LAW & CONTRACT

Law to ordinary layman is defined as being a general rule of

conduct.
A law expert, Sir John Salmond defines Law as the body of
principles recognized and applied by the State in the
administration of justice
In other words, law consists of the rules recognized and acted
on by courts of justice. In short, law may be defined as a body
of rules which are enforced by the State.
Classification of Law: see other Notes
Meaning of the Legal System
Basically it refers to the system of courts, .i.e. its
buildings, judges, lawyers, administration staff, the police
force and prisons for enforcing sanctions of the courts.
It includes the procedural processes whereby the courts
conduct their business, i.e. the procedure whereby civil
actions or criminal prosecutions are initiated, the actual
hearing or trial (involving the law on evidence) including
the various steps like pleadings, replies, discovery, etc.
and the actual procedure in court.

Contract
In general an agreement between two (2) persons or parties is
considered as a contract.
According to the Contract Act 1950 (Rev 1976), Section 2 (h),
An agreement which can be enforced by the law is a contract.
This means that a contract exists when the parties concerned
have reached an agreement or when they are assumed to have
reached an agreement and the law recognizes the rights and
responsibilities which arise from that agreement.
CRITERIA FOR A LEGALLY VALID CONTRACT
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Offer (tawaran)
Acceptance (penerimaan)
Consideration (balasan)
Intention (niat/hasrat)
Capacity to contract (keupayaan berkontrak)
Genuine consent (wujudnya kerelaan bebas)
Legality (sah di sisi undang-undang)
Certainty (ketentuan atau kepastian)

Brief description
Offer

An offer is a proposal by one party of its willingness to be

legally bound by the proposal as soon as it is accepted by
another party
An offer may be made in writing, in words or by conduct
Acceptance

An acceptance is a full acceptance by a party to whom an

offer has been made.
The acceptance must be in writing, in words or by
conduct.
Consideration

A consideration is something of legal value given, done or

forborne by one party in return for an action or inaction on
the part of another party.
Intention

It is necessary that the parties can be deemed to have

intended to create legal relationship.
This intention makes the agreement they have reached to
be one which would be legally enforceable.
Capacity to contract

 Capacity refers to the legal status of the parties to make a

legally binding contract.
Generally all persons have full and unqualified status to
be bound and to bind others by an agreement.
Exceptions are those who are under age, and those who
are mentally not sound.
Genuine consent

It is essential that the agreement is made with proper and

genuine consent by the parties to it.
Legality

The agreement must not involve an illegal purpose or

activity, e.g. an agreement to rob a bank, to defraud the
Inland Revenue or Income Tax Dept is not legally
enforceable.
Situations whereby an Offer of a Contract becomes
terminated or no more valid:

The offer is rejected by the party to whom it is made

The offer is revoked by the offeror before acceptance
Either party dies before acceptance
A stipulated time limit expires before acceptance.

Contract Documents

Are the documents which are compiled or brought

together to form the evidence of a contract, legally agreed
by the parties and therefore signed and stamped as such.
Main Functions of the Contract Documents:

They show the Client the extent of the construction

project and give an indication of the financial and legal
obligations before contract.
They delineate the works in terms of drawings which show
the extent and positions.
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 They reflect the intention of the parties and places rights

and obligations on them.
It is a record of the scope of the works in terms of price,
quality, time, risks and determination of disputes.
It provides a fair, equitable legal framework which ensures
that work is carried out in a proper manner and that
Contractors receive payment for work satisfactorily
completed.
It creates a situation which enables Contractors to bid for
jobs on the same information and terms without
ambiguity.
It can be submitted as evidence to establish a point in
dispute (i.e. failure to comply with rights and duties set
out in the Contract Documents)
It can be produced in order to prove the existence of a
collateral agreement or warranty between parties or
among project participants.
TYPICAL CONTENTS OF CONTRACT DOCUMENTS
Depending on the type of contract, in general the
followings are typical examples of Contract Documents:

Instructions to tenderers
Drawings
Specifications
Form of Tender
Conditions of Contract
Bill of Quantities
Articles of Agreement
Schedules
Appendix/appendices
Etc.

Important Terms related to Contract

Instructions to tenderers

 These refer to the information telling the Contractors how

to prepare the tender, when and where to send it in;
requiring them to fill in the various schedules, informing
them of sources of major materials, guarantees and bonds
needed, tax and import requirements (if any), etc.

Form of tender
This is the signed financial offer of the Contractor to carry
out the works in accordance with the contract drawings,
specifications, bill of quantities and the general conditions
of contract.
Specification
This describes in words the works to be built, the quality
of materials and workmanship to be used, methods of
testing, etc
General conditions of contract

These define the liabilities, responsibilities and the powers

of the Employer/ Client, the Engineer (S.O.), the
Contractor and covers such matters as methods of
payment, insurances, liabilities of parties to the contract,
etc.
Bill of Quantities
This sets out the expected measure or quantities of each
operation or activity of construction as calculated from the
drawings, classified according to trade or location within
the proposed works.
Drawings

Performance Bond

 This serves as a guarantee that the Contractor shall

perform his contractual obligations according to the terms
of the contract until completion of the whole contract.
In the JKR practice of the Malaysian government, the
performance bond is equal to 5% of the contract sum. This
amount need to be deposited with the government and
normally in the form of an approved bankers or Insurance
Guarantee or finance company guarantee.
The performance bond shall be released (upon certain
conditions) to the Contractor after the expiry date of the
defects liability period.
Prime cost sum (P.C.sum)

Is a sum for works or services to be executed by a

nominated subcontractor or materials or goods to be
obtained from a nominated supplier.
It covers certain percentage to include Contractors
overhead, profit and attendance.
Provisional sum (P.S.)

In the Bill of Quantities shall mean a sum for work or for

the supply of goods or materials which cannot be entirely
foreseen, defined or detailed at the time the tender
documents are issued and in such amounts in favour of
such persons as the S.O. may direct.
(Note: a PS can be a P.C. sum but a P.C sum CANNOT be a
P.S)
Tender Table Documents (TTDs)
These refer to the documents which are compiled
together, containing instructions to tenderers, conditions
of contract, drawings, specifications (depending on the
type of contract) and other related information which are
being displayed on the Tender Table. These displayed
documents are for the tentative tenderers to examine and

place their rates according to the respective proposed

project or contract.
Works Variation

Means a change in the Contract Documents which makes

necessary the alteration or modification of the design,
quality or quantity of the Works as described by or
referred to in the Contract Documents including:
The addition, omission or substitution of any work
The alteration of the kind or standard of any of the
materials, goods to be used in the works
The removal from the site of any work done or
materials or goods brought by the Contractor for the
purpose of the Works other than the work, materials
or goods which are not in accordance with the
Contract.
Overheads

These relate to off-site costs which need to be

recovered in order to maintain the head office and
local office facilities. Items to be covered include:
Salaries and costs to employ Directors and staff
Rental fees, maintenance of offices, stores, yards
Insurances
Fuel and power charges
Vehicles/transport for office staff, etc.
Project

A project is an investment of resources to produce

goods or services.
Projects vary in scale and complexity, from a small
investment to products and to large capital
investment.
To get value from the investment, a project usually
has a defined date for completion.
Project programme
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 Refers to a list of activities for a project showing the

dates for starting and finishing them. It is also called a
schedule.
Project life cycle

Every project undergoes through a cycle of activities,

starting from the initial study of ideas about what may
be needed and jow it might be achieved, and ending
with a much more intense concentration of resources to
complete it.
OR
Refers to the various stages that a project has to go
through, starting from the conception/initial stage,
planning stage, design stage, tendering stage,
construction stage, completion stage, handing over and
maintenance period. Thus the phases in a project life
cycle especially for construction work are:
Conception/initial proposal
Planning
Design
Tendering/contract
Construction
Completion
Testing and commissioning
Handing over
Maintenance period or DLP
Method Statements

Refer to written descriptions of how items of work will be

carried out.
They usually deal with the use of labour and plants in
terms of types, gang size and expected outputs.
Estimating

Is a system of building up or compiling notes to facilitate

competitive tendering and is the technical process of
predicted costs of construction.
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Quantity survey or Take off

Is a study of the amount or quantity of materials required

for the construction of a project. When doing the quantity
survey the Estimator should think in terms of actual field
procedures.
Procedural Guidelines to produce a Good Estimate

Study the legal documents and specifications.

Study the plans/drawings thoroughly before starting the
quantity survey.
Mark the plans, sections and details that pertain to the
Estimate.
Do the QS making sure to mark ALL areas covered.
Always double-check the survey. This is especially
important if there is interference during the survey.
Obtain the material costs and extend these costs.
Add taxes where applicable.
Determine labour costs through the productivity process
of from historical data.
Determine equipment and plant requirements and their
costs.
Add overheads and profits.
Double-check ALL mathematics/calculations and prepare
to tender the bid.
Include bonding costs, if any.
Possible Errors in Estimating:

Errors in arithmetic/ calculation, especially location of

decimal point.
Omitting profit
Estimating wages
Estimating waste of materials
Neglecting transportation costs, storage costs, etc.
No allowance for breakdown of equipment, weather
conditions, etc.
Estimating quantities.
Errors in copying items.
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 Omitting items of labour, plant and materials

Estimating time of workmen/workers.
Changing prices of labour and materials.

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