contractor claim damages as in the
case of Rapid Building Group v Ealing Family House Association (1984) 29 BLR 5 (CA).
In Milburn Services Limited v United Trading Group (UK) Limited (1995) 52 Con.L.R. 130, it was held that if
a contract contains an "entire agreement" clause, this will not prevent the implication of a right to
possession without clear words. While in The Queen in Rights of Canada v Walter Cabbott Construction
Ltd (1975) 21BLR26, it was held that the employer is required to give possession of sufficient portions of
the site of the work. The degree of possession or access that the employer provides varies with the
circumstances. Generally for construction project, it will be more than the actual site on which the structure
stands.
Moreover, in Canterbury Pipe Lines v Christchurch Drainage (1979) 16 BLR 76, it was held that the
employer is under an implied negative duty not to revoke the contractors license to occupy the site
otherwise than in accordance with the contract. The possession of site gives the contractor an irrevocable
license to occupy the site until completion as in the case Hounslow LBC v Tickenham Garden Development.
5. Implied duty to issue late certificates
In Cantrell and Another v Wright & Fuller Ltd, the issue was whether any certificate might still be issued
even if the time for issuing it had already passed. The Court held that by necessary implication, the contract
provided that any certificate might still be issued even if the time for issuing it had already passed.
6. Implied duty of non-hindrance
In the case of London Borough of Merton v Stanley Hugh Leach Limited (1985) 32BLR51, it was held that a
term will usually be implied in a construction contract (in the absence of express terms) that the employer
will not hinder or prevent a contractor from performing his obligation under the contract or delay him in will not hinder or prevent a contractor from performing his obligation under the contract or delay him in
performing it.
In Glenlion Construction v The Guiness Trust [1987] 39 BLR 89, it was held that the employer/his
representatives instruction should be given at such times and in such manner as not to hinder or prevent
the contractor from performing his obligations under the contract.
7. Implied duty of reasonable determination
In Renard Construction (ME) v Minister for Public Works, there was a case where the employer terminate
the contract after concluding that the contractor was late and the contractor guilty of unsatisfactory work.
This is similar with the case of Hughes Bros v Trustees of the Roman Catholic Church where the contractor
was in financial difficulties. In both cases the Court emphasised the implied duty on the employer to act
reasonably and honestly in forming the opinion that the contractor had failed to show cause why the
contract should not be cancelled.
How about in PAM, CIDB and PWD?
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Implied Duties PAM CIDB PWD
Co-operate

Obtain all necessary permits

Appoint competent consultants

Give possession of site

c. 6.1.a c. 38.2
Issue late certificates c. 26.1.b c. 6.1.e

Non-hindrance

c. 6.1.d

Reasonable determination c. 25.1 & 3 c. 44.1 & 2 c. 51
Note
mark means that there is no such express provision regarding to the employer duties, and therefore it
indicates the employers implied duties.
PAM 2006
Clause 25 (sub clause 1 and 3) describes the right of the employer to determine the employment of the
contractor in such events of contractors defaults.
Clause 26.1.b clearly states that if the employer interferes with or obstructs the issue of any certificate by
the architect, it will entitle the contractor to determine his own employment due to the employer defaults.
CIDB 2000
Clause 6.1.a expressly states that the employer shall give the contractor right of access to and possession of
the site in accordance with clause 17.2.
Clause 6.1.d expressly states that the employer shall not obstruct or interfere with the performance of the
contract but the contractor, except where expressly provided in the contract.
Clause 6.1.e expressly states that the employer shall not interfere with or influence or obstruct the issue of
any certificate by the Superintending Officer under the contract.
Clause 44 (sub clause 1 and 2) expressly states the events of default by the contractor which entitles the
employer the right to determine the employment of the contractor under the contract.
PWD 203 (Rev. 2007)
Clause 38.2 clearly describes the contractor shall be given the possession of site on or before the date for
possession stated in the Letter of Acceptance.
Clause 51 (sub clause 1 and 2) clearly describes the events of default by the contractor which leads to the
right of the government (employer) to reasonably terminate the contract.
The Limitations
From the above employers implied duties, there are some limitations which need to be considered. First, in
order to comprehend our understanding on implied terms, we must come back to see the decision in BP
Refinery (Westernport) Pty Ltd v Hastings Shire Council which stated that for a term to be implied, there
are some condition which must be satisfied:
- It must be reasonable and equitable
- It must be necessary to give business efficacy to the contract so that no term will be implied if the contract
is effective without it
- It must be so obvious that it goes without saying
- It must be capable of clear expression
- It must not contradict any express term of the contract
The limitation to the above employers implied duties are as follows.
1. In Appleby v Myers [1867] LR 23 CP651, it was held that the employer does not impliedly warrant the
fitness of the site.
2. In Porter v Tottenham Urban District Council [1915] 1 KB 776(CA) and LRE Engineering v Otto Simon
Carves [1981] 24 BLR 127, it was held that the employer does not impliedly warrant that there will be no
wrongful interference by third parties.
3. In Leslie & Co Ltd v The Mangers of the Metropolitan Asylums District [1901] 68 JP 86 (CA), it was held
that the employer (in the absence of fraud or collusion) is not responsible for delay caused by nominated
subcontractor.
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4. In Mona Oil Equipment Co v Rhodesia Railways, Devlin J said: I can think of no term that can properly
be implied other than one based on the necessity for co-operation. It is no doubt, true that every business
contract depends for its smooth working on co-operation, but in the ordinary business contract, and apart,
of course, from express terms, the law can enforce co-operation only in a limited degree to the extent that
it is necessary to make the contract workable. For any higher degree of co-operation the parties must rely
on the desire that both of them usually have that the business should get done. It means the employers
implied duty to co-operate is still leaving a question mark over the extent of the co-operation itself. This is
similar with the case of Bernhards Rugby Landscapes Ltd v Stockley Park Consortium Ltd (No 2) where
Llyod J noted: The degree of co-operation that is required depends in each case on the obligation
undertaken and not on what is reasonable.
5. Although the employer has an implied duty to appoint nominated subcontractor or supplier (if necessary
under contract), there is no such liability of the employer for the performance of the nominated
subcontractor or supplier. As in the case of Young & Marten Ltd v McManus Childs Ltd [1969] 1 AC 454
(HL), the employer had nominated the supplier of certain materials. In accepting that, the contractor ought
to be strictly liable for deficiencies in quality of those materials, and not the employer.
Conclusion
From the above description, we can define an implied duty as a duty which is not expressly written or
agreed under contract, but is still necessary for business efficacy. Regarding to the above cases, there are at
least 7 implied duties of the employer under construction contract. By knowing these employers implied
duties, it will help both employer and contractor to get a better understanding of their distribution of rights
and duties.
Despite the above employers implied duties, there are also some limitations for the practice of these
duties. It is mainly because the implied duties are also depended on other relevant circumstances. In this
paper, I found 5 limitations of the employers implied duties practice. paper, I found 5 limitations of the employers implied duties practice.
And lastly, I would like to end this paper with a quote taken from Barque Quilpue Ltd v Brown, where the
Court said: There is an implied contract by each party that he will not do anything to prevent the other
party from performing a contract or to delay him in performing it. I agree that generally such a term is by
law imported into every contract.
References
Statutes referred to:
Contracts Act 1950. s. 2 and 9.
Sale of Goods Act 1957. s. 12.
Books referred to:
Simanjuntak, R., 2011. Hukum Kontrak. Teknik Perancangan Kontrak Bisnis. Jakarta: Kontan Publishing.
Ying, L. Cen, 2007. Principles of Implied Terms in Construction Contracts. M.Sc. Universiti Teknologi Malaysia.
Articles/Presentations referred to:
Steensma, A., 2009. Implied Obligations of Non-hindrance and Co-operation in Construction Contracts.
Yaakob, J., 2012. Implied Duties of Employers and Contractors MBG 1244. Johor Bahru: Universiti Teknologi
Malaysia.
Yaakob, J., 2012. Possession of Site MBG 1244. Johor Bahru: Universiti Teknologi Malaysia.
Websites referred to:
http://www.atkinson-law.com/library/article.php?id=147
Books referred to as bibliography:
Murdoch, J. and Hughes, W., 2008. Construction Contracts Law and Management, 4
th
Ed. New York: Taylor
& Francis. (p. 171-174).
Beatson, J., 2002. Ansons Law of Contract, 28
th
Ed. Oxford: Oxford University Press. (p. 145-151).
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