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The Malaysian Standard Form qf Building Contract
(PAM/ISM 69)
 To my good 11'1'eiid
PI'dyessoi. Hj' itohd Toh!7. bi}I H/' Abd Mq 'Id,
ISM, DSN, KMN, PPT, AMP, PPISM, FCIOB, FRCS, ,
101' "ian}, ki}xi acii'ons

.
 ". ,

I ,

The Malaysian Standard

Form of Building Contract
(PAM/ISM 69)
Professor Vincent POWell-Smith
LLB (Hons), LLM, D Litt, FCIArb, MBAE
Visit^^g Professor of Construction Law,
Faculty of Built Envii'onineni, Univei'sill Teknolog!' Malays!'a,
Joint Editor of Cons!7'14ction Law Reports

Kuala Lumpur . Singapore

Malayan Law Journal F1e Ltd
Malayan Law Journal Son Bhd
1990
029727!^
^?'i2 . ^ THE BUTTER\VORTH GROUP OF COMP I
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OF AMERICA BUTTER\I, ;ORTH LEGAL PUBLISHERS
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Sealile. \\'asliingion

@
Vincent POWell-SiniilT
1990

All Tights reserved. No part of this ubr '

permission of theapplication
opyrighi holder, copyright for
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IsBN 0-409-99592-4

ypeset in Singapose by Superskill Gra hics Pi L d

tinted in Singapore by Utopia Press
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~.,-
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71 .
Preface

The PAM/ISM Standard Fomi of Building Contract 1969 is widely used

for private sector construction work throughout Malaysia. Despite its
popularity and widespread use, it is often misunderstood and many
people involved in the construction industry have spoken of the need
for a guide to its complex provisions.
This is what I have attempted to provide in this short book. Its purpose
is to assist users of the standard fomn and their advisers more readily to
appreciate the meaning of the Malaysian Standard Form of Building
Contract.
What I have written is also relevant to the fomier Singapore Institute
of Architects' standard fomi in its 1970 revision ("SIA 70"). Since 1982,
of course, Singapore has an entirely new foam of building contract which
has no parallel anywhere else in the common law world and this
commentary has no relevance to that fomi. However, problems are likely
to continue to arise under SIA 70 for some time to come.
I hope that Malaysian architects, quantity surveyors and contractors
will find this commentary of interest and of some assistance to them in
their day-to-day activities. it may also be useful to members of my own
profession, although I emphasize that it is not intended to be a legal
treatise. But construction law is a specialist branch of legal studies and
I trust that those of my professional colleagues who are newcomers to
the discipline will find what I have to say of some interest. Construc-
tion law is a unique combination of law and the practice of the industry
and is an area in which there is a large and growing body of case law
in the common law juTisdictions.
As an aid to understanding, a number of flow charts have been
included. They are based on those originally conceived by my friend
Dr David Chappell, PhD, RIBA, to aid understanding of other contract
fomns and which, judging from the kind continents of users of books
which we have written together, have been found of value.
My aim in this book is to explain what the contract means and how
it is intended to work in practice. in many respects it is as much pro'-
CGdural as legal and it is essential that those responsible for administer-
Ina the contract are familiar with the mechanisms which it provides and
ittiliate the procedural steps prescribed. I must emphasize, however, that
it is the wording of the contract itself which matters and not the views

V
 vi Pity'uce

o commentators. Those involved at Ih h

e amiliar with the actual wording of the . . e
guide or gloss can be any substitute fo h - - o
n the text, I have sometimes taken a I ,' ,
contract provisions where, in truth, there 'ah
amongst lawyers. Where I express an o ' ' '
meaning of a particular clause, it has no leg I e
ion. The courts and not IGOal authors are th Pin-
Contract means. ip erS o what the
Although the text of the clauses is re d ,
easier to follow the text if the}, have b h
1976 I 10n with quantities version, as reprinted in
i ferences between the Bill fomi and that b d G
minimal. The standard fomi is published ' ' I b are
copies can be obtained from the res ectiv ff n
lions, under whose sanction it is issued g 'za-
e law is stated as at I April 1990, and I ' '
errors, whether of commission or ,, is, 10 ' or

Vincent Po^, ell-Smith

June 1990

.
Table of Contents

Page
V
Prey'ace
IX
Flowc/iai. Is
X
Table of Cases

ntro u c tio n . . . . . . . . . . . . . . . . . . - - - - - - - - - - . . . . . .

The article s of aore eme nt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - - - - - - - - - - - - - -

Attestation ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' '

The conditions
Clause I Contractor s o blig atton s . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Clause 2 Archite c I S In sIruclion s . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cl au s e 3 C o ntr ac t doc urn en ts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Clause 4 Statutory obligations, notices, fees and charges ........................
Clause 5 Levels and s etting-out of the works . ..... .. ... .. ... .. ... ... .. ..... . .. .. .. .. ...
Clause 6 Materials, goods and workmanship to confomi
to description, testing and inspection ......................................
Clause 7 Royalties and p atent rights .... .. .................. ..... .. .... ..... .. .. . -. - -. .. . - - - - -
Clause 8 Foreman-In- c ar e . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Clause 9 AC CGs s for architect to the works . .. . ...... .. ... ...... ..... .. .... ... . ... . .... . ..
Clause 10 Clerk of w orks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - - - - - - - - - - - - -
Clause I I Variations, provisional and prime cost sums .............................
Clause 12 ontract I s -------. ........"""""' '

Clause 13 o n tract s uin - - - . . . - - - - ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' '

Clause 14 UnfixG d materials or o00 ds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - - - - - - - - - - - - - - - - - - - - .

Clause 15 Practical completion and defects liability ........,.......................... 53
Clause 16 Sectional completion ....................................................................
Clause 17 Assignment or sub-letting . .. ... .... .. ........ ...... .. ... ... .. ..... .. ... ....... .......
Clause 18 Injury to persons and property and employer s indemnity .......
Clause 19 insurance agaliist injury to persons and property ......................
Clause 20 Insurance of the works against fire, etc .....................................
Clause 201Al : New building - contractor to insure ................ 73
Clause 20[B] : New building - employer to insure. ................. 75
Clause 20tCl : Existing structures - employer s risk ............... 76
Clause 21 Possession, completion and postponement .................................
Clause 22 D am aoes for non-completion ...............,..................... .. . - - - - - -... - - - - - -

Vll
 vilI Table of Collieii!r

'aoe

Clause 23
Clause 24
Exten SIon of time .. . .. . ... .... ... .. . . . .. . .. . .. . . 87
Loss and expense caused by disturbance of reoular
Clause 25
progres s of the works . . ... . . . .... . . . . . . . . . . . . . . . . . . . . . .. . 99
Clause 26
Determination by, employer ................ ............ I 07
Clause 27
Deierrnination by contractor .............................. I 15
Clause 28
Nominated sub-contractors .............................. 122
Clause 29
Nominated s up pliers ............................... 136
Clause 30
Artists and tradesmen ................................ 139
Clause 31
Certificates and paymenIs .................................... 141
OUIbreak of hostilities .................................
...........------- 154
Clause 32 War damaoe. ............... ... ... .. ...
e -------------------------------------........... .......... .. . . . .. I 5 6
Clause 33
Clause 34
Antiq uities . . .. . ... . . .. . .. . .. . . ... . ... . ... . . .. . .. .. .. 158
Arbitration . . . .. .... . .... . . . . .. .... . .. . ... . ... ....... . . . . . ... 159

index ...................

.
Flowcharts

Page
Flowchart I Architect's instructions
( clau se 2 ) .................................................................. _
Flowchart 2 Extension of time : Contractor's duties
(cl anse 23 ) ................................................................ 9 7
Flowchart 3 Extension of time : Architect's duties
(clause 2 3 ) .................-------....."""""""""""""""""'
Flowchart 4 Loss and/or expense : Contractor's duties
(clause 24) .............................................................. I 05
Flowchart 5 Loss and/or expense : Architect's duties
(clause 24) .............................................................. I 06
Flowchart 6 Delenmination by employer ..... ........ ..................... .. . .. I 14
Flowchart 7 Detennination by contractor ..... .. ...... .. ................. ..... . 121

IX
 Table of Cases

Page Page
AMF (international) Ltd v Magnet Convent I{OSpiial Ltd v Eberlin &
Bowling Lid 119681 2 All Pinrs
ER 798 . 65 (1988) 14 ConLR I 8
A1gre}, Contractors Ltd v Tenth CToudace Ltd v London Borough of
Moat Housing SOCiei\, Ltd Lambeth
(1972) I BLR 45 ............:.......... 84 (1986) 6 CollLR 70 5.9.102
Amalgamaied Building Contractors Cutter v POWe11 (1795) 6 TR
Ltd v Wallham Holy Cross Urban 320 ..--."' "' ..................... 2
District Council
D & F Estates Lid v Church
119521 2 All ER 452. ................ 91 Commissioners for En, ,land
Appleby v Myers (1866) 2 (1988) 15 ConLR 35 ....:............. 127
LR CP 651 ,....
3.73
..............
Davies v Collins 119451 I All
Argyropoulas & Pappa v Chain ER 247 .. 62
Coinpania Naviera SA (1990) Dawber Williamson Roofing Lid v
7 - C L D - 05 - 0 I . . . . . . . . . . . . . . . . - - - - - - - - - - 10 Humberside Count>. Couiicil
Ban Hong 100 Mines Lid v Cheii & (1979) 14 BLR 70 .................... 52 112
Yap Ltd 119691 2 A1LJ 83 117
I Depariineiit of the En\ ironnieni for
Bolton v Mahadeva 11972: I Northern Ireland \. Farrans
..................... .. 2 (Construction! Ltd
BOSkalis We SIminsier Construction (1981) 19 BLR I . 85
Lid v Liverpool City, Council Dodd v Churlon 11897j I QB
(1983) 24 BLR 83 ...... 93 562 .. 88
Brainall & Ogden Ltd v She theId Englesham v A1cMaster
City Council [1920] AllER Rep 174. ....... 10
(1983) I ConLR 30 ................... 58, 85 English Industrial Estates Corporalion
British V, 'agon Co v Lea v George Wimpey & Co Lid
(1880) 5 QBD 149 .... ............. 62 119731 I Lloyd's Rep 118 .....
Building & Estates Ltd v AM ETiksson v Whalley 1197/1
NSWLR 397 . 110
Connor 119581 MLJ 174. ............ 2.9
Carr v IA BeTriman Ply Ltd EUsof A1i v Nyonya 'Lee Gaik
Hook
(1953) 27 ALJR 273 ..... 41
Central Provident Fund Board v Ho [1953] MLJ 98 ...................... 61
Bock Kee FG Minter Ltd v Weish Health
(l 981) 17 BLR 21 .................. 110. 161 Technical Services Organisation
Central Provident Fund Board v Ho (1980) 13 BLR I ..................... 46,100
Bock Kee Fairclough Buildino Ltd v Rhuddlan
(1981) 2 MLJ 162. ........ Borough Council
77
(1985) 3 ConLR 38 131
Cheng Keng Hong v Govt of the
............

Feinbrook Trading Co Ltd v Tagoarj

Federation of Malaya [1979] I NZLR 556 ............:... . 91
119661 2 MLJ 33 ........ 4.11
Forman & Co Proprietary Ltd v The
.............

Chew Sin Leng Consiruciion Co Lid Ship "Liddesdale"

v Cosy Housing Development 119001 AC 190 2
Pie Ltd .............

[1988] I MLJ 131 Gallagher v Hirsch (1889) NY 45

.................. 151
App Div 467 . 41
Chung Syn Kheng Electrical Co Bhd
George E Taylor & Co Ltd v G
v Regional Construction Sdn Bhd Percy Trentham Ltd
119871 2 MLJ 763 .................... . 83 (1986) 16 BLR 15. .... 128
X .
 ,

I'
.t.
J.

it
, .t
,. 11
I '

Table of Cases xi
I
Page Page , .

Gilbert-Ash (Northern) Ltd v IM Hill & Sons Ltd v London ,.,

!
Modem Engineering (Bitstol) Ltd Borough of Camden ... "
..

119731 3 All ER 195 131 (1980) 18 BLR 31 110

,;

I;
Glenlion Construction Ltd v The James Archdale & Co Ltd v A,
Gumness Trust Coinservices Ltd ,;
(1987) 11 ConLR 126 81,103 119541 I WLR 459 .......... 65 IJ *
,

Gold v Patinan & Fotheringham Ltd John Jarvis Ltd v Rockdale Housing ,.
,,

119581 2 All ER 497

.
... 48.68 Association Ltd
Goodwin & Sons v Fawcett .
\..,,
(1986) 10 ConLR 51 .................. 110
(1965) 195 E & G 27 110
John Laing Construction Ltd v I '.
J,

Greater London Council v Ryarsh County and Disirtct Properties Ltd

. ..
.,

Brick Co Ltd
(1982) 23 BLR 10 ................... . 43 ..

(1985) 4 ConLR 85 ................... 127

Greater Nottingham Co-operative
Society Ltd v Cement ation Piling
& Foundations Ltd
(1988) 17 ConLR 43 ..
Gunung Bayu Sdn Bhd v Syarikat
Pembinaan Penis Sdn Bhd
[1987] 2 MLJ 332
H Dakin & Co Ltd v Lee
Junior Books Ltd v Veitchi Co Ltd
[1983] I AC 520. ........................ 127
Kensington & Chelsea &
127,128 Westminster Area Health Authority
v Wettem Composites Ltd
(1984) I ConLR 114 36
9 Kepong Prospecting Ltd v Schmidt
[1968] I MU 170, PC ................ 126
. .

1/9/61 I KB 566 ......................... 2 Kiely & Sons Ltd v Medcraft

H Fairweather & Co Ltd v London (1965) 109 SI 829 2
Borough of Wandsworth Kilby & Gayford Ltd v Senncourt . 11
'*

(1988) 39 BLR 106 .................... 89 Ltd (1976) 3 BLR 104 ................ 145
H Fairweather Ltd v Asden Kunchi Raman v Goh BTOS Sdn Bhd
Securties Ltd t1978/1MLJ89. .. 2
(1979) 12 BLR 40 84 Lebeaupin v Crispi
HW Nevill (Sunblest) Ltd v Win [ 1920] 2 KB 714 ........................ 92
Press & Son Ltd
Lee Kam Chun v Syarikat Kukuh
(1981) 20 BLR 78 ............... 54
Maiu Sdn Bhd
Han Hasnan v Tan an Klan 119631 [1988] I CU 52 ...................... 148,149
MU I 75 ..... ................................ 12
Leon Engineering & Construction
Haulck v Nelson Canton Co Ltd v Ka Duk Investment
Construction Co Ltd
[1964] NZLR 72 ......................... 119 [1989] TCLR 465 9
Henry Boot Construction Ltd v
Central Lancashire New Town
Letchumi Am mai v Nam Fong
Housing Sdn Bhd
Development Corporation 119821 2 MU 19 61
(1980) 15 BLR I ...................... 95,139
Hickman & Co v Roberts Litn Hong Shin v Leong Fong Yew
(1918) 2 FMSLR 187 50
1/9/31 AC 229 ....... 10
Higgins v Northampton Corporation Ling Heng Toh Co v Borneo
[1927] I Ch 128 49 Development Corporation Sdn
Hoenig v Isaacs [1952] 2 All Bhd [1973] I MU 23 .............. 118,144
ER 176 2 London .Borough of Camden v
Houand Harmen & Cubitt 040rthem) Thomas MCInemey & Sons Ltd
Ltd v WeIsh Health Techitical (1986) 9 ConLR 99 144
Services Organization London Borough of Hillingdon v
(1981) 18 BER 80 ...................... 2,31 Cutlet
Holme v Guppy (1838) 2 M [1967] 2 AllER 361, CA 20
& W 387 80 London Borough of Hounslow v
Hong Kong Fir Shipping Co Ltd v Twickenham Garden
Kawasaki Kisen Kaisha Ltd Developments Ltd
[1962] 2 QB 26. ............ ............. 4 [1970] 3 An ER 326 ................ 80,112
XII Tubl, ' of' C, JICA

Page Page
London BOTougli of Merio!I \. P & M Ka\e Ltd \' Hosicr &
Sinnlc\' Hugli Lcach Ltd Dickinsoii Ltd
(1985) 32 BLR 51 119721 I AllER 121 15.54.152
4.17.89.94.100.103 Pacific Associaies 111c v BaAler
U
Lubenhtiin F1deliiies & In\. esiiiteni (1989) 16 Con LR 9(I ,

Co Ltd \' Soulli Feinbrokersliire Peak Consiruciion (Livcrpooli Ltd v

District Council MCKinne}' Foundations Lid
(1986) 6 CollLR 85 144 82 88
(1970) I BLR 11
Luxor (Eastbouriie) Ltd \. Coopcr Perc}, Billon Ltd \' Greater Lolldon
1194/1 AC 10s 4
Council
M Hamson & Co (Leeds) Ltd \' (1982) 20 BLR I 130. 133
Leeds Cii\ Council
81
Penni Corporation \' CommonwealilT
(1980)14BLR 118 of Australia
MJ Gleeson (Contraciors) Lid \. 119691 2 NSWLR 530 .......... :I
Hillingdon London Borough Queen in Right of Canada. Tile v
Council
Waller Caboit Construciion Lid
(1970) 215 EC 165 48.58
(1975) 69 DLR (3d) 542. ...... 80
Mackay *, Dick 118801 RB Burden Lid v Swansea
AC 251 3
Maniam \ The Slate of Perak Corporation
83 119571 3 AllER 243. 43,101,118
119571 MLJ 75
Maxwell \ Lo\\. Boon Tit RH Green & Sille), \Aleir Lid v
British Railwavs Board
(1907) I FMSLR 3 50
(1981) 17 BLR 94. ... 65
Ma\fluid }101dings Lid v Moana
Reef Ltd Rapid Building Group Ltd. Thc v
(1973) I :\:ZLR 3()9 ...... 112 Ealing Faniil\' Housiiig
Associaiioii Lid
Miller v London County Council
(1984) I ConLR I. 78
(1934) 151 LT425 91
Ming & Co \. Leong Ping Ching R;I>. ack Construction Lid v Lampeicr
Meal Co Lid
119641 MLJ 312. . ^.

Milchell v Guildford Union (1979) 12 BLR 30. ...... 148

Guardians Rees & Kirby Lid v S\^arisea City
(1903) I LGR 857 126 Council
Motifam Consultants Ltd v Bernard 119851 5 ConLR 34 .................. 46,102
Sunley & Sons Ltd Reynolds v Ashby
119751 LIR 197 131 I19041 AC 406 51
Munro v Bull (1858) 8 E & Saphiaioon v Lim Sie\v Hui
B 739 2.3 119631 MLJ 305 2 9, 109
Mviia Construction Co Lid v Scornsh Special Housing Association
Tanzania Harbours Authority v Wimpey Construction (UK) Lid
(1990) 46 BLR 19 ............ 108 (1986) 9 ConLR 19. ........... 76
Neodox Ltd v Borough of Swinton Shanklin Pier Ltd v Delel Products
& Pendlebun' Ltd [1951] 2 KB 855 127

(1958) 5 BLR 34. ........... ,5 Shen Yuan Pai v Daio Wee

Ng BTOS Construction v Kaolin
(Malaysia) Sdn Bhd
119851 I MLJ 245
North-west Metropolitan Regional
Hospital Board v TA Bicker10n
& Son Ltd
119701 I All ER 1039 .. 42,129 I
Northern Regional Health AUIhorliy
\. Derek Crouch Construction Ltd
(1986) 26 BLR I. .........
Norwich City Council v Har\, ey
119891 I AllER 1180.
Hood Teck
119761 I MLJ 16 ......... 15.43,101.152
12 Sim Chio Huat v Wonn Ted EUi
119831 I MLJ 151. ...... 82
Simaan General Contracting Co v
pilkinoton Glass Ltd
[1988] I All ER 791 127
Simplex Concrete Piles Ltd v London
Borough of SI Pancras
161 I (1958) 14 BLR 18 ...................... 40
I Smith Construction Co Ltd v Phil
76 Kirivatna 119551 MLJ 8 .............. 117
.
 TQb/e of Cases xiii

Page Page
Sumpter v Hedges
118981 I QB 673 ......................... 2 Wells v Army & Navy Co-operative
Society (1902) 86 LT 764 .......... 80
Tan Hock Chan v Kho Teck Seng Westminster City Council v I iaivis
[1980] I MLJ 308 ....................... 12.78 & Sons Ltd
Tan Swee Hoe Co Ltd v A1i HUSsain
[1970] I All ER 943 ........ 54.95,98
BTOs [1980] 2 MLJ 16 ............... 127
Whitaker v Dunn (1886) 3
Ternloc Ltd v Errlll Properties Ltd TLR 602 ..... ............................. 3
(1987) 12 ConLR 109 83
Wimpey Construction UK Ltd v
Token Construction Co Ltd v
Scottish Special Housing
Charlton Estates Ltd Association
(1973) I BLR 48. ...................... 84 (1986) 9 ConLR 19 .................... 65
Townsends (Builders) Ltd v Cinema Woon Hoe Kan & Sons Sdn Bhd v
News & Properly Mariaoement Bandar Raya Development Bhd
Ltd
119731 I MLJ 60. ........................ 145
(1958) 20 BLR 118 27
...................

Wraighi Ltd v pH & T (Holdings)

Trollope & Colls Ltd v Atomic Ltd (1968) 13 BLR 26. ..... 45,100,120
Power Constructions Ltd Yong Mok Hin v United
[1962] 3 All ER 1035 ................. 11
Malay States Sugar Industries Ltd
Walter Lawrence & Son Ltd v Coin-
119661 2 MLJ 286 .................. I 18, 145
inertial Union Properties (UK) Yong Mok Hin v United Malay
Ltd
States Sugar Industties Ltd
(1986) 4 ConLR 37. .................. 91 [1967] 2 MLJ 10 2.9
Waiters v Whessoe Ltd Yuison Bien v Bankers Trust Co Ltd
(1960) 6 BLR 23. ...................... 65 [1980] I MLJ 32 50
Introduction

The Malaysian Standard Form of Building Contract was issued in 1969

under the sanction of Pertubuham A1dtek Malaysia ("PAM") and the
Institution of Surveyors of Malaysia ("ISM"). it is closely modelled on
the fomi published by the Joint Contracts Tribunal ("ICT") in the UK
in its 1963 edition. The English standard fomi - commonly called ICT
63 - was formally withdrawn in 1980 when a new and somewhat
improved version was issued.
None of the many standard fomi contracts published by the Joint
Contracts Tribunal in England can be regarded as models of draftsman-
ship, and of the growing ICT faintly ICT 63 has been subjected to
considerable and justified judicial criticism. To give but one example,
in English Industrial Estotes Corporation v George Wimpey & Co Ltd
[1973] I Lloyd's Reports 118, Edmund Davies LJ described the docu-
merit as "a fanago of obscurities". Other members of the English judi-
clay have been equally scathing, and the many defects of ICT 3 have
resulted in its being condemned by judicial and other legal opinion. For
reasons best known to itself, the ICT takes no notice whatever of most
of these criticisms and has perpetuated many of the known defects in
its other standard forrns of contract.
The construction industry in Malaysia is, unhappily, obliged to use
what is essentially the same form as ICT 63. it is not only drafted in
difficult and obscure language, but it is also gravely defective in pro-
tecting the employer's legitimate interests in many important respects.
What has been described as the "calculated ambiguity" of the English
parent forrn has led to much costly and unnecessary litigation. The
learned editor of Hadson's Build^^g Contracts (10th edition, 1970) has
written that "no adviser of any private employer should allow the tJCT
63 fomil to be used without substantial amendment".
This is also the writer's view of the Malaysian Standard fomi, against
which the same criticisms can be levelled. indeed, this is the more so
since the Malaysian form ("the FAM forrn") does not incorporate some
of the later amendments which were introduced by English JCT -
sometimes in a vain attempt to overcome the effect of case law. The
few amendments which have been made to the PAM forrn are mainly
those which are necessary to binig the document into line with the law
of Malaysia. in the result the PAM fonn inherits all the legal and
procedural defects of its English parent. Nonetheless, it is the standard
fomi of building contract in the private sector and is very widely used.
 2 1/1/10duc!ion

The PAM fomi is a contract for a lump sum, re the contractor under-
takes to complete the whole work for a stated and fixed amount of
money payable by the employer. This is so even thouoh it contains
provisions for the adjustment of the contract sum for such thinos as
variations (clause 11) and payments in respect of both prolongation and
disruption claims I (clause 24) : Kanchi' Roi?1017 v Goh Bi'OS Sth Bhd
[1978] I MLJ 89 where Gunn Chit Tuan I reviewed the law on this
subject comprehensiveIy.
A contract on PAM terms is an entire contract for a lump sum, but
the contractor becomes entitled to payments only on reaching the van-
ous interim stages and, so far as the retention amounts are concerned,
on completion of the Works.
An admirable summary of the law relatino to the Endlish ICT 63
contract, which is equally applicable to the PAM fomi, was provided
by, Judge John Newey QC in Holland Hoiine, I & Cubiti (Noi'tilei'n) Ltd
v Wetsh Healih Technicol Se, .vices 01.80nisot!'on ( 1980) 18 BLR 80 :
*

(1) An entire contract is one in which what is described as "coin lete

pertonnance" by one party is a condition precedent to the liability
of the other party : Cuttei. v POWe11 (1795) 6 TR 320, and Mum, .o
v Bart (1858) 8 E & B 739.
(2) Whether a contract is an entire one is a matter of construction; it
depends on what the parties agreed. A lump-sum contract is not
necessarily an entire contract. A contract providino for interim pay-'
merits, for example, as work proceeds, but for retention money to
be held
be held until completion is usually"'
entire asIto retention
' ~moneys, '
but not necessarily as to interim payments : Demiing LJ in Hoenig
v Isaacs 119521 2 All ER 176.
(3) The test of complete perlonnance for the purposes of an entire
contract is in fact "substantial pertomiance" : H Do kin & Co Ltd
v Lee [1916] I KB 566; Hoenig v ISOocs. The docttine of sub-
stantial pertonnance is firmly established in a number of cases in
Malaysia and Singapore : see, for example, Ming & Co v Leon
^rig Ching 119641 MLJ 312; Build^^g & Es!ores Lid v AM Con-
nor [1958] MLJ 174; Saphi^toon v Lzhi Slew Hui [1963] MLJ
305; and Yoi?g Mok Hin v United Mala^ States Sugoi. IndMst, .ies
Ltd [1967] 2 MLJ 10.
(4) What is substantial is not detennined by a comparison of cost of
work done and work omitted or done badly : Kie!y & Sons Lid v
Medci'417
1009.
(1965) 109 SI 829; Bolton v Mahadeva [1972] I unR
(5) If a party abandons pertorrnance of the contract, he cannot re-
cover payment for work which he has completed : Sumpie/. v
Hedges 118981 I QB 673.
(6) If a party has done something different from that which he con-
tracted to perlonn, then, however valuable his work, he camiot
claim to have pertonned it substantially : Foi'man & Co F1'0 I'i-
etQ, y Ltd v Tile Ship "Liddesdale" [1900] AC 190.
 furroducrion 3

(7) If a parry is prevented from performing his contract by a default

of the other party, he is excused from performance and may re-
cover damages : dicta by Blackbum I in Appleby v Myers (1866)
2 LR CP 651; Mack@y v Dick [1880] AC 251.
(8) Parties may agree that, in return for one party pertonning certain
obligations, the other will pay him on a quantum merwit basis.
(9) A contract for payment based on quantum meI'm^ may be made in
the same way as any other type of contract, including conduct.
(10) A contract for payment based on quantum merun will not readily
be inferred from the actions of a landowner in using something
which has become physically attached to his land : M"nro v Butt
(1858) 8 E & B 739.
( I I) There may be circumstances in which even though a special con-
tract has not been performed there may arise a new or substituted
contract; it is a matter of evidence : Wh^taker v Dunn (1886) 3
TLR 602.

it is important to remember that, like other standard fonns of contract,

the PAM fomi must be read against the background of the general law
of contract. The standard fonn is not a self-sufficient and self-contained
document containing all the rights and obligations of the parties. it must
be read and understood in the light of the general law and in particular
in that part of the law governing contractual relationships. in this re-
spect, Malaysia is fortunate in having the Contracts Act 1950 (Act 136)
which is essentially a codification of the English common law.
The extent to which English law is applicable to Malaysia since the
introduction of the Contracts Act depends on the interpretation of sec-
tions 3 and 5 of the Civil Law Act 1956. This question is exhaustively
discussed by Dato' Professor Visu Sirmadurai in his classic work The
Law of Contract in Malaysia and Singapore .. Cases and Comment@77
(2nd edition, 1987) pages 10 to 17, to which readers are referred.
Since the Constitution (Amendment) Act 1983 there is no longer any
right of appeal to the Judicial Coriumittee of the Privy Council from the
decisions of the Malaysian courts, and thus no continuous input of case
law from the British system, but there is little doubt that English devel-
opments exercise an influence over the thinking of the Malaysian
judiciary. This is especially so in the specialist field of construction
contracts, where it is clear that English decisions on contracts worded
identically are of the highest persuasive authority and are likely to be
foUowed by the Malaysian courts. This becomes evident from a study
of the many recent Malaysian cases on building contracts. in this book,
therefore, decisions of the English courts dealing with ICT 63 (the parent
of the PAM fonn) are cited where appropriate, as are decisions of other
Coriumonwealth jurisdictions, which are also likely to be of assistance.
Moreover, the relevance of English case law in the Malaysian con-
struction industry is important in contract admitxistration because, as
noted, Malaysia's PAM fomi is vimally a reproduction of ICT 63 and
the majority of Malaysian architects, quantity surveyors and other con-
 4 1/1/10, /!1,110!I

sti'uction PI'oressionals use EITglisli case law (and 111e s ecialisi E gl' h
textbooks) as an aid 10 boili internreiatioii and administration. ~
Tile PAM fomi itself I'efei's 10 its \, anous clauses as "c d't' " b
this is all jinpi'ecise use of legal tel'1111nolog},. Not all the Tenjis of Ih
contract are "conditions" in tile legal sense. Contractual telni
dinonallcl,
dinonally classified into conchi!b/is 'f'd' and M,"o11uiii!'CS.
erera- Tile ,
to be a third category known as 1/11/0171i'linte 1,177is : Hoi K F ' '
Slimp!', 78 Co Lid v KdM. OSakv' K!'sell Kmsho Lid 119621 2 QB 26.
A colldi'ifbii is a maioi' tentT of the contract. breach of wh'ch g' I
rise 10 a right to treat 111e conti'act as repudiated. A uru'1'0 A' '
or subsidiary tenn, breacli of whicli gives rise onI to a 'gl I d
ages and not to a right to I'escind. A sei'IOHs breacli of an
oi' 1111eiv?led^^re lei'}?I gives rise to a right to rescind, but o111erw' d
only in damages. Tile Contracts Act 1950 contains no Tov' ' d I-
ing specifically with tlie contents of a contract or the clas 'f' f
terms, but the Malaysiaii coui'is have adopted the tradit' I
law approach.
Similarly, tlTe coui'Is recognize the distinction between e. ' d
117y?fled rely?is and it is clear that the courts will jin I , te h
contract based on the presumed intention of the arties or ' d
make it coinniercially effective. Tenris may also be jin lied Ih b
of CUSIon} or ti'ads usage (see Cheiig Keiig Hong v Gol'I of' 1/1e Fedciu-
1101i of Maid}'0 119661 2 MLJ 33 for' an unsucc;ssful allem I I i. v k
trade usage ill a consti'uctioii contract context). Tel'ms in a , I ' I
implied by, statute, as under the Sale of Goods Ordinanc 1957.
in implying ternis into a \\, titlen contract, the courts w'11 \, '
Inc contract for the parties. Tern!s based o11 tlie artie '
tention will only be implied judicialIy if tiley are "necessar I o' I
transaction sucli business efficacy as the parties must hav d d":
see the leading English case ofLiixoi. (EQsibo!!!vie) Lid v Coo)e. 11941
AC 108, at 137 per Lord Wright.
The tenns to be implied into a JCT 63 contract (on which Ih PAM
fomi is based) were one of the many points allssue in the se I
decision of Vinelott J in the English case of Lolldoii Bolou h I M I'-
1011 v Simile), Hwg/I Ledc/I Lid (1985) 32 BLR 51.11 was lield Ih h
two implied ternis must be written into the contract ' d
e
workable. The implied terms were :
,

(1)
That the employer would not hinder or prevent the c I . f
carrying out its contractual obligations or from executing Ih W k ,
in a regular and orderly manner.
(2) That the employer would take all SIG s rea bl
enable the contractor to discharoe its oblioations und h
tract and to execute the Works in a reoular and ord I
it is suggested that such telms are also to be jin I' d '
. O h - Saly to give business efficac>, to the con-

.
 Introduction 5

in the Australian decision of Permi' Corporation v Commonwealth of

Australia 119691 2 NSWLR 530, the Supreme Court of New South Wales
held that a tenti must be implied into a building contract binding the
employer to ensure that the certifier (who was its employee) would
perform his duties as certifier under the contract. This is of equal
application to a contract in PAM fonn.
A further example is provided by the English case of Crowdoce Ltd
^ London Borough of Lambeth (1986) 6 ConLR 70, where the English
Court of Appeal held that it was an implied term of a JCT 63 contract
that the employer must nominate a successor architect if the architect
designated under the contract retired or resigned his appointment. There
is little doubt that such a term must also be implied into a contract in
PAM form since the contractual machinery is inoperable unless there is
an architect.
 he ar icles of greeme

made the ............... day of ............... 19 .. .----------.

(or whose registered office is siiuate at) fj """ """' of
p oyer" which expression shall include his or 'I- h e in-
successors and assigns) of the one part and Ives.
office is situate am ............ .. (herdnafier called ,, Ih c ,, registered
sion shall include his or its heirs, personal re re , xpres-
Assigns) of the other part. Whereas the Empio er i, d , Permitted
in afier called "the Works") at ............... and h ' """"" "" I ere-
Quantities showing and describing the work to be done I b ' ' S O
e jrecjion of ............... of ............... his A h' y n er
of Quantities (wh. h inp OyeT with a fully priced copy of the said Bills
whereas the said Drawing numbered ............... incl ' SI') and
o b ' ra\\'ings") and the Contraci Bills have been signed b '
how it is hereb}, agreed as follows:
or the consideration hereinafier nieniioned Ih C '
the Contract Drawings and describe . . S Own upon
the said Conditions Ie on tract Bills and in
he Employer will pay 10 the Contractor Ih ........
(hereinafter referred 10 as "the Contract Sum") o h """"" "" ' I
3 Th I ,, ,, . e manner specified in the said Conditions.
............... or, in the event of his death or ceasin I b ""' """"'
purpose of this Contract, Such other person as Ih E I Or I e
Said Cond I appointed in accordance with clause 34 of the

I 10n or approval or instruction given or ex re d b

The tenn "the Quantity Surveyor"in the said Cond'Ii h ........
f I"""""' '', ip the event of his death or ceasing to be the Quantit S """"
or I at purpose, not being a person 10 who ' nominate
e Said Conditions rice Wit c ause 34

Note: This o812eme, ,I musi h

I 1101PO, 'I of Mold}'$1a ill M, /"dj Ihe o812e, ,,,,, - , re '"S app icob/e
Confinej is ,,, d, ' e CoiV'led our is diffe, .eiii. /i. on, lire PIOce I'M M, hid, Ihe
SIoie : nom, 'e of illie, Ided Woi'ks.
 The @111'c!es of o812emeni 7

The Articles of Agreement are the fomial opening parts and recitals of
the standard form and must be fully and properly completed.
The recitals (which begin "whereas") are introductory to the opera-
tive clauses. Since they are not within the operative part of the docu-
merit they cannot generally be used as an aid to the interpretation of the
operative part. However, if the operative clauses are ambiguous, the
recitals may be looked at to see if they assist in detennining the true
construction of the contract because they introduce what the parties are
intendino to achieve by their contract.
in this standard fomi of contract the recitals may in fact be of the
very greatest importance, particularly as regards the description of the
Works" which the contractor is to carry out and as to the site ' since
it is only here that there is any provision for such descriptions.
The recitals include a brief description of the Works to be constructed
and indicate the documents which are to be included as the contract
documents. it is conceivable that the description of the Works in the
Articles of Agreement might, by a side wind as it were, be used to
impose some measure of design liability on the contractor, eg where a
"Project Description" containing a design element or performance speci-
tication is expressly incorporated into the Articles of Agreement. In
that event it is thought that clause 12(I), below, would not be effective
to exclude its incorporation into the contract.
The recitals also state that the employer has caused drawings and
bills of quantities "showing and describing the work to be done to be
prepared by or under the direction of" his named architect. They also
state that a fully priced copy of the bills has been supplied by the
contractor to the employer. Throughout the contract, this copy is called
"the Contract Billsl'. By clause 3(2)(c) the contractor is entitled to ask
for a copy of the Contract Bills.
This recital recognizes the standard procedure of examiintig the suc-
cessful tenderer's priced bills and this means that when the Articles of
Agreement are executed an employer (or his architect or quantity sur-
veyor) will have the priced bills in his possession. The consideration of
the priced bills of all tenderers is an important part of the investigation
process as to whether or not the employer should be recoilrrnended by
his professional advisers to contract with a particular contractor since
the priced bills enable the employer's quantity surveyor to deterrnine
whether it is likely that the proposed contractor has put in an economi-
cally viable tender.
Tenderers must exercise considerable skill in pricing the bills and it
often happens that an employer finds the lowest tender price beyond
his available means, although he is amious to go ahead with the pro-
ject. in that event, a reduction of the work done has to be negotiated
and this results in what is called a bill of reductions.
Tenderers often operate on the basis that in pricing the bills they
seek to identify the items which may be omitted and to put a lower
price against that item. The difference between the net cost to the
 8 Tile @111'c/es of @81'ee"rel?I

contractor of such an item and the price put into the ri d b'11 '
transferred to and built into other rates. IdealI , fr h '
point of view, enhanced rates are entered for item h' h h
believes the quantities are likely to be increased a th
gresses. The English courts have held that there ' h'
this practice. '
in Convent Hospttql Lid v Ebe, .jin & Pilli. s (1988) 14 C LR ,
appeal (1990) 7-CLD-05-11) contractors or a suic'd H I '
against a bill item requiring a performance bond, b t h o
held that this was not improper conduct on thej e
"The representation they were making were in no f I
took the risk that financial loss would result t Ih f
priced below cost and the item was not omitted. P f
quired of the contractors was that the enhanced f
should not be too easily identified and challen ed". Th'
at issue in the Court of Appeal and the learned 'ud '
edly express the true position.
The drawings on which the contractor has tend d "
Contract Drawings" throughout the contract. B clause 4(2 b h
tractor is entitled to receive two copies of the Co I D
Both the Contract Bills and the Contract Dr ,' 0 ' '
by or on behalf of the 61nployer and the contract . I '
desirable that tlie quantity surveyor. should also sig th C ' '-
ings as evidence that tiley were the drawinos
Weretakenoff. 6 from
q wh' hh'
iies

Article I

This must be read with clause I(I) which is virtualI an '.

lion of this article with the additional obli atio th h
carried out to the reasonable satisfaction of the h '
contractor's obligation to carry out and coin lete th W k
on, and subject to, the contract documents, fo Ih
mentioned in Article 2, to the Contract Sum. Th'
corporates the Contract Drawings, the Contract B'11 d
Conditions into the contract ' '

Article 2

This requires the insertion of a sum of ino h' "

Contract Sum ' which is to be ad'usled o it d '
various conditions of contract. As alread not d, h
a urnp sum, to it is a contract to coin lete the h I
sum, but provided that the Works are subst I' U
PIiance with the contract the contractor will t b d
where the defects are minor : Ming & Co L P'
 The nine!es of as, 'eeme, 11 9

MLJ 312; 81/11ding & Estates Ltd v AM Connoi' [1958] MLJ 174; Sa-
phiotooiz v Liin SI^w H" [1963] MLJ 305; yong Mok Hih v United
Malay States Sugai. Indusn. I'es Lid 119671 2 MLJ 10.

Article 3

This requires the name and address of the architect to be inserted. The
person named must be an architect registered under the Architects Act
1967 : see GIInwng Boy!, Sdit Bhd v Syai'ikot Pemhinaan Pel'I^^ Sdn
Bhd 119871 2 MLJ 332 for discussion of the question whether a gradu-
ate architect who has not registered is entitled to sign certificates under
the contract. it is clearly permissible for the name of an architectural
practice to be inserted, and this is commonly done, although this may
cause evidential. difficulties if disputes arise in which the architect's
opinion is called into question.
The article goes on to provide that, in the event of the named
architect's death or his ceasino to act, the architect shall mean such
other person as the employer nominates. it is submitted that the Gin-
ployer is bound to nominate a successor within a reasonable time of the
death or cessation to act, as was held by the English Court of Appeal
in C"ouchce Ltd v London 80ro"gh of Lambeth (1986) 6 ConLR 70.
The functions of the architect are essential to the operation of the
contract and an employer's failure to nominate a successor would be a
breach of an implied terni of the contract, and breach would entitle the
contractor to damages in respect of any proven resultant loss.
The contractor has a right to object to the subsequent nominee for
reasons thought to be sufficient by an arbitrator appointed in accor-
dance with clause 34. The successor architect is not entitled to dis-
regard or overrule any certificate, opimon, approval or instruction given
by his predecessor.
Until recently, the view widely held by construction lawyers in Coin-
monwealth jurisdictions was that the architect owed duties in tort to the
contractor parallel to those remedies available to the contractor against
the employer under the contract, with the practical result that if the
architect negligently or unfairly under-certified, the contractor not only
had the right to have the certificate reviewed in arbitration, but might
also recover damages for economic loss against the architect, at least in
so far as he failed to recover from the employer.
The English Court of Appeal apparently put paid to that view by its
decision in Pacific Associates Inc v BCxter (1989) 16 ConLR 90, which
concerned a contract based on the F101C fonn and which contained a
number of clauses not usually found in construction contracts. The
clauses included an express disclaimer of liability extending to the
negligence and default of the engineer.
Subsequent to that decision, in Leon Engineering & Construction Co
Lid v Kg D"k Investment Co Ltd [1989] TCLR 465, the High Court of
Hong Kong considered the potential liability of an architect under a
 I O Tile @1ncles of ag, 'eel?leii!

building contract in tenns similar to the PAM form and reached a like
conclusion. After careful consideration of the authorities, Bokhary I
stated the principle in this way :
Where, first, there is adequate machinery under the contract between the
employer and a contractor to enforce the contractor's rinhts thereunder and,
secondly, there is no good reason at tender stage to suppose that such ri hts
and machinery would not tooether provide the contractor with an ade uate
remedy, then in general, a certify ino architect . . . does not owe the contractor
a duty in tort coterminous with the obligation in contract owed to the
contractor by the employer.
it is believed that the Malaysian courts will ado t the same a roa h
which is part of the trend to relieve professionals from nabilit to ames
with whom they are not in a direct contractual relationshi .
Nonetheless, it is important to appreciate that the architect must act
impartialIy in performing many of his duties under the contract, and in
particular those relating to certification of sums due, the rantin of
extensions of time, and the ascertainment of loss and/or expense. As
architect he should never allow the employer jin ro erl to innuen
his decisions nor should the employer prevent the inde endent exercise
of the architect's powers as certifier: Hickmo, I & Co v Robei. ts 1/9/31
AC 229. in such a case the need for a certificate in a , be d' d
with, and the contractor could recover sums due in its absence b w
of an action for daniages. Improper conduct of this sort renders the.
architect's acts invalid : see Engiesh@in v Mt. Masie, . 119201 All ER
RepJ74. ' ~
indeed, it has been recently held in England that the architect '
entitled to detennine his engagement if the emplo 'er interferes with h'
granting or prevents him from granting extensions of time : A1' 7'0 o1, -
ms & Papp@ v Chain Coinpoizio Noviei. a SA (1990) 7-CLD-05-01.

Article 4

This requires the name and address of the uantit surve t b d

and similar provision is made in the case of the named t't
surveyor s death or ceasing to act.

F CTpustak;\;{r: I I. :I \ I. ,<; \!I EtaZaL

133 tit, .It 'I' ,:; , ,! o< I 1.1 A kg.
Shuh A1am. Setsz. I:*r
Attestation

The attestation clauses need to be appropriate Iy completed by the

employer or his advisers and then executed under hand or seal as ap-
propriate. When he executes the contract, the contractor must notify the
architect of his address for the purpose of receipt of architect's instruc-
tions and notices under the contract : clause 2(4). If the contractor fails
to notify the architect of his address for service, or fails to inforrn him
of any change of address, any contractual notices and architect s in-
structions are "deemed served on the Contractor if sent by registered
post to his address stated in this Contract, or if left at his office on site
and a receipt obtained from [the] foreman-in-charge".
it is a bad but common practice for the Articles of Agreement to be
executed after work has begun. The contractual formalities are to be
completed before that stage is reached. it may well be, of course, that
there is a concluded contract in existence even though the document a-
tion has not been formally completed, on the basis of an unequivocal
acceptance of the contractor's tender by the employer.
The nature of the acceptance of a tender was considered by the High
Court of Salarigor in Cheng Keng Hong v Govt of the Federation of
Malay@ 119661 21v^it, I 33, where Raja Azlan Shall I (as he then was)
put the position in this way :
The law with regard to acceptance of a tender is perfectly clear. The
unconditional acceptance of a tender by the employer binds both parries,
and a contract is thereby fomied, the tenns of which are ascertainable from
the invitation to tender, the tender, the acceptance, and any other relevant
documents.

Where there are lengthy negotiations - often continuing as work pro-

CGeds - and a contract is then fonnally executed, unless there is any
contrary provision in the contract as executed its tenns will have Tetro-
spective effect. The ternis of the contract as executed will be treated as
applying, not only to fun!re relations between the parties, but also to
what has been done by them in the past since inc date of tender in
anticipation of the making of the contract. This was so held by the
English High Court in Trollope & Coils Ltd v Atomic Power Constr"c-
tions Ltd [1962] 3 All ER 1035.
However, considerable difficulties do arise in practice, particularly
where there are lengthy negotiations and an eXchange of correspon-
dence between the parties, and no formal contract is executed.
12 Aliesi@!10n

Whether a binding contract exists is essentially a question of fact.

This is illustrated by Ng BIDS Coilstiwcii'o11 v Ka01^71 (Mala), sia) Stht
Bhd [1985] I MLJ 245, where there was an acceptance of a quotation
and the forrner concluded :

We would also be sending you at a later date an official contract agreement

for you to sign to complete the usual formality.
it was held that there was a contract bindino on both parties, despite
the fact that no "official contract agreement" was sioned. Any subse-
quent disagreement between the parties on any proposal to vary the
agreed ternis did not affect the contract.
If, in fact, there is no contract at all because the parties have not
agreed on the minimum essential terms, but work has been done, that
would have to be the subject of a quantum "lei'Mir. Such a claim also
arises where there has been an acceptance of partial performance : Hoji
Hasnon v Tan Ah Ki^n [1963] MLJ 175; Ton Hock Chon v Kho Teck
Seng 119801 I MLJ 308.
The conditions
Clause I

Contractor's obligations

(1) The Contractor shall upon and subject to these Conditions carry
out and complete the Works shown upon the Contract Drawings and
described by or referred to in the Contract Bills and in these Conditions
in every respect to reasonable satisfaction of the Architect.
^~.

(2) If the Contractor shall find any discrepancy in or divergence be-

tween the Contract Drawings and/or the Contract Bills he shall inume-
diately give to the Architect a wrttten notice specifying the discrepancy
or divergence and the Architect shall issue intructions in regard thereto.

Clause I(I) is of the essence of the contract as it defines the contractor's

basic obligation to carry out and complete the contract works shown
upon the Contract Drawings and described by or referred to in the
Contract Bills and in the Conditions using materials of the quality and
workmanship to the standards specified in those documents. The con-
tractor merely has to carry out and complete the Works as designed on
behalf of the employer. He is not made responsible for the suitability of
the materials and goods specified. The contractor's obligation to coin-
PIete only comes to an end on the issue of a certificate of practical
completion under clause 15(I).
The sub-clause effective Iy restates Article I, except that there is an
added obligation, namely, that the contractor must carry out and coin-
prete the Works "in every respect to the reasonable satisfaction of the
architect". in order to appreciate the significance of this, reference must
be made to clause 300), which provides that, subject to certain pro-
visos about the cornmencement of proceedings or the appointment of
an arbitrator, the final certificate is "conclusive evidence in any pro-
CGedings that the Works have been properly camed out and completed
in accordance with the terms of this contract . . ." and subject to three
exceptions there set out.
in the English case of P & M Kgye Ltd v Hoster & Dickinson Ltd
119721 I All ER 121, the House of Lords held by a maiortty that these
words prevented any further legal action, including the legal proceed-
ings which had been started long before the final certificate was issued.
This decision was followed in Malaysia in Shen Yuan PCi v Doro Wee
Hood reck 119761 I A^it. I 16.
Obviously, this provision is inimical to the employer's legitimate inter-
ests and it is interesting that the corresponding English forrn was
15
16 Clause I

amended subsequent to the House of Lords' decision so as to avoid its

implications. Consequent on that amendment, the corresponding UK
provision required the contractor :
. . . to carry out and complete the Works shown upon the contract drawings
and described by or referred to in the contract bills and in the articles of
agreement and these conditions . . . using materials and workmanship of the
quality and standards therein specified, plan, ided rhoi M, heI. e and to Ihe extent
that OPP, 'oval of the quol!^^ of Ihe molei'to Is o1' of the SIond@I'ds of work-
monship is o manei'101. Ihe opinion of Ihe o, .chileci, such quotrty and slam-
doI. ds shall be 10 the I. e@solidb!e sQti. $faction of the ai'chi!eci
[Clause 30(7) was also amended. ]
This is manifestIy better than the position under the PAM fonn, but
the effect of the revised English proviso can still be unfair to the
employer.
All the work shown upon the Contract Drawinos and described by or
referred to in the other contract documents must be completed in every
respect. Nothing may be added or omitted to reduce or extend the
contractor's obligation except by an architect's instruction given under
the contract. The requirement that the work is to be "in every respect
to the reasonable satisfaction of the architect" cannot be used to obtain
a greater quantity of work or better quality of materials or workman-
ship than is specified by the contract documents.
The contractor's obligation to do the specified work includes an ob,
jigation to do all ancillary work iridispensably necessary. This is a matter
of general law, and even where a detailed bill of quantities is prepared
in accordance with a standard method of measurement, it is unlikely 10
descend to every detail of construction and there may well be some
work processes which are not fully described and it is arguable that
such work must be carried out by the contractor within the overall
Contract Sum and without any adjustment in respect of it.
There is no definition of what is meant by "reasonable satisfaction"
anywhere in the contract. Clause 6(I ) states that the standard of in a-
tenals, goods and workmanship "shall so far as procurable be of the
respective kinds and standards described in" the Contract Bills; the
architect camot require a higher standard than that there described.
Reasonable satisfaction" might appear to suogest that the test is an
objective one, but in truth the test is the subjective standards of the
particular architect, and there is a strong element of personal judgment
in that opinion. it is reviewable in arbitration under clause 34 and the
expression of satisfaction or otherwise by the architect can be chal-
16nged by both the employer and the contractor, provided a written
request to concur in the appointment of an arbitrator is given by either
party before the issue of the final certificate or by the contractor within
14 days of its issue : see clause 30(7).
The contract documents are not defined as such in this clause, but
they are the Contract Drawings, the Contract Bills, the Articles of
Agreement, and the Conditions themselves : see clause 3(3). If there is
 Contractor's obfigations 17

a specification, it is not a contract document, no more than is the

contractor s programme if required or provided, although there is an
apparently self-defeating provision about the specification in clause 3(3).
Clause I(2) deals with the situation where there is a discrepancy in
or divergence between the Contract Drawings and/or the Contract Bills.
it does not extend to discrepancies within and between the Contract
Drawings, architect's instructions (other than variations) and drawings
or documents issued under clauses 33(3), 3(4) and 3(5). The provision
gives the opportunity for the architect to correct a discrepancy which
might affect his design or the construction of the Works.
The sub-clause allows the correction of errors and it has been de-
cided in England that the provision "does not impose a duty on a
contractor to check the drawings to see if there are discrepancies or
divergencies . . ." : Vinelott I in London Borough of Merton v Sinn/ey
Hugh Leach Ltd (1985) 32 BLR 51.11 is only if the contractor finds
such a discrepancy or divergence that he must give written notice to
the architect. who must then issue the appropriate instructions, eg by
deciding whether to amend the Contract Drawings to coincide with the
Contract Bills or to issue an instruction under clause 11(I) requiring a
variation.

it is essential that the contractor gives written notice to the architect

whenever he spots a discrepancy or divergence. If he fails to do so and
cames out work shown on the Contract Drawings, and not described in
the Contract Bills, he will lose valuable rights to which he is otherwise
entitled, to extra payment under clause 11(4)(5), direct loss and/or ex-
pense (if appropriate) under clause I I (6) and an extension of time for
any consequential delay under clause 23 (e). Clause 24(I)(c) also pro-
vides the possibility of a clam by the contractor for direct loss and/or
expense where the regular progress of the Works is materialIy affected
by "any discrepancy in or divergence between the Contract Drawings
and/or the Contract Bins". This provision would be applicable where
the discrepancy was not cured by a variation instruction and it had a
material effect upon regular progress of the Works.
As worded, the clause appears to deal only with discrepancies or
divergences found by the contractor. Presumably, if the architect finds
one or is infonned of one by the quantity surveyor, he should issue a
variation instruction under clause I I . The variation instruction would
then fall to be valued under that clause.
Clause 2

Architect's instru tions

2
(1) The Contractor shall (subject to sub-clauses (2) and (3) of th'
Condition) forthwith comply with all instructions issued to him b th
Architect in regard to any matter in respect of which the A h'
expressly empowered by these Conditions to issue instructions. If 'Ih'
seven days after receipt of a wrttten notice from the Architect '
compliance with an instruction the Contractor does not coin I th
with, then the Employer may employ and pay other ersons to
any work whatsoever which may be necessary to give effect to such
instruction and all costs incurred in connection with such I
shall be recoverable from the Contractor by the Em 10 er as d b
may be deducted by him from any monies due or to become d I h
Contractor under this Contract.

(2) Upon receipt of what purports to be an instruction issued to him

by the Architect the Contractor may request tile Architect t .'f , '
wrtting the provision of these Conditions which em owers 111e ' f
the said instruction. Tlie Architect shall forthwith coin I , \\, ith , , I
request, and if the Contractor shall thereafter coin I , with th ' d
instruction (neither party before such compliance havin iven to Ih
other a wrttten request to concur in the appointment of an arb'I t
under clause 34 of these Conditions in order that it in a b d d
whether the provision specified by the Architect em owe th f
the said instruction), then the issue of the same shall be deemed f H
the purposes of this Contract to have been em owered b th '
of these Conditions specified by the Architect in a h
Contractor's request.
(3) All instructions issued by the Architect shall be issued ' ' ' 0.
Any instruction issued orally shall be of no jinmediat ff , b h "
be confirrned in wrtting by the Contractor to the Architect 'th'
days, and if not dissented from in writin b the A h'
Contractor within seven days from receipt of the Contra I ' f'
tion
days.
shall take effect as from the expiration of the I tt d
Provided always:
(a) That if 111e Architect within seven da ,s of 'v' h
instructi(111 shall himself confinn the same in ' ' , h
ontractor shall not be obliged to confirm as af 'd,
sai insti'11.1ion shall take effect as from the dat f h A '
confirmaiiijjj, and
 Arch^^ec!'s irisn. "ctions 19

(b) That if neither the Contractor nor the Architect shall confinn such
an oral instruction in the manner and at the time aforesaid but the
Contractor shall nevertheless comply with the same, then the
Architect may confirm the same in writing at any time prior to the
issue of the Final Certificate, and the said instruction shall there-
upon be deemed to have taken effect on the date on which it was
issued.

(4) The Contractor shall upon signing this Contract notify the Archi-
Iect in writing of an address whereat notices and Architect's instruc-
lions under this Contract may be served upon him. in the event of the
Contractor failing to notify the Architect of such an address or failing
to notify the Architect of any chanoe in such address, notices and
Architect's instructions shall be deemed served upon the Contractor if
sent by registered post to his address stated in this Contract, or if left at
his office on the site and a receipt is obtained from the Contractor's
foreman-in-charge.

Cm"se 2(I) obliges the contractor to comply "forthwith" with all

architect's instructions issued under express authority in the contract
conditions. The instructions which the contract Ginpowers the architect
to give may be summarized in the fonn of a table :

Tabular summary of the instructions which the architect is

empowered to give
CIO"se Instruction

I(2) Discrepancies
4(I) Statutory obligations
5 Setting-out
6(3) Opening up and testing
6(4) Removal of defective work
6(5) Dismissal of persons employed on Works
11(I) Variations
11(3) Expenditure of PC Sums, &c
15(3) Defects during defects liability period
201Cl(c)(ii) Damage by fire, &c
21(2) Postponement of work
27(a)(b) PC Sums for nominated sub-contractors
28 PC Sums for nominated suppliers
31(2) Protective work duting hostilities
32(I)(b) War damage

The remainder of clause 2(I) explains the consequences of a failure by

the contractor to comply with an architect's instruction which has been
validly given. Failure to comply with a valid instruction is, of course,
a breach of contract, but clause 2(I) provides the employer with a more
practicaUy effective tinmediate remedy. it empowers him to have the
 20 CIOi, ,e 2

insti'uction carried out by someone other than the c I r I

fail to comply. Any additional cost is then borne b h
Once he has received the written instruction Ih
to comply 101'111M, 17/1, to as soon as reasonably can be (Loi d I B I' I I
of Hivingdoll v Cullei' 119671 2 All ER 361, CA) unj h h ' '
its validity under clause 2(2). However, 1116 architect c '
tions only in so far as lie is Ginpowered to issue Ih d
dinons of contract, and this is the reason for Ih I
2(2). Any instructions given by any clerk of works d
clause 10 are ' of no effect unless oiven in regard t
of which 111e architect is expressly Ginpowered b Ih C ' '
issue instructions and unless confimied in writino b th A
two working days of the11' beintr oiven"
if the contractor does not comply with a valid i I , '-
Iect may serve a written notice on him re uir' a I'
contractor fails to comply within seven days (1101 work' o d'
receipt of that notice, the employer can Gin 10 Ih '
and the costs involved can be deducted from d
tor or else may be recovered from him as a debt.
CIO"se 2(2) enables the contractor to challe o h ' '
architect s instruction and lays down the roc d h'
followed. The procedure is essential becaus h 10
I ere is no Tooln for argUino that the architect h *
architect under the contract or as agent for tile I ~
bring it within the expi'ess provisions of the t '
a contractor who obeyed an instruction 1101 e d "
lions but which was nevertheless of the sort th
give could not look to tlie employer for an a . T
must be satisfied that an instruction is with' h '
If he is not satisfied he must follow the d I
Clause 2(I). P re prescribed in
If the contractor considers that the architect's ' , ' '
e must request the architect to specify in writino Ih '
conditions which Ginpowers its issue. Thi
' h C 10n, 16 straightaway. The architect must Comply
with the instruction (neither of the contract' o P ies
compliance given notice of arbitration), it is'd d '
^in powered by the provision of the conditio 'f'
in is reply. This is the case even if, had th
^r it rotor, he might have decided otherwi . Wh
giving an answer to the contractor's re u I '
or dii'cct
Clawse 2(3)loss, .and/or expense
, P rise un erunder clause24(I)(a).
cl. ause 24(I)(a).
Set out ej b . . ' 'aC must e in writing. it then proceeds to
fact oives ,, , . O Cover I e situation where the architect in
it instructions. These provisions are wholl
~**..,

. ..
, ,

I44 I, ,, *,,
41
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-

11. .::
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1:1*
^ A1'cmtec!'s 1'11sr!Tieri'o113 21
... ,
,.'. *

^ .
Oral instructions have no immediate effect and must be confirmed in
writino. Oral instructions must be confirmed by the contractor in writ-
Ina to the architect within seven days of receipt and if within a further
.
seven days from receipt of the contractor's notice the architect has not
dissented in writing, the instruction takes effect from the date on which
\
the architect receives the contractor's notice. If the contractor madver-
tently fails to confirm the Instruction but nevertheless complies with it
\
he will be at risk since the architect only rimy subsequently confinm it.
in theory, a contractor should not carry out an oral instruction from
the architect but should wait until it is reduced to writino. in practice,
this is unrealistic because oral instructions are often Diven in an Giner-
gency. The sub-clause deals with this situation inadequately. Sinctly, if
the architect issues an oral instruction in an emergency situation, it is
"of no immediate effect" and the complex provisions of the clause should
be observed.
However, there is no requirement that the instruction be in a specific
to mm; it is merely to be "in writino". The practical solution is therefore
for the architect to write the instruction in the contractor's site record
book immediately and thus comply with the provisions of clause 2(3).
The provisos are important. Proviso (0) says that where within seven
days of issuing an oral instruction the architect issues a written confir-
mation, the oral instruction is valid and effective from the date of con-
finnation. The contractor is then relieved of his obiioation to confinn
the instruction in writing. The original oral instruction is therefore
validated retrospective Iy only to a limited extent.
PI'oviso (b) allows for the retrospective confirmation of oral instruc-
tions, but does not appear to deal adequately with the situation where
the contractor has already acted upon an oral instruction without going
through the confinnation procedure. If neither the contractor nor the
architect collfinms the oral instruction in writing, but the contractor acts
upon it, then the architect may (not must) confinn it in writing at any
time up to the issue of the final certificate. If the architect does this, the
Instruction is validated retrospectiveIy to the date of its issue. The op-
eration of this cumbersome procedure causes considerable difficulties
In practice.
Clause 2(4) is an interesting and necessary provision requiring the
contractor to notify the architect in writing of his address for service of
any notices or receipt of any instructions under the contract. He must
do this "upon signing the contract" 16 when executing the fonnal contract
documents. Should the contractor fail to so notify the architect (or to
infonn him of any subsequent change in such address) notices and
architect's instructions are deemed to have been validly served if sent
by registered post to the address stated in the testimonium "or if left at
his office on site and a receipt is obtained from" the foreman-in-charge
whom, under the ternis of clause 8, the contractor must "constantl
keep upon the Works". This is an eminently sensible provision not found
in the parent un fomi.
Flowchart I illustrates the operation of clause 2.
22 Clot, se 2

Flowchart I
Architect's instructions (clause 2)

START

A1 No
Empowered
in writing by, conditions

No Yes

Contractor No Architect Yes Contractor must forth-

confirms in 7 confirms in 7
with comply 2(I)
days days
Yes No

if contractor complies,
architect may confirm Contractor
at any lime up 10 final complies
certificate 2(3)(b)
I\;o

Architect No
dissents

Yes

Employer may engage

others 10 do the work
Contractor not entitled No
10 payment for, or
taking account of this
work 2(I )
Architect may send
Contractor
notice requiring
complies \Ajihin compliance within 7
7 davs
days 2(2)

STOP
Clause 3

Contract documents

( I) The Contract Drawings and the Contract Bills shall remain in the
custody of the Architect or of the Quantity Surveyor so as to be avail-
able at all reasonable times for the inspection of the Employer or of the
Contractor.

(2) Immediately after the execution of this Contract the Architect with-
out charge to the Contractor shall furnish him (unless he shall have
been previously furnished) with:
(a) one copy certified on behalf of the Employer of the Articles of
Agreement and of these Conditions,
(b) two copies of the Contract Drawings, and
(c) two copies of the unpriced Bills of Quantities, and (if requested
by the Contractor) one copy of the Contract Bills.
(3) So soon as is possible after the execution of this Contract the Archi-
tect without charge to the Contractor shall furnish him (unless he shall
have been previously furnished) with two copies of the specification,
descriptive schedules or other like document necessary for use in
carrying out the Works. Provided that nothing contained in the said
specification, descriptive schedules or other documents shall impose any
obligation beyond those imposed by the Contract documents, namely,
by the Contract Drawings, the Contract Bills, the Articles of Agreement
and these Conditions.

(4) As and when from time to time may be necessary the Architect
without charge to the Contractor shall funtish him with two copies of
such drawings or details as are reasonably necessary either to explain
and amplify the Contract Drawings or to enable the Contractor to carry
out and complete the Works in accordance with these Conditions.
(5) The Contractor shall keep one copy of the Contract Drawings, one
copy of the unpriced Bills of Quantities, one copy of the specification,
descriptive schedules or other like document referred to in sub-clause
(3) of this Condition, and one copy of the drawings and details referred
to in sub-clause (4) of this Condition upon the Works so as to be
available to the Architect or his representative at an reasonable times.
(6) Upon final payment under clause 30(6) of these Conditions the
Contractor shall if so requested by the Architect, forthwith return to the
Architect all drawings, detads, specifications, descriptive schedules and
other documents of a like nature which bear his name.
 24 Clawse 3

(7) None of tile docunients hereinbefore mentioned shall be used b

the Contractor for any purpose o1hei' than this Contract alld neither the
Employer, the Architect nor the Quailiit>, Surveyor shall divuloe or use
except for the purposes of illis Contract any of the prices in the Con-
tract Bills.

(8) Any certificate to be issued by tile Architect under these Condi-

tions shall be issued to the Contractor.

., <3ky4, ^, ", ,
Clause 3(I) deals with the 4145/9d of Ih C D ,
Contract Bills referred to in the recitals to the Articles of Agreeme I.
These are to remain in the custody of~The architect or the uantit sur-
veyor, but must be available for inspection by either the Gin 10 ,er or
the contractor at any reasonable time, Ie_ dunno normal office hours,
By clot, se 3(2) 1177medraieb, after the '6\^^till6fi';)f the contract, Ih
contractor must be given, without charge, a certified co of the
^:L^^Q^!!. t and the Conditions, two co ies of the Contract
Drawin s, and two co ies of the un riced Bills. The contractor in a
also ask for a co of the Contract ills.
Clawse 36) obliges the architect to provide the contractor - unless
he has previously done so - "as soon as possible after the execution of
this contract" with two copies of the specification (Which is not a contract
document) and of the "descriptive schedules or other like document
necessary for Lise in carr}, ing out 111e Works". This is again to be done
without cliarge. 11 is subniitted that 11ns obligation would be met b , 11
provision of an 3130.91^,!g, d Bill. The reference to the specification is
curious because the Bills contain the only IGOally bindin s ecification
of the work, to the detailed description of the methods and ual't f
work and materials : see clause 6.
indeed, this is emphasized by the proviso to the sub-clause wh' h
sa s that :

Nothing contained in the said specification, descri live schedule Ih

documents shall impose any oblioation beyond those jin OSed b the c
' I ' ' _*,___.__ S, I , Contract Bills, the
CIO"se 3(4) is also important since it imposes on the architect an obli-
galion to furnish the contractor wit awlnos and details as a d h
necessary, thus giving express effect to an oblioation which wo Id
otherwise be implied under the General law. Clause 3(4) re uires the
architect to give the contractor without charge two co ies of h f
ther drawings and details as are I'eosonob/ necessai. , to I '
amplify the Contract Drawings or to enable the contractor to
the contract Works. These further drawings, etc are to be 'd d "
and when from time to time may be necessa " 11 is s b 'tt d h
is an implied terni of the contract that the architect will a t 'th
sonable diligence and will use proper skill and care in 'd' h'
 Con!, act doc!linen!s 25

information and that his failure to do so is a breach of contract for

which the employer is liable and damages may be recoverable at
common law : see the leading English case of Neodox Ltd v Boi. ough
of Swi, Iron & Pendleb, ,IT (1958) 5 BLR 34.
The obligation in clause 3(4) is not conditioned on any request from
the contractor for infomiation. However, if the contractor wishes to make
a claim in respect of direct loss and/or expense under clause 24(I)(a)
(and thus get the benefit of early reimbursement under the contract) he
must, of course, have made a specific application for the infomiation in
due time. Late infomiation may, in appropriate cases, also give rise to
an extension of time (clause 23(f)), and in an extreme case gives the
contractor a right to detennine his employment under the contract under
clause 26(I)(c)(v).
By cmuse 36) the contractor must keep on the Works a copy of the
Contract Drawings, unpriced Bills, Specification or any descriptive sched-
ules, etc supplied to him under clause 3(2) together with a copy of any
drawings and details provided by the architect under clause 3(4). These
are to be available to the architect or his representative at all reasonable
times.
Once the final certificate is honoured, clause 3(6) requires the con-
tractor (if so requested by the architect), forthwith to return all draw-
ings, etc which the architect has supplied and which bear his name.
By clause 3(7) the contractor is forbidden to use any of the docu-
merits supplied under or referred to in the clause for any purpose other
than the contract to which they refer. The employer, the architect and
the quantity surveyor are prohibited from divulging the contractor s rates
and prices in the Contract Bills except for the purposes of the contract.
Clause 3(8) is a provision of a different nature. it provides that any
certificate to be issued by the architect under the contract is to be
issued to the contractor and it seems strange that there is no express
provision requiring a duplicate to be issued to the employer. Good
contract practice dictates that this should be done as a matter of course.
Clause 4

Statut . r . . i . at ions, n tices,

fees . d ch rges

4 (1) The Contractor shall comply with and give all notices required by
any written law applicable to the territory or territories of Malaysia in
which the works are to be carried out, any instrument, rule or order
made under any written law applicable to the territory or territories of
Malaysia in which the works are to be carried out, or any redulation or
byelaw of ally local authority or of any statutory undertaker which has
any jurisdiction with regard to the Works or with whose systems the
same are or will be connected. The Contractor before making any
variation from the Contract Drawings or the Contract Bills necessitated
by such compliance shall give to the Architect a winten notice specify-
ing and giving the reason for such variation and the Architect may issue
instructions in regard thereto. If within seven days of having given the
said \\, mien notice the Contractor does not receive any instructions in
regard to the matters therein specified, he shall proceed with the work
confonning to the written law applicable 10 the territory or territories of
Malaysia in which the works are to be carried out, instrument, rule,
order, regulation or byelaw in question and any variation thereby neces-
sitated shall be deemed to be a variation required by the Architect.
(2) The Contractor shall pay and indemnify the Employer against Iia-
bility in respect of any fees or charges (including any rates of taxes)
legally demandable under any written law applicable to the territory or
territories of Malaysia in which the works are to be carried out, any in-
strument, rule or order made under any written law applicable to the
territory or territories of Malaysia in which the works are to be carried
out, or any regulation or byelaw of any local authotity or of any SIatu-
tory undertaker in respect of the Works. Provided that the amount of
any such fees or charges (including any rates or taxes) shall be added
to the Contract Sum unless they
(a) arise in respect of works executed or materials or goods supplied
by a local authority or statutory undertaker for which a prime cost
sum is included in the Contract Bills or for which a prime cost
sum has arisen as a result of Architect's instructions oiven under
clause 11(3) of these Conditions, or
(b) are priced or stated by way of a provisional sum in the Contract
Bills.
*.,,,,**.""" "" "' "

I. *\;; . I ..:...;:'-
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***. . ., .,._ * ,

-,. -: ...,.
,
\

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\
\ , Skilli!OJT ob!!^allo, is. norices. fees and CAOiges 27
..... \

, ,
*
Clause 4(I) is a short but important provision which is sometimes
... ..
:....
:,
* misunderstood. At one time it was suggested that the contractor's obli-
:
,,

**,...^. ;'*
-
galion was restricted to complying with or giving statutory notices. De-
o.
*~**;;* spite the punctuation of the first sentence. it is clear that the contractor
**^"
I
is bound to comply with any applicable written law, to statutory provi-
** . *-'. '*
sions, in the territories of Malaysia where the works are belno carried
out. This written law includes delegated legislation such as building by-
\.,
\
laws. indeed the contractor's obligation to so comply is made plain by
\
the final sentence. Even if that statement were not present, the position
*

* ,
would be the same, and the matter was considered by the English Court
of Appeal in Townsends (Builders) Lid v Cinema News & PI. opei'Iy
\

Managemeni Ltd (1958) 20 BLR 118.1n that case Lord Evershed MR,
while critical of the draftsmanship of the equivalent English provision,
had no difficulty in discernino that the contractor was under an oblioa-
lion to comply with the by-laws, etc as well as to o1ve any required
notices-.

in this context, the provisions of the Street, Drainage and Buildino

Act 1974, and by-laws made thereunder, are of particular importance.
The contractor's statutory obligation is to comply with those by-laws
and section 71 of the 1974 Act makes "the person responsible for . . .
misconstruction of " a building criminally liable if the building fails.
it the contractor finds a diver o6nce between the statutory require-
merits and the Contract Drawings or Bills which means that he must
depart from the contract documents, he must notify the architect in
writing specifying the deviation and giving the reason for it, to coinpli-
an CG with the relevant statutory requirements. The architect may then
issue an appropriate instruction. Where the contractor receives no in-
SITUction from the architect within seven days of having given notice,
he must proceed to execute the work so that it complies with the star-
utory provisions. This overrides his general contractual obligation to
comply with the architect's design and instructions.
The work so done "and any variation thereby necessitated shall
be deemed to be a variation required by the architect" and will fall to
be valued accordingly under clause 11. in an appropriate case, it is
submitted, there would be a right to an extension of time under
clause 23 (e).
The contract is silent as to what is to happen if the architect notices
a divergence between the contract documents and statutory requirements,
but in principle he is bound to issue any necessary instruction, includ-
ing a variation instruction, so as to ensure the necessary compliance
with statute.
Clause 4(2) deals with "nabitity in respect of any fees or charges
(including rates or taxes) legally demanded" by statutory authority. The
opening words provide that "the contractor shall pay and indemnify the
employer against liability in respect of any fees or chardes" but some-
what surprising Iy the sub-clause goes on to provide for such fees to be
added to the Contract Sum unless :
28 CIOi, se 4

(1) they arise in respect of work done or goods or materials supplied

by a local authorit> or statutory undertaker for \\ hich a PC sum is
included in the Contract Bills or for which a PC sum has arisen as
a result of an architect's instruction under clause 11(3); or
the^ are priced or stated by way of a provisional sum in the
Contract Bills.
Clause 5

Levels and setting-out of

the works

5 The Architect shall dererrnine any levels which may be required for the
execution of the Works, and shall furnish to the Contractor by way of
accurately dimensioned drawinos such infomiation as shall enable the
Contractor to set out the Works at ground level. Unless the Architect
shall otherwise, instruct, in which case the contract sum shall be ad-
justed accordingly, the Contractor shall be responsible for and shall
entirely at his own cost amend any errors arising from his own in-
accurate setting out.

The architect has two duties under this clause. First, he must detennine
any levels required for the execution of the Works. Second, he must
provide the contractor with accurately dimensioned drawings to enable
him to set the Works out at ground level.
All setting-out above ground level is a matter for the contractor, but
he may need to be provided by the architect with working drawings to
enable him to set out where the contract drawings are insufficiently
detailed. The contractor is, of course, responsible for any maccurate
setting-out due to his own fault and must amend any errors resulting
from his maccurate setting-out at his ouni cost "unless the architect
shall otherwise instruct, in which case the Contract Sum shall be ad-
justed accordingly". On one reading of this provision, it would appear
that the architect is empowered to add the costs of erroneous setting-
out to the Contract Sum so that the employer would have to pay for the
contractor's error. On any purposive interpretation of the clause this
camot be the case. it is thought that the only sensible interpretation of
this ineptly-worded provision is that if the work can be accepted by the
employer as incorrectly set-out, then the Contract Sum may be red"ced
to take account of the error.
Clause 6

t r'. Is, goods an orkm nshi .

con or to . escrip ion, testin .
and inspection

6 (1) All materials, goods and workmanship shall so far as procurable

be of the respective kinds and standards described in the Contract Bills.
(2) The Contractor shall upon the request of the Architect furnish him
with vouchers to prove that the materials and Goods comply with sub-
clause (I ) of this Condition.

(3) The Architect may issue instructions requirino the Contractor to

open up for inspection any work covered up or to arrange for or carry
out any' test of any materials or goods (\\'he ther or not already, incorpo-
rated in the Woi'ks) or of any executed v, ork. and the cost of such
opening up or testing (logetlier with Ihe cost of niaking good in conse-
quence thereof ) shall be added to 111e Contract Sum 11nless provided for
in the Contract Bills or unless the irisoectioii or test shows tliat the
work. materials or goods are not in accordance with this Contract.
(4) The Architect may issue instructions in regard to the removal from
the site of any work, materials or goods which are not in accordance
with this Contract.

(5) The Architect may (but not unreasonably or vexatiously) issue in-
sumctions requiting the dismissal from the Works of any person em-
ployed thereon.

This is an important provision, which must be read against the general

law and in conjunction with the contractor's primary obligation in clause
I(I). The Contract Bills will usually specify the kinds and standards of
materials or goods. They may also specify the standard of workman-
ship. Where they do not so specify, it is submitted that there will be an
implied tenn that the materials or o00ds will be of merchantable qual-
ity and that the workmanship will be carried out with reasonable care
and skill.
in clause 6(I) the words "so far as procurable" oive the contractor a
valuable protection, as without them his oblioation to provide the s eci-
fled materials would be an absolute one, The words protect the contrac-
tor from having to obtain things which have become unobtainable since
the date of tender. Unfortunately, the clause does not s 611 out what the
30
 More rin/s, goods and workmanshij710 conform 10 desc, '!prion, resi!'rig and Irispecrion 31

effect should be if the materials, Goods or workmanship are not in fact

procurable. Presumably, in that event any instruction of the architect
perrnitting substitution will constitute a variation under clause 11. The
provision does not peruiit the contractor to substitute materials, goods
or workmanship for those described in the Contract Bills without first
seeking an architect's instruction. if the contractor substitutes goods or
materials, etc without a prior instruction, he is in breach of contract,
but, as noted, any instruction given by the architect will be a variation
instruction under clause I I.
Clause 6(2) is self-explanatory and provides for the contractor to
submit vouchers to the architect when the architect requests the con-
tractor to prove that materials and goods comply with the contract.
Clause 6(3) empowers the architect to require the contractor to open
up for inspection any work covered up and to arrange for or carry out
any tests of materials or goods (whether incorporated into the Works or
not) or of any executed work in order to prove compliance with the
contract. This power extends to the date of practical completion. The
contractor can recover the cost of opening up, testing and making good,
unless this has been provided for in the Bills "or unless the inspection
or test shows that the work, materials or goods are not in accordance
with the contract".
Where the inspection or testing does not disclose disconfonnity, the
contractor may have a claim for extension of time under clause 23(i)
and the right to recover any direct loss and/or expense caused by the
opening up and testing which disturbs regular progress of the Works
under clause 24(I)(b).
The remedy provided by this sub-clause is inadequate from the
employer's point of view except for "spot checks".
Clause 6(4) Ginpowers the architect to order the removal of defective
work, materials or goods. There is no express power to order its re-
execution, as there was in an earlier version of the UK parent form.
The wording should be noted carefully. it provides :
The Architect may issue instructions in regard to the removal from the
site of any work, materials or goods which are not in accordance with
this Contract.

it is submitted that this must bear a narrow meaning and the clause is
in need of amendment, for example, by providing expressly for the re-
execution of any defective work and extending the architect's powers
to deal effectiveIy with defective work during the progress of the Works
: see clause 15(2) as to the contractor's liability for defects during the
defects liability period.
As presently worded the architect's power under clause 6(4) is Iim-
ited to ordering removal of the offending work, materials or goods, and
he camot merely condemn it without ordentig removal. This was so
held by an English judge of great experience in construction law in
Holland Hannen & CMb^^t (Northern) Ltd v We!sh Health Technical
32 Clawse 6

Sei'\, Ices Oi'80nizoiioit (1981) 18 BLR 80, where a sub-contractor in-

stalled windows in a hospital which were defective in both design and
workmanship. The architect issued a notice under a contract provision
identical in its wording with clause 6(4) condemnino the windows as
not complying with the contract.
Judge John Newey QC gave a literal interpretation to the provision
and held the notice invalid. "The architect's power under clause 6(4) is
simply to instruct the removal of the work or materials from the site on
the ground that they are not in accordance with the contract. A notice
which does not require removal of anything is not a valid notice under
clause 6(4)", he said.
Architects must ensure that any notice issued under clause 6(4) is
phrased sinctly in accordance with its wording. They should then issue
an express instruction requiring the re-execution of the work condemned
and, if this is ignored by the contractor, they should invoke clause 2(2)
by bringing in other contractors.
On balance, there is little doubt that the sub-clause needs substantial
redrafting.
Clause 6(5) deals with the architect's right to instruct "the dismissal
from the Works" of any person employed thereon, to to instruct their
exclusion from site. He is not to exercise this power "unreasonabl , or
vexatiously" and the inclusion of these words ensures that the clause is
used only rarely. The contractor' has no right to claini for the cost of
compliance with such an instruction.
Clause 7

Royalties and patent rights

7 All royalties or other sums payable in respect of the supply and use in
carrying out the Works as described by or referred to in the Contract
Bills of any patented articles, processes or inventions shall be deemed
to have been included in the Contract Sum, and the Contractor shall in-
demnify the Employer from and against all claims. proceedings, dam-
ages, costs and expenses which may be brought or made against the
Employer or to which he may be put by reason of the Contractor in-
fringing or being held to have infringed any patent rights in relation to
any such articles, processes and inventions. Provided that where in
compliance with Architect's instructions the Contractor shall supply and
use in carrying out the Works any patented articles, processes or inven-
tions, the Contractor shall not be liable in respect of any infringement
or alleged infringement . of any patent rights in relation to any such
articles, processes and inventions and all royalties damages or other
monies which the Contractor may be liable to pay to the persons en-
titled to such patent rights shall be added to the Contract Sum.

The principle of this clause is that if royalties or other sums are pay-
able for any patented articles, processes or inventions used in carrying
out the Works as described in the Contract Bills, these are the
contractor's responsibility. This responsibility extends to any proceed-
ings arising out of breach of patent rights, and the contractor gives the
employer an indemnity against any such liability.
However, the contractor is relieved of liability if he supplies and
uses patented articles, processes, or inventions "in compliance with
architect's instructions". in that case, the responsibility is that of the
employer and the Contract Sum is to be adjusted accordingly. it must
be said that the wording of the proviso is inept and obscure, but pre-
sumably the architect's instructions referred to must mean instructions
to supply or use patented articles, etc which the contractor would not
otherwise have used.
Clause 8

ore an-In-c 'roe

The Contractor shall constantly keep upon the Works a competent fore-
man-in-charge who shall be capable of receivino verbal instructions in
Malay or English and any instructions diven to him by the Architect
shall be deemed to have been issued to the Contractor.

This is an important clause because the foreman-in-charoe is the

contractor s agent not only for the purposes of receivino any architect's
instructions and clerk of works' directions, but also for the purpose of
receiving any of the many notices which may be required to be ser\, ed
on the contractor under the contract : see clause 2(4).
Surprising Iy, no expi. ess sanction is provided for breach of the obli-
gation to provide a competent foreman-in-charde despite its immense
practical importance. Of course, if the architect fontted the opinion that
the contractor's appointed representative was incompetent, lie could
instruct his removal from the Works under clause 6(5).
The clause requires the contractor "constantly" to keep upon the
Works "a competent foreman-in-charge who shall be capable of receiv-
ing verbal instructions in Malay or English". "Constantly" can only mean
what it says, to all the time the Works are beino carried out, while
"competent' means that the person appointed must have sufficient skill
and knowledge to enable him to perform his functions properly.
There is no practical significance in the term "foreman-in-charde";
the contractor's obligation is to provide a competent representative on
site who is capable of receiving architect's instructions. Any instruc-
tions given to him by the architect are deemed to have been given to
the contractor, so that clause 2(I) applies immediately.
 \
~**: .:-.
**, . .
{;-\:'.
;*"'.^': '
*,"****** *.
$1. I' .1-'
it. . ^
**** '
$1{' { ; '
, ****

... 44 I Clause 9
*." ~ '.

..

....
.*
***
***
*, Access for architect to the works
' '..*
**
** ,

^^9
I;

*
**
9 The Architect and his representatives shall at all reasonable times have
**

* *,
access to the Works and to the workshops or other places of the Con-
44
, tractor where work is being prepared for the Contract. and when work
,
is to be so prepared in workshops or other places of a sub-contractor
(whether or not a nominated sub-contractor as defined in clause 27 of
,.',; these Conditions) the Contractor shall by a tenn in the sub-contract so
{

*
far as possible secure a similar right of access to those workshops or
places for the Architect and his representatives and shall do all things
reasonably necessary to make such right effective.

This provision confers express power on the architect and his represen-
tatives to have access to the Works, and to the workshops or other
places of the contractor where work is being prepared in compliance
with the contract. The right of access is one "at all reasonable times",
which must mean during working hours'
Where, as is usually the case, work is to be prepared in the premises
of a sub-contractor, the contractor undertakes "so far as possible" to
ensure a similar right of access to those premises by means of a terni
in the sub-contract. He also undertakes to "do all things reasonably
necessary to make such right effective". This seems to be purely pre-
catory. However, it is important that this provision should be stepped-
down in any sub-contract. in the case of nominated sub-contracts, clause
27(a)(Ix) provides that it shall be a term of the sub-contract that the
architect and his representatives be allowed necessary access to the
nominated sub-contractor's premises.

35
 Clause I O

Clerk or s

10 The Employer shall be entitled to appoint a clerk of works whose duty

shall be to act solely as inspector on behalf of the Employer under the
directions of the Architect, and the Contractor shall afford every reason-
able facility, for the pelfomiance of that duty. it any directions are given
to the Contractor or to his foreman upon the Works by the clerk of
works the same shall be of no effect unless given in regard to a matter
in respect of which the Architect is expressly Ginpowered by these
Conditions to issue instructions and unless confirmed in writino by the
Architect within two working days of their being given. if any, such
directions are so given and confirmed then as from the date of confir-
mation they shall be deemed to be Architect's instructions.

The two sentences of 111is clause niight in o1'e conveniently have been
divided into sub-clauses as they deal with diffei'ent aspects of tlie same
subject, whicli is largely important in practice. in tile narui'e of thinos,
the architect \, is its the site only periodically. in contracts of any, in ao-
nitude it is necessaiy for the employ, a' to have a full-time represent-
ative on site to assist the architect in his duties of supervising of the
work and in particular to ensure compliance with the contract provi-
sions with regard to standards of materials and workmanship.
The first sentence Ginpowers the employer to appoint a clerk of works
and clearly labels him an illspecioi', to someone who examines closely
the contract Works as they proceed, His authority is very limited; he is
to act solely as an inspector" and can originate nothino. The contrac-
tor is bound to afford the clerk of works "every reasonable facility" for
the performance of his duties.
The clerk of works is employed and paid by the employer even though
in some cases he will have been recommended by the architect. There
is English case law authority which says that where an employer
appoiiits a clerk of works, the employer is vicariously responsible for
any negligence by him in the perfomiance of his duties. in appropriate
cases this could reduce the negiioent architect's financial liability to
the employer, eg where the arcliitect has been Guilty of neonoent
supervision.
The case in question is Kensii?gioii & Che/sea & WeSIminsiei' A, 'e@
Heo11h Awn?o1'1'ty v Wetiei7? Con?pornes Lid (1984) I ConLR 114, where
 Cle, 'k of ", 0"As 37

it was held that the appointment of a clerk of works. whilst a factor to

be taken into account, does not reduce the architect's liability to use
reasonable skill and care to ensure conformity with design, as opposed
to mere detail. However, the clerk of works acts as the eyes and ears
of the architect and has a responsibility to keep him infonned as to
what is happening on site. On the facts, the clerk of works was negli-
gent in failing to keep an eye on the work as it progressed, and as he
was an employee of the employer. the latter was vicariously respon-
sible for him. This had the effect of reducing the negligent architect's
financial liability to the employer by 20%.
The second part of clause I O deals with d!}ections issued by the
clerk of works to the contractor or his foreman. A direction of the clerk
of works has no effect as such. in theory, when a direction is Given it
can be ignored until confimned in writino by the architect. The architect's
confirmation converts the direction of the clerk of works into an
architect's instruction.
11 is a serious gap in the draftsmanship that confirmation of the clerk
of works' direction by the contractor to the architect is not a method of
validating the direction.
A clerk of works' direction can be converted into an architect's in-
struction if :

(1) it relates to a matter on which the contract conditions Ginpower

the architect to issue instructions; and
(2) it is confinned by the architect within two working days of being
given.

it so confirmed, the direction is deemed to be an architect's instruction

as fom the date of confirmation.
This could - in theory at least - cause problems if the direction
involves a variation.
Clause 11

V ' tio s, p ovis'on al an pri e

c st s ms

(1) The Architect may issue instructions requiring a variation and he

may, sanction in writing any variation made by the Contractor otherwise
than PUTSuant to all instruction of the Architect. No variation required
by the Architect or subsequently sanctioned by him shall vitiaie this
Contract.

(2) The term "variation" as used in these Conditions means the altera-
tion or modification of the design, quality or quantity of the Works as
shown upon the Contract Drawings and described by or referred to in
the Contract Bills, and includes the addition, omission or substitution of
any \\, ork, the alteration of the kind or standard of ally of the niaterials
or goods to be used in the Works, and the reinoval from the site of any
work Inaterials or goods executed or brought thereon by, the Contractor
for the purposes of the works oilier than work materials or goods which
are not in accordance with 111is Contract.

(3) The ,Architect shall issue instructions in Terrard to the expenditure

of prime cost* and provisional sums included in the Contract Bills and
of prime cost sums which arise as a result of instructions issued in
regard to the expenditure of provisional sums.
(4) All variations required by the Architect or subsequently sanctioned
by him in writing and all work executed by the Contract or for which
provisional sums are included in the Contract Bills (other than work for
which a tender made under clause 27(g) of these conditions has been
accepted) shall be measured and valued by the Quantity Surveyor who
shall give to the Contractor an opportunity of be ino present at the time
of such measurement and of taking suclI notes and measurements as the
Contractor may require. The valuation of variations and of work exe-
cuted by the Contractor for which a provisional sum is included in the
Contract Bills (other than work for which a tender has been accepted as
aforesaid) unless otherwise agreed shall be made in accordance with the
following rules:
(a) The prices in the Contract Bills shall determine the valuation of
work of similar character executed under similar conditions as work
priced therein;
(b) The said prices, where work is not of a similar cliaracter or exe-
cuted under similar conditions as aforesaid, shall be the basis of
prices for the same as far as may be reasonable, failing which a
fair valuation thereof shall be made;
 Voltorions. PIO\ is!brio! and prime cos! sums 39

(c) Where work cannot properly be measured and valued the Con-
tractor shall be allowed day-work-rates on the prices prevailing
when such work is carried out (unless otherwise provided in the
Contract Bills):
(i) at the rates, if any, inserted by the Contractor in the Contract
Bills or in the Form of Tender; or
(ii) when no such rates have been inserted, at the actual prime
cost to the Contractor of his material, transport and labour for
the work concerned, plus fifteen per cent, which percentage
shall include for the use of all ordinary plant, tools and scaf-
folding, and for supervision, overheads and profit;
Provided that in either case vouchers specifying the time daily
spent upon the work (and if required by the Architect the
workmen's names) and the materials employed shall be delivered
for verification to the Architect or his authorised representative
not later than the end of the week following that in which the
work has been executed;
(d) The prices in the Contract Bills shall detennine the valuation of
items omitted; provided that if omissions substantially vary the
conditions under which any remaining items of work are carried
out the prices for such remaining items shall be valued under rule
(b) of this sub-clause.
(5) Effect shall be given to the measurement and valuation of vari-
ajions under sub-clause (4) of this Condition in Interim Certificates and
by adjustment of the Contract Sum; and effect shall be given to the
measurement and valuation of work for which a provisional sum is
included in the Contract Bills under the said sub-clause in Interim
Certificate and by adjustment of the Contract Sum in accordance with
clause 30(5)(c) of these Conditions.
(6) If upon written application being made to him by the Contractor,
the Architect is of the opinion that a variation or the execution by the
Contractor of work for which a provisional sum is included in the
Contract Bills (other than work for which a tender made under clause
27 (g) of these Conditions has been accepted) has involved the Con-
tractor in direct loss and/or expense for which he would not be reim-
bursed by payment in respect of a valuation made in accordance wit
the rules contained in sub-clause (4) of this Condition and if the said
application is made within a reasonable time of the loss or expense
having being incurred, then the Architect shall either himself ascertain
or shall instruct the Quantity Surveyor to ascertain the amount of such
loss or expense. Ally amount from time to time so ascertained shall e
added to the Contract Sum, and if an Interim Certificate is issued after
the date of ascentirunent any such amount shall be added to the amount
which would otherwise be stated as due in such Certificate.

* Footnote - The term "prime cost" may be indrcoted by the abbrevi@-

lion "PC" in any document relating to this Contract (including the
Contract Bills), gad wherer, er the abbreviation is used it shall be deemed
to mean "prime cost" .
 40 Cm, Ise I I

Clanse 11 is one of the niosi important in the contract, since with t

express power tile employer would have 110 right 10 instruct an , vai'I-
ation in the contract work. Power to require variations is essential in
any modem construction contract.
CIOitse 11(2) contains a definition of "variation" for the u OSes f
the contract, which at once defines and limits the architect's owers
regards what may be instructed as a "variation" An jin onant lociii?
in that definition is that the architect has no authorit to re uire v '-
ations in any obligations and restrictions which may be jin OSed on 111e
contractor s methods of workino in the Contract Bills.
CIO"se 11(I) not only empowers the architect to issue instructions
requiring a variation as defined in clause I I(2), but also to "sanction in
writing any variation made by the contractor otherwise than ursuant t
an instruction of the architect". This power is pennissive and its exe -
cise is a matter for the architect's discretion, allhouoh that discretion is
subject to review in arbitration under clause 34. The architect's sub-
sequent sanction of a variation made by the contractor without
instruction validates it retrospective Iy : see clause I I (4).
The earlier overriding provision as to instructions be in in writ'
(see clause 2(3)) is obviously of particular importance in re ard to
variation instructions which are, in practice, a common around of claims
for extra cost. TITat the provision is open to abuse is illustrated by Ih
English case of SiringIex Colici'cie Piles Lid v London 80, o1^"/I ;/' SI
Poncias (1958) 14 BLR 18 where dunno the course of carr inn out tile
works a pile selected for test failed and the conti'actors conclude ' Ih, I
the piles would not be able to cam, the woi'king load s ecified. Th ,
therefore proposed to the architect the employment of a s ecialist f'
at extra cost and wrote seeking his "instructions and views as to the
extra cost which will be involved". The architect re lied sa ino "
are prepared to accept your proposal". it was held that the letter con-
stituted a variation instruction for which the contractors were entitled t
be paid. Had the contractor not been pennitted to deviate f h
specified works, they might have been unable to recover an Ihi g f
what they had done and would have been liable in damao I' h
employer for the additional cost in coinpletino the works because, .'
IQcie they were in breach of contract.
Clause 11(I) goes on to provide that no variation "shall vinate this
contract . This traditional phrase must be read in the Ii ht of th d -
scription of "the Works" in the recitals to the Articles of A re
The purpose of the statement is to ensure that the orderino of b
tial variations will not entitle the contractor to treat the contract a t
end and claim to be paid on a quontum meI'Mii basis rather Ih '
accordance with the contractual tenns.
However, despite the wide scope of this phrase there is a limit t Ih
extent and nature of the variations which in a be ordered. it ' I
' the Works ' as described in the contract documents that b I
or modified and the architect's power does not extend to d
 Vo, 'iati0,13. PIO\'is Ib, 101 and PI'jine cost sums 41

additions or substitutions that would require the contractor to execute

work clearly not contemplated by the contract.
Certainly the architect cannot substantially alter the nature of the
Works, eg by changing a steel-framed building into a reinforced con-
CTete-framed building.
A variation is something essentially ancillary to the original contract
work. The variation instructed must not only fall within the definition
in clause 11(2) but must also have some direct relation to "the Works"
as defined. However, the number of variations is immaterial; the real
question is whether the "variation" fundamentally changes the nature of
the work which the contractor has contracted to carry out and coin-
PIete. it it purports to do so, the variation instruction is invalid.
Clause 11(2) defines the tenn "variation" and thereby limits the
architect's powers to issue instructions requiting a variation to matters
falling within the definition. it is important for the contractor to be CGr-
tain that an instruction to vary is in fact for a variation within this
clause, and if necessary the procedure prescribed by clause 2(2) should
be invoked. Like other instructions, a variation instruction must be in
writing (see clause 2(3)) which would include a drawing showing work
to be varied even though not accompanied by an instruction expressed
in words.
"Variation" for the purposes of the contract covers four main topics :
(1) alterations or modifications of the design, quality or quantity of
Works as shown on the Contract Drawings and described by or
referred to in the Contract Bills;
(2) the addition, omission or substitution of any work so shown or
described;
(3) the alteration of the kind or standard of any materials or goods to
be used in the Works;
(4) the removal from site of any executed work or the removal of
goods and materials, provided this is not on account of failure by
the contractor to provide work, goods and materials in accordance
with the contract.

Despite the width of this definition it imposes limitations on the

architect's power which is limited to ordering variations as here
defined. Under the general law, for example, the power to vary by way
of "omission or substitution" does not enable the architect to omit the
work in order to give it to another contractor. The instruction must be
one for a genuine omission, to something to be omitted entirely from
the Works.
Work which fomis part of the contract camot be taken away from
the contractor and given to another contractor, no matter how widely
phrased the variation clause may be : Carr v IA Berriman Ply Ltd
(1953) 27 ALJR 273; Gullogher v Himch (1889) NY 45 App Div 467.
Those matters apart, however, the power to omit work is virtually
unlimited.
 42 Clawrc U

Clause 11(3) requires the architect to issue instructions for the ex-
penditure of any prime cost (PC) and provisional sums included in the
Contract Bills and of prime cost sums which arise as a result of ' t
lions for the expenditure of provisional sums. 11 seems clear froni the
use of the word "shall" (and the use of the same word in clause 27(a)(b))
that the architect is bound to issue instructions on the ex enditu f
PC sums. to to exercise the power to nominate s ecialists. Indeed,
will be seen, if a first nomination fails before the work done und
PC sum instruction is completed, there is a duty on the Gin 10 er
(through the architect) to nominate another sub-contractor to succeed
the first : TA Bickeito, I & Co Ltd v Noi. th-WeSI Men. 0 o17 H I
Boor. d 119701 I All ER 1039 HL. The effect of nomination b wa of
a PC sum instruction is considered under clauses 27 and 28.
Not unexpectedly, the contract contains no definition of eith
prime cost or provisional sums, and definitions based on SMM in a be
useful ,

(1) A provisional sum is one provided for work or for costs which
cannot be entirely foreseen, defined or detailed at the time th
tendering documents are issued.
(2) A prime cost sum is one provided for work or services to be
executed by a nominated sub-contractor, a statuto authority o
public undertaking or for materials or o00ds to be obtained f
a nominated supplier.
Provisional sums can only be \, andly expended aoainst instructions d
clause I I(3). Such instructions may, for example, give some of the wor'
to the contractor and the remainder to a specialist sub-cont a I
instruct that some goods are to be obtained from a su lier nominat d
by the architect.
The contractor's work ordered under such an instruction falls I b
valued under clause I I (4) and clause I I (6) (if appropriate), while that
of the nominees will be dealt with under the relevant sub-c t
supply contract. The possibility that the expenditure of Tovisio I
may involve a nomination and therefore the substitution of a PC
for all or part of the provisional sum is covered b the last h
clause 11(3).
Clause 11(4) provides for the measurement and valuation of:
(1) variations as defined in clause 11(2);
(2) any contractor's work ordered by the architect when is sum 'n-
SITUctions on the expenditure of provisional sums.
The rules for valuation are only applicable to these two ite , d h
rules apply ""litess otheit-I, ise agi'eed" between the e I d h
contractor. it is sometimes SUGgested that the words " I h
agreed" in clause 11(4) mean "agreed by or with the uantit surve "
but this view was decisively rejected b the E o1' h H' h C
 Vari'orlons. pro\. is Ibna/ and prime cosr sums 43

John Laing Construction Ltd v County and District Properties Ltd (1982)
23 BLR 10 for reasons which are entirely convincing. The words mean
"agreed between the contracting parties" although of course the em-
ployer may give the quantity surveyor express authority to make such
an agreement.
The role of the quantity surveyor under a contract identical in tenns
10 the PAM fomi was fully considered in the Laing case. it was held
that his "function and authority under the contract are confined to
measuring and quantifying. The contract gives him authotity, at least in
certain Instances, to decide quantum . . . it does not in any instance
give him authority to detennine any liability, or liability to make any
payment or allowance . . .".
There are, in fact, few express references to the quantity surveyor in
the contract. He is identified in Article 4 of the Articles of Agreement;
by clause I I (6) he is given the express duty of measuring and valuing
variations; by clause I I (6) he is given the duty of ascertaining loss and
expense involved in a variation if so instructed by the architect; by
clause 24(I) he is given a sintilar duty in respect of loss or expense
caused by disturbance of regular progress of the Works.
The quantity surveyor's position appears to be as stated by Lord Rad-
cliffe in the well-known English case of RB Burden Ltd v Swanse@
Corporati'on 119571 3 All ER 243, HL, where he said :
Generally speaking, I regard the quantity surveyor as the person charged
with the duty of valuing the contractor's work and advising the architect
as to the allowance of his claims for payment. But I do not see anything
in the contract which suggests that the architect is bound to accept the
quantity surveyor's opinions or valuations when he exercises his own
function of certifying sums for payment. At that point the architect
remains master in his own field.

it is suggested that this statement applies to the quantity surveyor

operating under a contract in PALl fomi. indeed, the quotation from
Lord Radcliffe's speech was cited with approval by BTH Lee I in Shen
Yuan Pat v Doto Wee Hood Teck [1976] I ^^^rr. ,I 16 and may therefore
be taken as an expression of the position in Malaysia.
Clause I I (4) has no application to work for which a prime cost sum
is included in the Contract Bills or which arises under clause 11(3) or
as a result of a variation instruction substituting prime cost sum for
work which was originally billed, to where the architect has changed
his mind and wishes to have that work done by a specialist sub-
contractor. Such work is dealt with under clauses 27 and 30.
Clause I I(4), then, provides that, unless otherwise agreed between
the parties, all variations and all work executed by the contractor as a
result df a provisional sum instruction are to be measured and valued
by the quantity surveyor in accordance with the prescribed rules. These
valuation rules are set out in the order of application. The quantity
surveyor must give the contractor an opportunity of being present at the
 44 CIOii$e U

time of measurement and of taking such notes and measurements as 116

requires.
Tile rules for valuation are :
Rule I says that the prices in tile Contract Bills shall delemiine the
valuation of work of a similar character executed under similar condi-
lions : clause I I(4)(a).
Rille 2 might witli advantage have been sub-divided as it contains
two methods of valuation. First, where work is not of a similar charac-
Ier or executed under similar conditions, tile Bill rates and prices "so
far as may be reasonable" shall be used. Second, if that is mapplicable,
a fair valuation must be made : clause 11(4)(b). TITe Bill rates and
prices provide the starting point.
R"Ie 3 applies where work cannot be properly nieasured and valued.
Then, unless otherwise provided in the Contract Bills, the contractor is
to be allowed day-work rates on the prices prevailino when the work is
carried out. This is to be done at the rates (if any) which the contractor
has put in the Contract Bills or Form of Tender o7. , if no rates have
been so inserted, at the actual prime cost to the contractor of his
materials, transport and labour for the work concerned, plus 15%. The
percentage addition is inclusive of the use of all ordinary plant, tools,
scaffolding, supervision, overheads and profit : clause I I (4)(c).
The proviso makes it clear that in both cases day-work vouchers
must be produced for verification not later Inari the end of the week
following that in which the woi'k was executed.
Rifle 4 deals \\, ith omitted work. Tile Bill prices determine its valu-
an on. However, if the omission subsioiiii'@16, cha, lyes 1/1e colldriib, is
Mildei' M, hic/I ally I'emailiiiig lienzs of woi'k ale cal','led owl the prices of
the remaining items are ascertained in accordance with Rule 2.
it will be noted that there is no specific requirement for the quantity
surveyor operating these rules to take into account lump-sum or
percentage adjustments set out in the Contract Bills or the effect of
variations upon preliminary items. 11 is nonetheless thouoht that the quan-
tity surevyor is under an obligation to take such matters into account.
The obligation to revalue work not itself varied where a variation chanoes
the conditions under which it is to be carried out only relates to the
effect of omissions and not of additions or substituted work.
CIQuse 11(5) provides for the cost of variations valued under clause
I I (4) to be included in interim certificates. Such valuations, like all
matters included in interim certificates, are subject to revision in the
final certificate : see the commentary on clause 13 for the reference to
the Contract Sum.
The cost of contractor's work done under an instruction for the ex-
penditure of a provisional sum is also to be included in interim centfi-
cates. The machinery for finally determining the valuation of contractor's
provisional sum work is that the actual sums expended are set a amst
the provisional sum and the actual figure is added to or deducted from
the Contract Sum. Any revision of the interim valuations for such work
 Valid!lolls. p, 'o1'isIbno/ and prime cos! $11ms 45
is carried out when determining the actual fioure as a am SI th '-
sional sum to be added to or deducted from the Contract Su :
clause 30(5)(c).
C/Quse 11(6) is a provision of great importance and is widel in'
understood. 11 deals with all direct loss and/or expense adsin fro
variations and not specifically covered by the valuation of the va ' d
work itself. Clause I I (6) applies only if the contractor makes a written
application to the architect to act and he must make his a Iic I'
timeously. Ie within a reasonable time of the loss or ex ense havi
been incurred' . it the contractor so applies, then the architect must fo
an opinion as to whether the contractor has been involved in direct I
and/or expense "for which he would not be reimbursed b a merit i
respect of a valuation made in accordance with" the rules in cl
I I(4). If he does so, the architect must then himself ascertain or '
struct the quantity surveyor to ascertain the amount of the loss and/or
expense which must then be added to the Contract Sum. Clause 11(6)
is directed to loss or/expense which stems directly from a variation or
the execution of work for which a provisional or rime cost an
included in the Contract Bills and for which the contractor w'11 t b
reinibursed under clause I I (4).
The contractor's wrttten application need not be in an art' I
fomn, but it must be in sufficient detail to enable the architect to krl
upon what question he is required to form an opinion. it is o0d
tice for a contractor claiming under clause 11(6) to set out as clearl as
possible his reasons for claiming that the valuation under clause 11(4)
is not sufficient recompense. it is open to the architect to call fo fu -
ther infomiation. The contractor's application must relate to dire t I
and/or expense which has already been incurred and the architect's owe
is limited to ascertairunent of the loss and/or expense incurred u to th
date of application. Successive applications must be made b the
tractor in respect of continuing direct loss and/or expense. All amount
ascertained under clause I I (6) must be included in the interim certifi-
cate next issued after the architect's decision on the claim.
[The] intention of the clause is to pennit the contractor to recover loss
and/or expense directly resulting from the variation, but not forrnin art
of the cost of the varied work itself, to the conse uential eff t f h
introduction of the variation upon other unvaried work. it wo Id al
cover, we suggest, items of cost which, while directl related to th
variation, cannot be covered by rates applied to measurement, e the 10
to the contractor involved where materials have alread been o d d f
the work as originally designed and made redundant b the vari t' . . . .
(POWe. 11-Smith and Sims, Building Contract Chims (2nd edition, 1988)
BSP Professional Books, page 198). '
"Direct loss and/or expense" means that the sums recoverable are
equivalent to damages at conrrnon law (Wr@18ht Ltd v pH & T (Hold-
I'rigs) Ltd (1968) 13 BLR 26), to the loss or ex ense which directl
and naturally results in the ordinary course of events from the matt
46 Clause U

specified : see section 74 of the Contracts Act 1950. it covers financino

charges where appropriate as one of its constituent parts : see the English
decisions of FG Milliei. Lid v Wets/I Heali/? Techiiico/ Sei. I, ices 01' on I'-
sarion (1981) 13 BLR I and Rees & Kii'by Lid v SM, oilseo Coi7?o1'01ion
(1985) 6 ConLR 34.
Contrary to the views espoused by some contractors, clause I I(6) is
a very limited provision which is only applicable to those cases where
the valuation under clause I I (4) is insufficient. This mostly arises where
the rules set out in clause I I (4)(a) and I I (4)(b) are applicable, as well
as where there is actual delay to progress caused by a variation.
Clause 12

Contract bills

12 (1) The quality and quantity of the work included in the Contract Sum
shall be deemed to be that which is set out in the Contract Bills which
Bills unless otherwise expressly stated in respect of any specified item
or items shall be deemed to have been prepared in accordance with the
principles of the Standard Method of Measurement of Building Works
last before issued by the Federation of Malaya and Singapore Branches
of the Royal Institution of Chartered Surveyors but save as aforesaid
nothing contained in the Contract Bills shall override, modify, or affect
in any way whatsoever the application or interpretation of that which is
contained in these Conditions.

(2) Ally error in description or in quantity or in omission of items

from the Contract Bills shall not vitiate this Contract but shall be cor-
rected and deemed to be a variation required by the Architect.

Clause 12 defines the work for which the Contract Sum is payable and
also provides for the correction of errors in items (not prices) in the
Contract Bills.
Clause 12(I) makes clear that the quality and quantity of work for
which the Contract Sum is payable is that given in the Contract Bills.
Unless otherwise expressly stated in respect of any specified item or
items, the Contract Bills are deemed to have been prepared "in accor-
dance with the principles" of the Standard Method of Measurement
referred to ("SMM").
The reference to the Contract Bills having been prepared "in accor-
dance with the principles" of the SMM is ambiguous and obscure and
it would have been better by far to have stated that the Contract Bills
are deemed to have been prepared in accordance with the current edi-
tion of the SMM. it is suggested that the only sensible way to interpret
this ambiguous phrase is that it should be read in this way and, while
the SMM provides a unifonn basis for me asuting building works and
embodies the essentials of good practice, it is clear that more detailed
infonnation than is required by Sunl must be given where necessary
in order to define the precise nature and extent of the required work.
This opens up a wide area of potential contractor's claims.
it the Bills are drawn up in any way other than "in accordance with
the principles" of the SMM, the contractor must be infomied. it he is
not so infonned it is thought that the contractor is entitled to assume
 48 C/diffe 12

that 1116 Contract Bills are drawn up in accoi'dance with the relevant
SMM.

TITe final part of clause 12(I) is \, itally important because it provides

that "save as aforesaid nothing contained in the Contract Bills shall
oven'Ide, modify, or affect in an} w^, whatsoever the application o1'
interpretation of that which is contained in these Conditions"
TITis describes the relationship between the Articles. the Conditions,
the Appendix and the Contract Bills and reverses the ordinar and se -
sible rule of contractual interpretation whicli is that written words in a
contract will prevail over printed conditions. in the nonnal course of
events, where a contract is contained in a printed form with writing
added - such as specially prepared provisions in the Contract Bills - if
there is any doubt about the meanino of the whole, Greater effect is
given to the writing than to the printed words. This is because written
words are taken to express more immediately the true intention of the
parties. T>, pewrttten or nandwritten \\ ords will be preferred to those
contained in a printed standard fomi of contract for the same reasons.
The latter part of clause 12(I) reverses that rule and precludes the
court from looking at any special Bill provisions to see what the real
intention of the parties is. If any Bill provision attempts to inodif or
override o1' affect the printed conditions in any way, those Tinted
conditions will prevail. Thus, a special clause in the Conti'act Bills which
conflicts with one of the printed conditions \\, ill be ignored.
Tilere are many decided English cases on the point. For exam Ie, in
Gold v PainioJi & Foihei. 1118ho, ?? Lid 1195812 All ER 497. tile En lish
Court of Appeal held That similai' \voiding nullified an insurance Tovi-
sion in the Contract Bills which was contrary to a provision in Ih
printed conditions.
This part of clause 12(I) should, in the writer's view, be entirel
deleted as in practice it often defeats the true intention of the art'
and there is no legal or logical justification for its inclusion.
If the parties wish to have any special terms which conflict with the
printed conditions, the fomi itself must be amended. I! .is msufficie I
for the Contract Bills to provide that the Articles of Aoreement a d
Conditions will be in the standard fomi "with certain amendments d
additional clauses as set out in the Bills" : see M/ Gleesoit (Contiuc-
10's) Ltd v Hillingdoi? London Boloug/? Council (1970) 215 EG 165.
CIO"se 12(2) pennits the correction of errors in items. 11 Tovides
that any error in description or in quantity or in omission of ifen?s from
the Contract Bills shall be corrected and such corrections shall b t t d
as variations. They will be valued accordinoly under clause I I (4). The
architect must make the necessary correction and it is the correcti
that is deemed to be a variation.
There is no provision whatever for the correction of errors in
ing, or in multiplication or addition. If the contractor makes a unilateral
mistake in his render, he cannot claim to have the contract set 'd .
Contracts Act 1950, section 23, provides:
 ^.
**
.,,

,
..

I*
*

Coni!. aci b!7/3 49

I
A contract is not voidable because it was caused b f h
it being under a mistake as to a matter of fact.
Thus, the contractor is stuck with any prtcino errors h k
*

It

by the English case of H!'ggi'ns v Noi'Iham roll C 2

I Ch 128. The better view is that such erroneou ^ '
to both original and any varied work.

,
Clause 13

Contract sum

13 The Contract Sum shall not be adjusted or altered in any way whatso-
ever otherwise than in accordance with the express provisions of these
Conditions, and subject to clause 12(2) of these Conditions any error
whether of arithmetic or not in the computation of the Contract Sum
shall be deemed to have been accepted by the parties bereto.

Clause 13 emphasizes that the Conditions are applicable to a lump-sum

contract, to an agreement by the contractor to do certain work for a
fixed sum. If the work is done as originally ordered then, no matter
what the work may have cost him, the contractor is entitled only to the
fixed sum called "the Contract Sum". This will nomially be the total of
the Contract Bills and the tender amount submitted by, the contractor or
as adjusted by negotiations at tender stage. Once the contract is made
the Contract Sum remains in violate. The Contract Sum can be adjusted
only in accordance with sonie pro\, is ion of the contract, eg an addition
may be made as a result of the valuation of a variation involving extra
work, or a reduction may be made if work is omitted by variation
instruction.
Clause 13 emphasizes that the parties are bound by the Contract Sum
as set out in Article 2 and that both parties are bound by any error in
it. Accordingly, it is of vital importance that any errors of anthmetic in
the Contract Bills are eliminated before the contract is made. If errors
are discovered subsequently, the loss lies where it falls. Of course, this
is subject to the very limited provision in clause 12(2), above, which
relates to errors in description or in quantity or omission of items
and to the rare situation where the remedy of rectification may be
approptiate : Marvel! v Low Boon Tit (1907) I FMSLR 3; Lim Hong
Shin v Leong Fong yew (1918) 2 FMSLR 187; y"ison Bi^n v Boltke, .s
Trust Co Ltd [1980] I MLJ 32.
 Clause 14

Unfixed materials or goods

14
Unfixed materials and goods intended for, delivered to, and laced on
or adjacent to the Works shall not be removed except for use upon the
Works unless the Architect has consented in writing to such removal
which consent shall not be unreasonably withheld. Where the value of
any such materials or goods has in accordance with clause 30(2) of
these Conditions been included in any interim Certificate under which
the Contractor has received payment, sucii materials and goods shall
become the property of the Employer, but subject to clause 20[B] or
clause 201Cl of these Conditions (if applicable), the Contractor shall
remain responsible for loss or damage to the same.

Cmuse 14 is a vesting clause and deals with 111!fixed materials and goods
intended to be fixed into the works. Under the general law, once the
are built into the works they become the property of the emplo^;CT. in
the absence of r v' ' , ""
the absence of provision to the contrary, the contractor's own;goods
and materials which he brings on site remain his properI until the
are built into the works : see the decision of the House of L6;as in
Reynolds v Ashby [1904] AC 406.
Considerable problems arise in the construction industry in eneral
and under the PAM form in particular because of the revalence of
retention of title clauses in the contracts of merchants and suppliers.
Many supply contracts contain a clause whereby the seller retains title
in the goods until he has been paid for them.
The right to retain title is recognized by section 25(I) of the Sale of
Goods Ordinance 1957 which provides :
Where there is a contract for the sale of specific goods or where goods
are subsequently appropriated to the contract the seller may by the ternis
of the contract or appropriation reserve the right of disposal of the goods
until certain conditions are fulfilled. in such case, notwithstanding the
delivery of the goods to the buyer . . . the property in the goods does
not pass to the buyer until the conditions imposed by the seller are
fulfilled.

The provisions of clause 14 are ineffective to defeat a retention of title

clause, and it is suggested that both clause 16 and clause 30(2), below,
need amendment.
 52 C/diffe 14

Tile sort of problems that do arise ai'e illustrated by the well-known

Englisli case of DaM, bel' 11 ill^^171soii Roofi}Ig Lid \ Hill?Ibc!'$1tie Colliii\,
Cornici1 (1979) 14 BLR 70, WITere 111e En, fish Hi, ,h Court held, line;.
offQ, that clause 14 can only transfer property in goods if tile contrac-
tor has good title to them. Tilere. under a contract identical in terms to
the PAM foiTn, sums in respect of 16 tons of roofino slates delivered
to site by a sub-contractor were included in an interim certificate and
paid for by the employer. Subsequently, the main contractor became in-
solvent and the sub-contractor (who had not been paid for the slates b
the main contractor) was awarded judgment for their value. The
employer s claim that, by virtue of clause 14 and the fact that he had
paid the main contractor for the slates the property had assed to him,
was dismissed. ,
This elementary principle is often overlooked by architects who all
too readily assume that goods on site are automatically the contractor's
properly and that once the o00ds are included in an interim certificate
and paid for by the employer, ownership passes to the eni 10 er auto-
matically. That is not the law of Malaysia.
CIO"se 14 might more sansfactorily have been divided into two
graphs. The first sentence makes cleai. that unfixed materials and goods
placed on or adjacent to the Works cannot be removed, exce t to u
them on the Works, without tile written consent of the architect, wh' h
cannot be 11nreasonably withheld.
The second sentence refers to clause 30(2). That clause provides for
the inclusion in in lentil certificates of the value of unfixed o00d ' o
materials delivered to or adjacent to the \\,'o1'ks for use thereon"
vided the goods or materials are "reasonably, pro erl and not
maturely brought or placed adjacent to the Works and then on I f
adequately protected against weather and other casualties". Goods a d
materials so included become the property of the Gin 10 er once Ih
relevant certificate has been issued, provided of course that the o d
are the contractor's property in law and he has a legal title to them.
However, the contractor remains responsible for loss or damaoe I th
goods or materials (including loss by theft), subject to the provisions of
clause 201Bl and clause 201Cl as appropriate. Under those insurance
clauses the employer assumes the fire, etc. risk for "all unfixed
tenals and goods intended for, delivered to and laced on or d'
to the Works", and it would seem unfortunate that the first t f
this sub-clause and the provisions of clauses 201Bl and 201Cl refer to
a possibly wider range of materials.
 ,,^

**

>,
* Clause 15
,

*
I
Practical completion and
I
defects liability
,\

*
*

A
15 (1) When in the opinion of the Architect the Works are practically
. ,....
completed, he shall forthwith issue a certificate to that effect and Prac-

^*,
\*
tical Completion of the Works shall be deemed for all the purposes of
this Contract to have taken place on the day named in such certificate
*;. 11 *
;;*, (2) Ally defects, shankages or other faults which shall appear within
$ . .... : . the Defects Liability Period stated in the appendix to these Conditions
*\-'-'
*;*\ ' I, and which are due to materials or workmanship not in accordance with
*- - - this Contract shall be specified by the Architect in a Schedule of De-
*-
*-- , rects which he shall deliver to the Contractor not later than 14 days
*----
I
- after the expiration of the said Defects Liability Period, and within a
44.1' '
****' reasonable time after receipt of such Schedule the defects, shrinkages
4$*- ' and other faults therein specified shall be made good by the Contractor
*;.. and (unless the Architect shall otherwise instruct, in which case the
Contract Sum shall be adjusted accordingly) entirely at his own cost.
$1':::.
;;;, (3) Notwithstanding sub-clause (2) of this Condition the Architect may
I;*; whenever he considers it necessary so to do, issue instructions requiring
J, ,... any defect, shrinkage or other fault which shall appear within the Defects
{;^,"
\** Liability Period named in the appendix to these Conditions and which
is due to materials or workmanship not in accordance with this Contract
I\ --
to be made good, and the Contractor shall within a reasonable time
after receipt of such instructions comply with the same and (unless the
Architect shall otherwise instruct, in which case the Contract Sum shall
be adjusted accordingly) entirely at his own cost. Provided that no such
instructions shall be issued after delivery of a Schedule of Defects or
** .-
*;:: -" after 14 days from the expiration of the said Defects Liability Period.

**** '
(4) When in the opinion of the Architect any defects, sharkages or
4'<: * other faults which he may have required to be made Good under sub-
,*^ ..
clauses (2) and (3) of this Condition shall have been made good he
shall issue a certificate to that effect, and completion of making o00d
defects shall be deemed for all the purposes of this Contract to have
taken place on the day named in such certificate.
*. .:.
I'.

I\,,
Clause 15(I) provides that "when in the opinion of the architect the
\
*** *. Works are practically completed, he shall forthwith issue a certificate
* *** to that effect and practical completion of the Works shall be deemed
.- for all the purposes of this contract to have taken place on the day
named in such certificate".
*
. .-

**
**
53

<1,

.;:- .
 54 Clanse 15

Whether or not tile works are "piactically completed" is a matt f

the opinion of the architect, but Inat opinion is sub'ect to revi
arbitration under clause 34. There is, unfortunateI , no defi 'I' f
what is meant by "practical completion" and the PITTase is ambi u
There is much conflicting case law in the UK.
in We3117/1/1siei' City Coll/Tcl'/ v I Jail, is & Soils Lid [1970] I All ER
943. it was suggested that "practical completion" nieant that ther
be no defects apparent in the works at the date on which the h'I
issues the certificate, to the architect in a>, issue 11is certificate ev 'f h
knows that some patent defects are present.
in contrast, in P & M KOI, e Ltd v Hosiei. & DJtkiiisoi? Lid 119721 I
All ER 121 it was said that the architect could withh Id h' 'f'
until all known defects, except trimno ones, were corrected.
in the niost recent case - HW Ne\, ill (S"rib/esi) Lid v Wi?I F1'e &
Soil Ltd (1981) 20 BLR 78 - one of the jud, es most ex e ' d '
construction law favoured the view expressed in the 101'vis cas , h Id-
ing that the word "practically" gives the architect a discretion t f
that the contractor has fulfilled his obligation "where ve d
rin, Iimis works had not been carried out, but if there were an
defects in what Ithe contractorl has done the . architect cannot \
certificate of practical completion". "Practical coin letion" h b
described as tlie building be intr reasonably safe and not unr bl
Inconvenient.

The issue of the certificate of practical coin letion is f '

for the following reasons :
(1) half of the retention percentage becomes due for release : I
30(4)(b); e
(2) the day named in the certificate marks the be inni f h
defects liability period : clause 15(2);
(3)
the day named in the certificate marks the be innino of Ih ' d
(4)
of final measurement and valuation : clause 30(5)(a);
if clause 20tA1 insurance is in force, the contractor's obli ano I
insure ends;
(5) the contractor's liability to liquidated damages ends : cla 22;
(6) regular interim certificates cease to be issued : clause 30(I). '
These are "the purposes of this Contract" referred to.
Clause 15(2) specifies what the liabilities of the contracto f
the practical completion certificate has been issued. He '
for "defects, shrinkages or other faults" which a d '-
fled defects liability period. This will be a eriod f
the day named in the certificate of practical coin let' I
other period is specified in the Appendix. There is noth' a
a much longer period than six months bein a s ecif' d d
contractor is made aware of this at the time of tender. 11 '
some types of contract to have a 12 months' eriod to H f d
to appear during the full range of seasonal variations.
 Piacricol coinp!ei!'on and d<fec!s 11^hilt!y 55

"Other faults" is in this context to be interpreted ej'Msdem genei. is

and any "other faults" must therefore be similar to "defects" and
"shankages". Before the contractor is liable to remedy them they must
arise from materials and workmanship not being in accordance with the
contract, to as set out in the contract documents (see clause 3) or any
variation thereof. They must also be set out in a schedule of defects
prepared by the architect and delivered to the contractor within the
defects liability period, not later than 14 days from its expiry. This is
commonly but maccurately referred to as a "snagging list". The con-
tractor then has a reasonable time in which to make good the defects at
his own cost "unless the architect shall otherwise instruct, in which
case the Contract Sum shall be adjusted accordingly".
This last phrase is ambiguous and the sensible meaning is that if the
employer is prepared to accept the defects, the Contract Sum is to be
I. educed by an appropriate amount. it would make nonsense of the con-
tractual scheme to interpret the phrase as conferring on the architect
anthotity to agree to the contractor being paid extra for remedying his
own breach of contract.
On receipt of the architect's schedule (which is in itself a written
instruction of the architect to remedy the defects set out therein) the
contractor must remedy the defects within a reasonable time. The de-
fects Iiabnity period is primarily for the contractor's benefit so that he
can rectify defects and put the works in accordance with the contract.
it is not in substitution for the employer's right to sue for damages for
breach of contract.
Clause 15(3) deals with defects which are required to be remedied
before the schedule of defects is prepared but after the begiming of the
defects liability period. it enables the architect "whenever he considers
it necessary so to do", to between the beginning of the defects liability
period and the issue of the schedule of defects, to issue instructions to
remedy any defects as defined in clause 15(2). The architect's powers
under this sub-clause end either on delivery of the schedule or on the
expiry of 14 days from the end of the defects liability period. it is
possible, therefore, that an architect may choose to act under this pro-
vision rather than issue a schedule of defects. The treatment of the cost
of rectification work is the same as under clause 15(2).
Clause 15(4) is important since it provides for the architect to issue
what is called the "Certificate of Completion of Making Good Defects '
(see clause 30(4)(c)) when the instructions contained in the schedule of
defects or given under clause 15(3) have been complied with. This is
an important certificate because its issue is:
(1) one of the alternative events which must occur before the second
half of the retention money is payable : Clause 30(4)(c);
(2) one of the events which must have occurred before the period
within which the final certificate is due begins to run : clause 30(6).
These are the "purposes of this contract" referred to.
56 Clanse 15

Although this certificate is of considerable value from tlie contractor's

point of view, it does not discharge him finally of liability for defects.
No competent architect is likely to issue a final certificate (which dis-
charges the contractor from liability subject to limited exceptions - see
clause 30(7)) unless all the work is to his reasonable satisfaction.
Clause 16

Sectional completion

16 If at any time or limes before Practical Completion of the Works the

Employer with the consent of the Contractor shall take possession of
any part or parts of the same (any such part being hereinafter in this
clause referred to as "the relevant part"), then notwithstanding anything
expressed or implied elsewhere in this Contract:
(a) Within seven days from the date on which the Employer shall
have taken possession of the relevant part the Architect shall issue
a certificate staring his estimate of the approximate total value of
the said part, and for all the purposes of this Condition (but for
no other) the value so stated shall be deemed to be the total value
of the said part.
(b) For the purposes of sub-paragraph (ii) of paragraph (f) of this
Condition and of sub-clauses (2) and (3) of clause 15 of these
Conditions, Practical Completion of the relevant part shall be
deemed to have occurred and the Defects Liability Period in respect
of the relevant parr shall be deemed to have commenced on the
date on which the Employer shall have taken possession thereof.
(c) When in the opinion of the Architect any defects, shankages or
other faults in the relevant part which he may have required to be
made good under sub-clause (2) or sub-clause (3) of clause 15 of
these ' Conditions shall have been made good he shall issue a
certificate to that effect.
(d) The Contractor shall reduce the value insured under clause 20 [A]
of these Conditions (if applicable) by the full value of the Tele-
vant part, and the said relevant part shall as from the date on
which the Employer shall have taken possession thereof be at the
sole risk of the Employer as regards any of the contigencies re-
forred to in the said clause.
(e) in lieu of any sum to be paid or arrowed by the Contractor under
clause 22 of these Conditions in respect of any period during which
the Works may reinani incomplete occurring after the date on
which the Employer shall have taken possession of the relevant
part there shall be paid or allowed such sum as bears the same
ratio to the sum which would be paid or allowed apart from the
provisions of this Condition as does the Contract Sum less the
total value of the said relevant part to the Contract Sum.
(f ) (i) Within fourteen days of the date on which the Employer shall
have taken possession of the relevant part there shall be paid
to the Contractor from the sums then retained under clause
30(3) of these Conditions (if any) one inoiety of such amount
58 Clanse I6

as bears the same ratio to the unreduced amount named in tile

appendix 10 these Conditions as Limit Retention Fund as does
the total value of the said relevant part to the Contract Sum,
and the amount named in the appendix to these Conditions as
Limit of Retention Fund shall be reduced by the amount of
such inoiety.
) On the expiration of the Defects Liability Period named in
the appendix to these Conditions in respect of the relevant
part or on the issue of the Certificate of Completion of Makino
Good Defects in respect of the relevant part, whichever is the
later, there shall be paid to the Contractor from the sums then
retained under clause 30(3) of these Conditions (if any) the
other inoiety of the amount referred to in the immediately
preceding sub-paragraph, and the amount named in the ap-
pendix to these Conditions as Limit of Retention Fund shall
be reduced by the amount of such inoiety.

Although entitled "sectional completion" this provision is not apt to

deal with the situation where. the Works are to be completed by phased
sections. Considerable adaptations would be needed to the standard fomi
to bring about that result. Clause 16 deals with what is more properly
called (and is now so called in the UK parent fomi) pallidl possession
by, Ihe employei. , to the situation where the employer decides dunno the
course of the contract that he would like to lake possession of part of-
the Works before completion of the whole.
Various problems can arise if the employer attempts to use clause 16
to achieve sectional completion in its true sense because clause 16 does
not in itself provide for the work to be completed and handed over in
sections. in England, it has been so held : MJ Gleesoii (Conii'@CIOi. s)
Ltd v Hill^778don London Boi. ough Council (1970) 215 EG 165.
in that case, there was a contract in the Enolish equivalent of the
PAM form for a large number of dwellings to be erected in blocks.
There was one date for completion. The Bill preliminaries provided
that the work was to be completed and handed over in sections, some
blocks after 12 months and the remainder at three-monthly intervals up
to the contract completion date. The blocks which were due for coin-
pietion after 12 months were not completed and the employer deducted
liquidated damages which the Appendix entry stated at a rate pel' dwell-
ing per week. it was held by the English High Court that the employer
was not entitled to make deductions because there was no provision in
the contract for sectional completion.
The later case of Bi. onion & 08deit Ltd v Sh<ffield City Council
(1983) I ConLR 30 is to the same effect. in practical tenns the result
is that if the employer requires the work to be completed in sections,
the form itself must be extensively amended, preferably by way of a
Sectional Completion Supplement. Clause 16 cannot be used to impose
on the contractor an obligation to complete the Works in parts.
 Seciiono! coinp!e!ion 59

Clause 16 comes into effect only if :

(1) before practical completion of the Works, to before the day named
in the Certificate of Practical Completion;
(2) the employer, with the conti. octo, .'s consent, takes possession of
any part(s) of the Works. The contractor is not bound to give his
consent and there is no provision that consent shall not be umea-
sonably withheld. The decision as to whether to consent or not is,
therefore, entirely a matter for the contractor.
If those two conditions are satisfied, the part of the Works of which the
employer takes possession is called "the relevant part" and must be
treated in accordance with paragraphs (a) to (f). These have the effect
of relieving the contractor of responsibility for the relevant part.
Under paragraph (a), within seven days of the employer taking
possession of the relevant part, the architect must issue a certificate
stating his "estimate of the approximate total value" of the relevant
part. This estimate then becomes, for the pulposes of clause 16 only,
the total value of that relevant part.
The remaining paragraphs deal with "the relevant part" in respect of
defects, insurance and retention in a similar way to that in which the
contract deals with these matters in regard to the whole. The effect of
sectional completion on liquidated damages is also dealt with. The
position may be sununarized in this way :
( I) Practical completion of "the relevant part" is deemed to have
occurred and the defects liability for that part coriumences on the
date on which the employer took possession and the obligations
for defects under clause 15 apply from that date. The architect
must then apply clause 15(4) to "the relevant part" and issue a
certificate of making good defects in respect of the "relevant part"
once any defects have been made good under clause 15(2) or (3) :
see paragraphs (a), (b) and (c).
(2) it clause 201Al applies, the contractor's insurance obligation ceases
from the date of practical completion of the relevant part and the
risk passes to the employer. Accordingly, the contractor will re-
duce the "full value" insured under clause 20tA1 by the "total
value" of the "relevant parr" as certified by the architect under
clause 16(a) : see paragraph (d).
(3) If any liquidated damages become due from the contractor after
the date on which the employer took possession of the relevant
part, they are reduced by the fonnula given in paragraph (e). For
example, if the Contract Sum is M$10 Twillion and the value of
the relevant part is M$2.5 million and liquidated damages which
are at the rate of M$1,000 become due after practical completion
of the "relevant parr", those damages are to be reduced by a quarter
leaving M$750 to be paid.
(4) On practical completion of "the relevant part", to the date when
 60 Clanse 16

the employei' took possession, the eniployer becomes liable to pay

to the contractor within 14 days the first 11alf of the Retention er-
centage applicable to the "relevant part". The amount due is cal-
CUIated by first reducing the Percentage by the same proportion as
the "total value" of the "relevant part" bears to the Contract Sum.
For example, if the Contract Sum is M$50,000 and the total value
of the relevant part is M$30,000, the Retention percentage attrib-
utable to the relevant part is three-fifths of the Percentaoe. If the
total percentage is 5 per cent of M$50,000, to M$2,500, the pro-
portion atin butable to the relevant part is tlrree-fifths of M$2,500,
to Ms 1,500, and the employer would have to release to the con-
tractor half of that latter amount, and the Retention Percentage is
reduced accordingly : paragraph (f)(i). ~
(5) When the defects liability period for the "relevant part" expires or
the certificate of completion of making o00d of defects for the
relevant part has been issued, whichever is the later, the Gin 10 er
must release to the contractor the remainino half of the Retention
Percentage which is attributable to the relevant part : aragra h
(f)(11). '
Clause 16 does not make a final settlement; no separate certificate is
issued in respect of the relevant part. Clause 16(a) niakes this clear. it
says that the architect:

. . . shall issue a ceitificaie stating his estimate o1' the approximate total
value of the said part. and for all the purposes of this Condition (but 110
other) the value so stated shall be deemed to be the total value of the said
part.

The words in brackets in this quotation indicate that whatever has b

done under clause 16 in no way prejudices the preparation of the final
certificate except, of course, that due allowance will have to be made
in the clause 30 calculations for any sums paid over to the contractor
in respect of retention atin butable to the relevant part. So, for exam Ie,
if variations have been ordered in respect of the part of the Works
which has been taken over by the employer, the will be dealt w'Ih
finally under clause 30(5)(a). Any architect's clause 16(a) certificate
will not prejudge the final value to be placed on the ordered variations.
The operation of clause 16 effectiveIy requires two "valuations" to be
made.
 Clause 17

Assignment or sub-letting

17
(1) The Contractor shall not assign this contract or any part thereof or
the obligation to carry out and the right to receive payment for any art
of the Works to be carried out under this contract or the ri ht to receive
the whole or any part of the Contract Sum without the prior wrttten
consent of the Employer.
(2) The Contractor shall not sub-let the whole of the Works. Exce t
where otherwise provided by the Contract, the Contractor shall not sub-
let any part of the Works without the prior written consent of the
Architect (which shall not be unreasonably withheld) and such consent
if given shall not relieve the Contractor from any liability or obli ation
under the Contract and he shall be responsible for the acts, defaults and
neglects of any sub-contractor, his agent, servants or workmen as full
as if they were the acts, defaults or neglects of the Contractor, his a ents,
servants or workmen.

There is a distinction between assignment and sub-letting, and sensibl

clause 17 is divided into two sub-clauses.
Section 41 of the Contracts Act 1950 provides :
if it appears from the nature of the case that it was the intention of the
parties to any contract that any prontise contained in it should be pertonned
by the promisor himself, such prontise must be pertonned b the Tomisor.
in other cases, the promisor or his representatives may pertomi it.
This sensibly recognizes that some contracts call for ersonal erfo
anCG, to where the identity of the promisor is crucial, as in a contract
with an artist to paint a picture or one with an author to write a book :
see EWSof Alt v Nyony@ Lee G@ik Hook [1953] ^, it, J 98.
Section 42 of the Act Goes on to provide that "when a romise
accepts pertomiance of the proimse from a third person, he calmot
afterwards enforce it against the promisor" . see Letch"ini Ammat v
Nam Fong Hows!'rig Sdn Bhd I 19821 2 A^it, I 19. These stainto Tovi-
sions embody the coriumon law rule that the contract in a be erfonned
by a third party on behalf of the promisor, to vicarious erfonnance,
unless the nature of the contract is such that personal elfonnance b
the prointsor is required.
 62 Clanse I7

in general, building contracts are not of a nature requiting personal

perlonnance, and subject to the contractor obtainino consent under clause
17, he is entitled to secure the vicarious performance of his oblioations
by means of sub-contractors. However, the contractor remains liable for
defective or non-performance by his sub-contractors, as shown by the
old English case of Bi'inch Wagon Co v Lea (1880) 5 QBD 149. There
may, of course, be cases where a buildino contract does contemplate
personal pertonnance, eg a contract of a specialist nature.
in the English case of Do vies v Colliiis [1945] I All ER 247 the
position was put simply :
There is a well-known division of contracts for work and labour into two
broad classes. One class is where the work and labour can, on the true con-
struction of the contract, only be perlomied by the contracting party himself
or by some staff that he employs. The other class is where, from all the
circumstances of the case, including of course the true construction of the
contract, it is to be inferred that it is a matter of indifference whether the
work should be pertonned by the contractino party or by some sub-contrac-
tor whom he employs . . . . The contracting party, of course, is the only
party who remains liable. He cannot assign his liability to a sub-contractor,
but his liability in those cases is to see that the work is properly done, and
if it is not properly done he is liable. it is quite a mistake to regard that as
an assignment of the contract; it is not.
The integrity, financial stability and performance capability of the
contractor ai. e, of course, all important considerations for tile employer;
and those are the factors which must be considered by, the arclTitect in
deciding whether or not to give consent to sub-letting under clause 17(2).
CIOuse 17(I) deals with assignment ill the legal sense. The general
principle is that the burden of a contract cannot be assigned, to trans-
forred, without the consent of the other party and so the contractor camot
assign his liability to complete. The sub-clause prohibits assionment by
the contractor of "this contract or any part thereof" without the previ-
ous written consent of the employer (not the architect). it is also
directed against the not uncommon practice of the contractor assignino
the retention money or other sums due under the contract to secure
advances from banks or factoring houses. The contractor cannot assion
moneys due under the contract to third parties without the employer's
consent. There is no corresponding restriction on the employer assign-
ing the contract.
Clause 17(2) deals with sub-letting. There is a straightforward pro-
hibition against sub-letting the whole of the Works. Unless the contract
otherwise provides, as will, of course, be the case where the contract
documents identify nominated sub-contractors or the Bills include PC
sums, the contractor camot sub-let any part of the Works without the
previous written consent of the architect. That consent must not be
unreasonably withheld, and refusal of consent can be challen ed in
arbitration under clause 34. The person to whom the contractor sub-lets
 Assignmenr o1. sub-!erring 63

with the architect's consent under this sub-clause is commonly called a

domestic sub-contractor to distinguish him from a nominated sub-
conti'octoi'.
The remainder of clause 17(2) emphasizes that if the architect con-
sents to sub-letting, this does not affect the contractor s liability. The
contractor remains "responsible for the acts, defaults and neglects of
any sub-contractor, his agent, servants or workmen as fully as if they
were the acts, defaults or neglects of the Contractor, his agents, ser-
vants or workmen". This is the traditional common law position and so
the main contractor is liable to the employer for all defaults of a sub-
contractor, whether he is nominated or domestic. This is so whether the
sub-contractor's default consists in his design, fabrication, workman-
ship or anything else.
Breach of clause 17 is a ground for detennination of the contractor's
employment under clause 25(I)(d).
Clause 18

in' ry t. .. s. ns rid er y
e joyer's in. e nity

18 (1) The Contractor shall be liable for, and shall indemnify the Em-
ployer against, any expense, Iiabilit>,, loss. claim or proceedings what-
soever arising under any statute in respect of personal injury to or the
death of any person whomsoever an sino out of or in the course of or
caused by the carrying out of the Works, unless due to any, act or ne-
glect of the Employer or of any person for whom the Employer is
responsible.
(2) Except for such loss or damage as is at the risk of the Employer
under clause 20[Bj or clause 20[C] of these Conditions (if applicable)
the Contractor shall be liable for, and shall indemnify the Employer
against any expense, liability. loss, claim or proceedings in respect of
any injury or damage whatsoever 10 any property real or personal in so
far as such injury or damage arises out of or in the course of or by
reason of the carrying out of the works, and provided always that the
same is due to any negligence, omission or defauli of the Contractor,
his servants or agents or of any sub-contractor, his servants or agents.

This is a straightforward but limited indemnity clause under which the

contractor indemnifies the employer against claims for personal injury
or death "arising out of or in the course of or caused by the carry ino
out of the Works" unless the accident is due to an act or omission of
the employer or of those for whom he is responsible. it also deals
separately with property damage, where the contractor indemnifies the
employer only if the damage is his fault. The corresponding provisions
in the UK fonns have given rise to a considerable body of case law.
CIQ"se 18(I) is concerned with cases of personal injury or death. 11
states that it is the contractor who is liable for the injury or death of
any person arising out of, or caused by the carrying out of the Works.
if the injured person or the personal representatives of a deceased person
attempt(s) to sue the employer in respect of any damaoe within the
scope of the sub-clause, the employer can join the contractor as a third
party or alternatively bring separate proceedings against the contractor
on the indemnity. it should be noted, however, that the indemnity is
only given in respect of claims, etc "arising under any statute" and so
would not extend to an action for common law negligence.
There is an exception to the liability imposed by the clause, namel ,
 In/'11n' 10 pel'sons and PI'oner!y and employer's indemnity 65
if the injury is due to some act or neolect of the employer or an er
for whom the employer is vicariously responsible in law. The word' o
of the sub-clause would appear to indicate that the in denmit still a I'
proportionally where some part of the death or inju is due to th
employer's act or default.
Time will only begin to run for the purpose of the Limitation O d'-
nance 1953, when the employer has suffered loss, to has had 'ud in I
or an arbitral award given against him : see the En lish case of RH
Gleen & Siney War Ltd v Bi. inch Railways Board (1981) 17 BLR 94.
Clanse 18(2) covers liability for damage to property. The litase
"property real or personal" includes the Works themselves. This '-
SIon makes the contractor liable for any injury or dama e to To rt
arising out of or in the course of or by reason of the ca in out of th
Works, where the injury or damaoe is due to his ne 11 ence, o
or default or that of his servants, agents, sub-contractors (whether
nominated or domestic) or of their servants or agents. The onI exce -
tion to this is where the employer has assumed the risk under of
20[B] or 20[C].
in the leading English case of Wimpey Constrwc!ion UK Lad v S
ti'sh Spec!'o1 Housing Associotion (1986) 9 ConLR 19 the House of Lord
held (affimiing the correctness of the earlier case of James Archd I &
Co Lid v Coinservices Ltd [1954] I WLR 459 to the same effect und
an earlier version of the contract) that, on its true interpretation, clause
20[C] imposes on the employer the entire risk of damage b fire, even
if the fire is caused by the contractor's negligence. Fire caused b th
contractor s negligence falls within the exception to the in denimt h' h
he gives to the employer under clause 18(2). it follows that where clause
201Cl applies and the Works are damaged by a fire caused ne it e tl
by the contractor or one of his sub-contractors, the em 10 er c t
claim to be indenimfied by the contractor.
A further loophole was exposed in AllF (International) Ltd v Mo net
Bowling Ltd 119681 2 All ER 798, where a third party recovered dama
against both the employer and the contractor. However, the em I
was held not to be entitled to recover from the contractor u d Ih
indexnntty contained in clause 18(2) because his liability was in art the
result of his own negligence through the architect's lack of an ervis'0 .
The courts are always suspicious of indemnity clauses and s h
clauses are interpreted very strictly. in the English case of Watters v
Whessoe Ltd (1960) 6 BLR 23 the reason for this was thus ex ressed :
if a person obtains an indemnity against the consequences of certain a t ,
the indemnity is not to be construed so as to include the conse uenc f
his own negligence unless these consequences are covered ex ressl o
by necessary implication.
Clause 19

nsurance ag . inst injury pers ns

a . pr. perty

19
(1) Without prejudice to his liability to indemnify the Employer under
clause 18 of these Conditions, the Contractor shall maintain and shall
cause any sub-contractor to maintain:
(a) Such insurances as are necessary to cover the liability of the
Contractor or, as the case may be, of such sub-contractor, in res ect
of personal injuries or deaths arising out of or in the course of or
caused by the carrying out of the Works; and
(b) Such insurances as may be specifically required by the Contract
Bills in respect of injury or damage to property real or personal
arising out of or in the course of or by reason of the carrying out
of the Works and caused by any neolitience, omission or default
of the Contractor, his servants or agents or, as the case may be, of
such sub-contractor, his servants or agents.
The Contractor shall produce or cause any sub-contractor to roduce for
inspection the relevant policy, or policies of insurance together with the
receipts in respect of premiums paid under such policy or policies as
and when required so to do by the Employer; Provided always that as
and when may be reasonably required by the Employer the production
by either the Contractor or any sub-contractor of a current certificate of
insurance from the company or finn which shall have issued the o1ic
or policies aforesaid shall be a good discharge of the Contractor's
obligation to produce or to cause the production of the policy or o1-
icies and the receipts in respect of premiums paid.
(2) (a) The Contractor shall maintain in the joint names of the Em-
ployer and Contractor such insurances as may be specificall stated b
way of provisional sum items in the Contract Bills in res ect of an
expense, liability, loss claim or proceedings which the Em 10 er in a
incur or sustain by reason of injury or damage to property real or personal
arising out of or in the course of or by reason of the carrying out of the
Works and caused otherwise than by the negligence, omission or d -
fault of the Contractor, his servants or agents or of an sub-contra I ,
his servants or agents.
(b) Any such insurance as is referred to in the immediateI re-
ceding paragraph shall be placed with insurers to be a roved b th
Architect, and the Contractor shall deposit with him the I' I-
icies and the receipts in respect of premiums paid.
 his",'ance agains! milliy 10 persons and propel'!y 67
(3) Should the Contractor or any sub-contractor make default in in-
sunng or in continuing to insure as provided in sub-clauses (1) and (2)
of this Condition the Employer may himself insure against any risk with
respect to which the default shall have occurred and may deduct a sum
equivalent to the amount paid in respect of premiums from any monies
due or to become due to the Contractor.

Clause 19, together with clause 201Al, IBl or [C], contains the contrac-
tual requirements for insurance.
Clause 19 is concerned with claims against the contractor by third
parties. Both the contractor and his sub-contractors must insure aoainst
their liabilities for injury to third-party persons and property.
Clause 19(I) requires the contractor to insure (and cause his sub-
contractors to insure) against liability in respect of injury to persons
and property. He is bound to to take out and maintain :
(1) insurances necessary to cover his liability in respect of personal
injury or death arising out of or in the course of or caused by the
carrying out of the Works, to insurance against the liabilities which
he has accepted under clause 18(I). The wording follows that of
clause 18(I) when describing the classes of risk that must be
insured against. What is required is full insurance cover without
limit of the contractor's liability for claims for personal injuries
and death. The contractor must ensure that this provision is stepped-
down in any sub-contract. Under the indemnity provisions (clause
18(I)) the contractor is not liable to the employer if the injury is
due to the employer's act or neglect or the act or neglect of those
for whom the employer is responsible.
(2) insurance against property claims in respect of the liabilities which
he has assumed under clause 18(2). in this case, the requirement
is for the contractor to take out and maintain "such insurances as
may be specifically required by the Contract Bills" to cover this
area of risk. Once again it is important that the obligation is
stepped-down in any sub-contract.
it is important that contractors (and their sub-contractors) should main-
rain realistic cover; the in denimty which the contractor has given to the
employer under clause 18 is not limited to the amount of cover which
the contractor maintains under this provision.
The opening words of clause 19(I) are of great importance and are
not mere legalese. They make it clear that if a clann is made against
the employer, and under clause 18 the employer can claim to be indem-
litfied, he can claim from the contractor the total sum for which he is
liable. it would be no defence for the contractor to say that his irisur-
an CG cover was inadequate, and the advice of a competent insurance
broker should be obtained. Damages in personal injury cases can be
astronomical.
 68 C/aM. ,e 19

Tile final part of clause 19(I) contains provisions relatino to mspec-

tion, etc of both the contractor's and his sub-contractors' policies and
receipts. The contractor In us I produce for inspection - and cause his
sub-contractors to do likewise - documentary, evidence of the suffi-
cleric^ and currenc>, of the policies. The employer is given the noht to
see tile actual insurance policies and receipts.
CIOuse 19(2) requires tlie contractor to take out and niaintain in joint
names insurance in very wide terms. TITe necessary insurance may be
difficult to obtain. The contractor's oblioation is limited to "such msur-
mices as niay be specifically stated by way, of provisional sum items in
the Contract Bills". in other words, the contractor's duty to insure on I
arises when the architect gives an instruction under clause I I (3) for the
expenditure of the insurance premium. The cover is to be against "any
expense, liability, loss, claim or proceedings which the employer may
incur or sustain by reason of injury or damaoe to property real or
personal arising out of or in the course of or by reason of the carryino
out of the Works caused otherwise than by the neoligence, omission, or
default of the contractor" or of those for whom he is vicariousl re-
sponsible.
The sub-clause does not exclude damaoe to the Works and it is
significant that this version of the requirement was substantialI revised
in the English parent fonn o11 several occasions. This sub-clause and,
indeed, the whole of the insurance provisions of the fomt are in the
most 11rgent need of amendment; and certainly irisui'ance cover of the-
kind envisaged by this sub-clause is difl'icult and expensive (if not
impossible) to obtain.
The paragraph is largely intended 10 deal with the case where in'ur
or damage arises out of the carrying out of the Works without ne Ii-
gence on anyone's part, but which may nonetheless involve the Gin-
ployer in liability.
The need to provide such insurance was illustrated in England b the
case of Gold v PQtm@n & Fothdi. i, 78ho"I Lid. 119581 2 All ER 493,
where it was held that insurances for liability for To ert dama, e
required by the equivalent provision in the English contract were onI
in respect of the contractor's own liabilities. Clear words would be
needed to extend the coverage to the employer's liabilities.
in the Gold case subsidence causing damage to another buildino aros
out of piling works ordered by the employer but carried out without
negligence by a sub-contractor. The contractor was held not to be in
breach of the insurance provisions even thouoh he had failed to insure
against the employer's liability.
As now worded, the provision draws attention to the need for the
employer and the architect to decide at pre-tender SIaoe the insurances
necessary to meet the liability, and hence the opening words of
paragraph (a).
Paragraph (b) of clause 19(2)(b) is procedural. The required msur-
an CG is to be placed with insurers approved by the employer, with whom
 Insurance Qgainst in/it, y to persons and property 69
the contractor is to deposit the policy or policies and the premium
receipts.
If insurances are required under clause 19(2)
(1) A provisional sum must be inserted in the Contract Bills.
(2) The insurance is to be in joint names.
(3) The insurers must be approved by the employer.
(4) The policy and premium receipts must be deposited with him.
Clause 19(3) confers an essential remedy on the employer if either the
contractor or any of his sub-contractors fail to insure under clause 19(I)
or 19(2). it gives default powers to the employer and Ginpowers him to
effect the necessary insurances himself and to deduct the premiums aid
from moneys due or to become due to the contractor. The reference is
to the contractor or any sub-contractor making d<fowlt in insuring; in
other words, there must have been a breach of contractual duty.
InterestingIy, under the fomi as currently drafted, the contractor is
not relieved of liability in respect of loss, damage or injury caused to
the Works, etc by nuclear and allied risks - as is the case under the UK
fomis. The risk and the obligation to insure against such evils there-
fore lies with the contractor.
Clause 20

nsura ce f the orks

... i st f' e, etc

20
*tA1 (1) The Contractor shall in tile joint names of the Employer and
Contractor insure against loss and daniage by fire, storm, tempest, light-
ning, flood, earthquake, aircraft or any, thing dropped therefrom, aerial
objects, riot and civil commotion for 111e full value thereof (plus the
percentage named in the appendix to these conditions to cover profes-
sional fees) all work executed and all unfixed materials and goods
intended for, delivered to, and placed on or adjacent to the Works, but
excluding temporary buildings, plant, tools and equipment owned or hired
by the Contractor or any sub-contractor, and shall keep such work. in a-
tenals and goods so insured until Practical Completion of the Works.
Such insurance shall be with insurers approved by, the Architect and the
Contractor shall deposit with him tile pollc} or policies and the recei is
in respect of premiums paid: and should the Contractor make default in
insuring or continuing to insure as aforesaid 111e Employer Ina), himself
insure against any, risk \\, ith respect of \\ hich Ihe default shall ha\. e
occurred and deduct a suni equivalent 10 the amount paid by him in
respect of premiums from any monies due or to become due to the
Contractor.
Provided always that if the Contractor shall independently of his obii-
gations under this Contract maintain a polic), of insurance which covers
conei. alto) the said work, materials and goods against the aforesaid
contingencies to the full value thereof (plus the aforesaid percentage,
if any), then the maintenance by the Contractor of such policy shall. if
the Employer's interest is endorsed thereon, be a discharge of the
Contractor's obligation to insure in the joint names of the Em 10 er
and Contractor; and the production by the Contractor as and when in a
reasonably be required by the Architect of a current certificate of irisur-
ance from the Company or finn which shall have issued the said o1ic
shall be a discharge of the Contractor's obligation to de OSit with the
Employer a policy or policies and the receipts in respect of reiniums
paid.
(2) Upon the settlement of any claim under the insurances aforesaid
the Contractor with due diligence shall restore work dama ed re lace o
repair any unfixed materials or o00ds which have been destro ed or
injured remove and dispose of any debris and proceed with the ca inc
out and completion of the Works. All monies received from such msur-
ances (less only the aforesaid percentaoe, if any) shall be paid to the
Contractor by instalments under certificates of the Architect issued t
 Irisi, ,'Q, ice of Ihe 11.01'ks againsiji, 'e. erc 71

the periods of Interim Certificates named in the appendix to these

Conditions. The Contractor shall not be entitled to any payment in respect
of the restoration of work damaged. the replacement and repair of any
unfixed materials or goods, and the removal and disposal of debris other
than the monies received under the said insurances.

*tBj All works executed and all unfixed materials and goods intended
for, delivered to and placed on or adjacent to the Works (except tern-
POTary buildings, plant. tools and equipment owned or hired by the Con-
tractor or any sub-contractor) shall be at the sole risk of the Employer
as regards loss or damage by fire, storm, tempest, lightning, flood,
earthquake, aircraft or anything dropped therefrom, aerial objects, riot
and civil commotion. The Employer shall maintain a proper policy of
insurance against that risk. and such policy and the receipt for the last
premium paid for its renewal shall upon request be produced for irispec-
tion by the Contractor. If the Employer shall at any time fail upon the
request to produce any receipt showing such a policy as aforesaid to be
effective then the Contractor may in the name and on behalf of the
Employer insure all work executed and all unfixed materials and goods
as aforesaid against loss or damage occasioned by the said contingen-
cies and shall upon production of the receipt for any premium paid by
him be entitled to have its amount added to the Contract Sum. it any
loss or damage affecting the Works or any part thereof of any such
unfixed materials or goods is occasioned by any one or more of the said
contingencies, then
(a) The occurrence of such loss or damage shall be disregarded in
computing any amounts payable to the Contractor under or by virtue
of this Contract.
(b) The Contractor with due diligence shall restore work damaged,
replace or repair any unfixed materials or goods which have been
destroyed or injured, remove and dispose of any debris and proceed
with the carrying out and completion of the Works. The restoration
of work damaged, the replacement and repair of unfixed materials
and goods and the removal and disposal of debris shall be deemed
to be a variation required by the Architect.
*[C] The existing structures together with all the contents thereof and
the Works and all unfixed materials and goods intended for, delivered
to and placed on or adjacent to the Works (except temporary buildings,
plant, tools and equipment owned or hired by the Contractor or any
sub-contractor) shall be at the sole risk of the Employer as regards loss
or damage by fire, stonn, tempest, lightntng, flood, earthquake, aircraft
or anything dropped therefrom, aerial objects, riot and civil coriumotion,
and the Employer shall maintain a proper policy of insurance aganist
that risk, and such policy and the receipt for the last premium paid for
its renewal shall upon request produced for inspection by the Contrac-
tor. if the Employer shall at any time fail upon request to produce any
receipt showing such a policy as aforesaid to be effective then the
Contractor may in the name and on behalf of the Employer insure the
existing structures together with all the contents thereof the Works and
all unfixed materials and goods as aforesaid against loss and damage
occasioned by the said contingencies, and for that purpose shall have
72 CIO"se 20

such right of entry and inspection as niay be required 10 make a survey

and inventory of the existing structures and all their contents and shall
upon production of the receipt for any premium paid by him be entitled
to have its amount added to the Contract Sum. it any loss or damage
affecting the Works or any part thereof or any such unfixed materials or
goods is occasioned by any one or more of the said contingencies, then
(a) The occurrence of such loss or damage shall be disregarded in
computing any amounts payable to the Contractor under or by virtue
of this Contract.
(b) a) If it is just and equitable to do so the employment of the Con-
tractor under this Contract may within 28 days of the occur-
Tence of such loss or damage be determined at the option of
either party by notice by registered post or recorded delivery
from either party to the other. Within 7 days of receiving such
a notice (but not thereafter) either party may give to the other
a written request to concur in the appointment of an arbitrator
under clause 34 of these Conditions in order that it may be
determined whether such delennination will be just and equi-
table.
(ii) Upon the giving or receiving by the Employer of such a notice
of detennination or, where a reference to arbitration is made as
aforesaid, upon the arbitrator up holding the notice of deterini-
nation, the provisions of sub-clause (2) (except SLib-paragraph
(vi) of paragraph (b)) of clause 26 of these Conditions shall
apply.
(c) it 110 notice of delemiination is served as aforesaid, or. where a
reference to arbitration is made as aforesaid, if the arbitrator de-
cides against the notice of delennination, then
(i) the Contractor with due diligence shall reinstate or make good
such loss or damage, and proceed with the carrying out and
completion of the Works;
(ii) the Architect may issue instructions requiring the Contractor to
remove and dispose of any debris; and
(iii) the reinstatement and making good of such loss or damage and
(when required) the removal and disposal of debris shall be
deemed to be a variation required by the Architect.

* Footnote - Clause 20 IAI is applit@ble to the ei'ection of a new build^^g

if the Con!,'@CIOr is I'eq"ired to iris"I'e against loss o1' damage by 771'e,
etc. Clause 201Bl is OPPficoble to the ei. ection of a new build^718 if Ihe
Employer is to bear the risk in I. espect of loss or damage by In'e, etc.
Clause 201Cl is OPPlic@ble to @11ei'@lions of o1' exiensions 10 an exist-
ing building, the 7'40, 'e $11'ike out clauses IBl and ICJ o1' CIOuses IAI
and ICJ o1' clauses IAI and IBl OS the case may I'equii. e.

This important clause must be read with clauses 18 and 19. There are
three alternatives and two of them must be deleted, as explained in the
first footnote. Each alternative is applicable to a particular situation.
 instt, .OJTce of Ihe works agains! fire, e!c 73

Cmi, se 201Al covers works of new construction where the contractor

is required to insure. 11 is the provision which is most commonly used.
in the case of works of new construction the contractor is in possession
of the site and the employer has no effective control. If the Works are
accidentally destroyed while uncompleted, this would be at the
contractor's risk since clause I(I) requires him to "carry out and
complete the Works". Insurance is therefore essential because the
contractor would be bound to rebuild without further payment
Appleby v Myers (1866) 2 LR CP 651, which is decisive on this point.
Clause 20/8/ deals with new buildings where the employer assumes
the risks.
Clause 201Cl applies to works of alteration and works of extension
to existing buildings where the employer is to assume the risk.
Each of these options will be commented on in turn.

Clause 201Al : New building - contractor to insure

This provision is relatively straightforward and provides for the con-

tractor to insure in the joint names of himself and the employer against
the specified perils. There are, however, pitfalls for the unwary, since
the specified perils do not include theft or vandalism. Contractors should,
therefore, consider whether it is commercially sensible to take out
additional insurance because damage and loss to work executed and to
materials on site through these risks are matters for which the contrac-
tor is responsible until the architect certifies practical completion.
The list of risks to be insured against is extensive and in some cases
cover may not be available on the insurance market. Because of this, if
necessary the provision should be amended by agreement between the
parties at tender stage. The specified risks are :
Fire, stonn, tempest, lightning, flood, earthquake, aircraft or anything
dropped therefrom, aerial objects, riot and civil commotion.
These are the traditional "insurance risks" and there is much antique
case law concerrulig their mealxing. The list is outmoded in modem
ternis. it would be better by far to have a simpler provision requinng
the contractor to take out and mannan "all risks" insurance which would
include other risks such as impact, subsidence, theft and vandalism, and
sensible contractors will certainly consider taking out this broader cover.
Clause 201Aj(i) requires the contractor to insure against loss or
damage by the specified risks all work executed and all unfixed in a-
tenals and goods intended for, delivered to and placed on or adjacent
to the Works, to materials eligible for inclusion in interim certificates
(clause 30(2)). The insurance cover is to be maintained until practical
completion of the Works as certified by the architect under clause 15(I).
The risks do not include theft or vandalism. Depending on the cover
available in the insurance market, amendment may need to be agreed at
tender stage.
 74 CIO". re 20

What has to be insured is

(1) the full vo/Me of all work executed;
(2)
the full vaine of all unfixed materials and o00ds intended f ,
(3)
delivered to, and placed o11 or adjacent to the Works; d
the cost of professional fees which is expressed as a a
(1) and (2) and stated in the Appendix. 5,
it no percentage is stated in the Appendix, then the cost of f
sional fees would be borne by the employer and need I b
by insurance.
The expression "full value" should be noted. Th' '11 '
value as the work proceeds. Should one of the ms d ' k
damage to the Works and reinstatement is necessa , h '
entitlement is to recover the amount of the insurance. it ' h
important that the cover be adequate. The risk that Ih W k
accidentally destroyed is borne by, the contractor. If the '
are insufficient to reinstate the Works, any extra costs w Id h
borne by the contractor whose obligation under claus I. ' ' '
Ally delay caused by an accident covered b the I '
a right to an extension of time under clause 23(c). Moreov , d
clause 26(I)(c)(ii) the contractor is Ginpowered to dete it
ployment under the contract if the work is sus ended f h
or such other period as is stipulated in the A endix b f' ,
damage caused by the insurance risks. .'
The insurances must be (1) taken out in the joint nam f h
employer and the contractor; (2) with insurers a roved b 11
ployer; and (3) tile insurance policies and premium recei t
deposited with the employer.
The proviso to clause 20[A](I) is important. it covers th I
practice of contractors of taking out an annual o1ic 11 f
risk of accidental damage to the works the undertalc d
particular contract. Running antisks cover of this I ff' '
the purposes of clause 201Al provided :
(1)
the policy covers the full value of the work, etc and th '~
ate percentage for professional fees;
(2)
(3)
the employer's interest is endorsed on the o1ic ; d
the contractor is able to send documentary evidence (or the I'
itself, if so required) to the employer that the o11c is I
endorsed and maintained.
Clanse 201Al(2) deals with what is to ha on "u I
claim . These words seem to suggest that the contra t
stop work until the claim has been settled. This w
tended by the draftsmen but it appears to be the o f
clause read as a whole. b
After any insurance claim has been settled, the "
due diligence . . . restore work damaged re lace o
 his", urice of Ihe works against fire, erc 75

materials or goods which have been destroyed or injured remove and

dispose of any debris and proceed with the carrying out of the Works"
The insurance moneys received (less the percentage for professional
fees) are to be paid out to the contractor by instalments under architect's
certificates. These certificates are issued at the period for interim
certificates.
The final sentence is vital; it emphasizes that only the insurance mon-
eys and no more will be paid to the contractor for the reinstatement
work, thus emphasizing the importance of the insurance cover being for
"full value". Payment to the contractor for making good is limited to
the amount recoverable under the insurance policy. Cover must, there-
fore, be adequate and take account of such things as inflation.

Clause 20[B] : New building - employer to insure

Clause 201B/ is similar in its terms to clause 201Al, but provides for
the employer and not the contractor to take out the necessary insurance.
in this case, the matters for which the contractor is required to take out
insurance under clause 20[A] are at the sole risk of the employer. The
contractor is entitled to inspect the policy and premium receipts at any
time by simple request. if the employer fails to produce a receipt, the
contractor may insure against the specified perils in the employer's name.
He is then entitled to have the amount of any premium he pays added
to the Contract Sum on production of the receipt.
There is no express obligation on the contractor to give notice to the
employer should any loss or damage occur, but it is thought that such
an obligation is implied. Paragraph (a) emphasizes that if loss or damage
is caused by the specified risks, this in no way affects the computation
of any amounts due to the contractor under the contract up to the date
of the damage.
in simple tenns, the architect or quantity surveyor must take no
account of the damage when computing any amount nonnally payable
to the contractor under the contract in these circumstances.
in contrast to clause 20tA1, this clause tries to ensure that the con-
tractor suffers no loss of any sort if any of the work is damaged by the
insurance risks. This is emphasized again in paragraph (b) which sets
out the contractor's obligations as to reinstatement in ternis Corres ond-
ing to clause 20[A](2). The contractor must carry out restoration, re-
pair, and removal of debris and proceed with the Works in the nonnal
way. This is subject, of course, to his right to detemiine his own Gin-
ployment under clause 26(I)(c)(it) if appropriate and to his entitlement
to any extension of time for completion under clause 23(c) in respect
of any delay. The reinstatement work is to be regarded as a variation
and is to be valued accordingly under clause I I .
76 Clause 20

Clause 20[C] : Existing structures - employer's risk

Clause 201Cl applies where work is being carried out to an existing

structure, and has given rise to a considerable body of case law in
England. Thus, in Scornsh Speciol Housing Associaiioiz v Winij?e),
Consii'uctioii (UK) Ltd (1986) 9 ConLR 19 the House of Lords held
that on the true interpretation of clause 20[C] the employer bears the
whole risk of fire damage to the Works even if the fire is caused by the
the negligence of the contractor or any of his sub-contractors. Indeed,
this decision was taken a stage further in NoiM, ic/I City Council v
Hoi. \, ey [1989] I All ER 1180, where the contractor sub-contracted
roofing work to a sub-contractor, one of whose employees negligently
set fire to both the existing building and a new extension. Clause 20[C]
applied in the main contract. The English Court of Appeal held that the
employers were not entitled to claim damages in tort direct from the
sub-contractors for negligence.
The court held that it would not be just and reasonable to exclude
the sub-contractor from the protection of clause 20[C] even though there
was no prtvity of contract between him and the employer. Moreover, so
it was said, in these circumstances there was not such a close and direct
relationship between the building owner and the sub-contractor for the
latter to owe a duty of care to the foamer.
The wording of clause 20[C] is comparatively free fronT obscurity.
The 61nployer accepts the risk of loss or damage caused by one or
more of the specified risks. The risk which he assumes covers loss or
damage to "the existing structures together with all the contents thereof
and the Works and all unfixed materials and goods intended for, deliv-
ered to and placed on or adjacent to the Works". Only the temporary
buildings, plant, tools and equipment owned or hired by the contractor
or any of his sub-contractors are excluded. The employer is bound to
insure against these risks, and the insurance cover should be maintained
until practical completion.
The contractor is once again entitled to inspect the policy and pre-
inium receipts on request. it the employer fails to produce a receipt, the
contractor can take out the necessary insurance. He has the Tight of
entry and inspection to survey and make an inventory of existing SITUc-
tores and contents. If the contractor exercises his default power to insure,
he is entitled to have the amount of any premium he pays added to the
Contract Sum on production of a receipt.
There are some practical difficulties for employers in obtaining cover,
and it is important that it should be adequate. if damage occurs, and
there is a shortfall between the insurance moneys received and the cost
of reinstatement, this would have to be borne by the employer.
The second part of clause 201Cl, (which begins "If any loss or damage
. . . is occasioned") deals with what is to happen after the disaster.
No account must be taken of the damage when computing any amount
payable to the contractor under the contract : pal'ogi'aph (0).
 insurance of Ihe works against 117e, etc 77

Paingraph (b) gives either party the right to detemiine the contractor's
employment under the contract "if it is just and equitable to do so"
The parties have only 28 days from the occurrence of the loss or damage
in which to serve notice of determination on the other party, who then
has only seven days from receipt of the notice within which to give the
other party a wrttten request to concur in the appointment of an arbitra-
tor under clause 34 to decide whether notice of delemiination would be
just and equitable. This last phrase is deplorably vague and the contract
lays down no criteria to aid in its interpretation.
The notice of detemnination is to be served by registered post or
recorded delivery, and it is submitted that these words are best inter-
preted as being mandatory : Cenirol Provident Fund Board v HO Bock
Kee 119811 2 MLJ 162, a decision of the Court of Appeal of Singapore.
When notice of detennination is given and not challenged (or is up held
by the arbitrator), the financial settlement of the contract up to the
detennination is to be canled out under clause 26(2). However, sensi-
bly and equitably, the contractor in these circumstances is not entitled
to be paid "any direct loss and/or damage" caused to him by the deter-
mination. As a result - and very sensibly - the contractor has no right
to recover, inter and, the loss of profit and overhead contribution which
he would have received had the contract proceeded to completion.
Paragraph (c) deals with what is to happen if no notice of detenni-
nation is given or, if given, is not upheld by the arbitrator. in that case,
the contractor must reinstate the Works and proceed to completion in
the nonnal way, obeying any architect's instructions for the removal
and disposal of debris. All reinstatement work, the making goods6f any
loss or damage, and compliance with architect's instructions for the
disposal and removal of debris is to be treated as a variation and valued
accordingly under clause I I.
Clause 21

Possession, coinple ion an

postponement

(1) On the Dale of Possession stated in the appendix to these Condi-

lions possession of the site shall be given to the Contractor who shall
thereupon begin the Works and regularly and diligently proceed with
the same, and who shall complete the same on or before the Date for
Completion stated in the said appendix subject nevertheless to the
provisions for extension of time contained in clauses 23 and 32(I)(c) of
these Conditions.

(2) The Architect may issue instructions in regard to the postpone-

merit of any work to be executed under the provisions of this Contract.

This short clause is one of the most inTPOitant in the coniract, and -
perhaps not surprisingIy both of its constituent parts are \\, idcly niisun-
derstood in the construction industry.
Although failure by the employer to give effective possession of the
site does not of itself amount to a repudiation of the contract, it is a
breach of a covenant essential to the performance of the contract and,
as Chang Min Tat F1 pointed out in To, ? Hock Charr v Kilo Teck Sellg
119801 I MLJ 308, in such circumstances "the other party to the con-
tract may rescind the contract and he does so, ordinarily, by giving
notice of his intention to do so. His right to do so arises immediately
where time is or is made the essence and the time has passed .
Failure to give effective possessioi} of the site on the date specified
is thus a breach of contract which in principle entitles the contractor to
rescind. At the very least, the contractor will be entitled to damages for
any loss which he suffers as a result of the breach. Moreover, since
there is no provision in the contract for the architect to grant an exten-
sion of time for completion because of the delay caused by the
employer's breach, it means that the date for completion will be "at
large" and the employer will forfeit his right to liquidated damages.
The English Court of Appeal has considered the problems involved
in the operation of clause 21(I) in Tile Rapid Build^77g GJ'oup Ltd v
Eol^itg Family Housing Associoiion Ltd (1984) I ConLR I where, at
the time when, by clause 21, the defendants promised to give the plain-
tiffs possession of the site, they were unable to do so because its north
east corner was occupied by squatters in an area of some size behind a
 -.:

.
.,

I
,

I
A

*;; Posse$51'01i. coinp!eiion and POS!ponemeni 79

I
* stockade. it was some 19 days before the site was cleared of squatters
\
* so as to enable the plaintiffs 10 occupy the whole site. The Court of
, Appeal confinned the in al judge's finding that this was a breach of
,
clause 21 which caused appreciable delay to the plaintiffs who were,
therefore, entitled to damages. There was a clear breach by the employ-
:
ers of clause 21(I) which says that, on the date stated in the Appendix,
t
I possession "shall be given" to the contractor. The employer's failure to
#
remove the squatters until an appreciable time after they had promised
, to Give the contractors possession was a breach of contract.
The employer's failure to give possession of the site is not covered
*
by the provisions of clause 21 (2) which merely entitles the architect to
postpone "any work to be executed under the provisions of the Con-
tract
,
,,
On any reading this does not empower the architect to defer the givino
A; of possession of the whole or part of the site. and even a postponement
of the whole of the work to be carried out does not constitute defer-
merit of possession. Legally, there is a great deal more involved in
giving the contractor possession than there is in allowing him to carry
,
out work. One result of this is that the architect has no power to grant
,
an extension of time under clause 23 for the employer's failure to give
, possession, and consequently for the reasons set out in the discussion
*
of clause 23, time will be "at large" and the employer will lose his
A
right to liquidated damages.
This situation was belatedIy and reluctantly recognized by the Joint
Contracts Tribunal in the UK when, in July 1987 it introduced provi-
A sions in the current ICT 80 form Grititlino the architect to defer o1ving
possession on the due date, subject to satisfactory safeguards for the
I contractor.
I

There is no doubt that the the PAM fomi needs similar amendment.
Until it is so amended, any failure by the employer to give possession
"
* of the site on the due dare is a breach Going to the root of the contract
*
and at the very least the contractor will be entitled to damages for any
loss he suffers by the breach.
"
, .*** Gin!, se 21(I) sets out the employer's obligation to give possession of
* . .- . .
*~* .
the site to the contractor. The contractor is then oblioed to begin the
Works, proceed "regularly and diligently" with them so as to complete
^* *.
\** .
the Works "on or befoi. e" the completion date set out in the Appendix.
The dates for possession of the site and for completion must be speci-
^. .. fled in the Appendix and, subject to the orant of any extension of time
j;;:***.-
;*- -
under clause 23 or clause 32(I)(c) (which peruiits an extension of time
for reinstatement of war damage) the contractor is bound to complete
the work by the specified completion date. it he fails to do so, he will
** *
*** be liable for liquidated damaoes to the employer under clause 22.
***^
",*.
This is subject to the exception that the employer is not entitled to
liquidated damages if by his acts or omissions he has prevented the
*-
,. . ^ ..
contractor from completing his work by the completion date unless an
*,-, extension of time is both Grantable and has been granted for any delay
caused by that act or omission : see the old Enolish cases of Ho/me v
;.* *.
It *..

** *
*, -:,

~..
{...
80 CIOuse 21

Guppy (1838) 2 M & W 387; Wells v A1'my & Na\, y CO-OPei'drive So-
ciei}, (1902) 86 LT 764.
Clause 21(I) says nothing about the degree of possession which must
be Given to the contractor but it has been held in Canada that the
contractor is entitled to a sufficient degree of possession to allow him
to execute the work unimpeded by others : The Queen ill Right of
Coiloda v Waite, ' Cabott Const, .MCIion Lid (1975) 69 DLR (3d) 542.
The sub-clause in fact contemplates that the contractor is to haveexclu-
sive possession of the site, subject to the employer s power under clause
29 to brino others on the site to work concurrently with the contractor.
in such a case the contractor is entitled to an extension of time for any
consequent delay (clause 23(h)) and to recover any direct loss and/or
expense which he suffers or incurs as a result of the exercise of that
power (clause 24(I)(d)).
in principle, then, "the contract necessarily requires the building owner
to give the contractor such possession, occupation or use as Is neces-
sary to enable him to perfonn the contract" : London Bo, 'oug/I of
Houjislow v Twickenhanz Go, den Developments Ltd [1970] 3 All ER
326. This is a fundamental obligation on the part of the employer.
The contractor's primary obligation is to complete the Works by the
contractual date for completion. His secondary obligation is to proceed
with the Works "regularly and diligently ' so as to achieve that objec-
live "on or before" the date for completion stated in the Appendix. '
in the TM^kenhai?I Golden Developme, lis Lid case the meaning of
the phrase "I'egularly and diligently" was discussed. Tile judge said :
These are elusive words on which the dictionaries help very little. The
words convey a sense of activity, of orderly progress, and of industry and
perseverance; but such language provides little help on the question of
how much activity, progress and so on is to be expected. They are words
used in a standard fomi of building contract and in those circumstances 11
may be that there is evidence that could be given, whether of usage
among architects, builders and building owners or otherwise, that would
be helpful in construing the words. At present, all I can say is that I
remain somewhat uncertain as to the concept enshrined in those words. ,

Failure to proceed regularly and diligently with the Works is one of the
grounds in clause 25(I) which may give rise to delennination of the
contractor's employment by the employer.
The obligation to complete "on o1' b<fore" the completion date should
be noted. The contractor may programme for early completion and he
is entitled to complete the Works on a date earlier than the date of
completion stated in the Appendix. He is further entitled to carry out
the Works in such a way as to enable him to achieve an earlier coin-
PIGtion date whether or not the Works were programmed.
However, there is no corresponding obligation on the employer or
his architect to co-operate with the contractor so as to enable early
completion to be achieved, eg by supplying infonnation at times to
enable the contractor to complete by the earlier date he had in mind.
This is so even if the Bills have required the submission of a pro-
 Possession, coinple!ion and POS!ponemen! 81

gramme to the architect and the programme submitted shows a dare for
completion ahead of the contract date.
These points were a matter of direct decision in England in Glenfton
Consti'wction Ltd v The Gumness T, .ust (1987) 11 ConLR 126. The
contractor is entitled, but not oblioed, to complete by an earlier coin-
PIetion date shown in his programme, and it is clear that the contrac-
tor has no claim for damages (or for "direct loss and/or expense" under
clause 24) for the architect's failure to issue information and instruc-
lions at times necessary to comply with the progranune. The fact that
the Contract Bills have required a programme to be submitted by the
contractor does not in itself make the position different.
in practical terms, it is important that the contractor should prepare
a competent programme before commencing work, and that he updates
this programme as the work proceeds and that he prepares forward plans.
Potential causes of delay are then revealed in time to allow preventive
action to be taken. Too many contractors proceed in the hope that they
can make up time which appears to be lost, and discover too late that
this is physically impossible due to the overlapping of trade operations
which must eventually result. Any programme produced by the
contractor is merely a management document; it has no contractual
effect and is not a contract document. This is so even if, as in the
Glention case, the programme is required by a provision in the Bills of
Quantities.
The date for completion should not be confused with the date of
practical completion (clause 15(I)). This may or may not coincide with
the date for completion stated in the Appendix. The date so stated is
the date by which the Works must be completed, subject of course to
the fact that the date may be altered by the grant of extensions of time
under clause 23 or 32(I)(c). Only if the Works are not completed by
that date is the contractor in breach of his obligation to complete and
becomes liable to liquidated damages. The contractor camot be required
to finish earlier than the completion date stated in the Appendix.
Clause 21(2) Ginpowers the architect to issue instructions requiring
the postponement of any work to be executed under the contract, and
neither this sub-clause nor any other terni of the contract empowers
him to defer the giving of possession of the site. in England it has been
held that an instruction to postpone win be implied if the architect issues
an instruction to the contractor which necessarily entails postponement
of the work, even though the instruction is not issued under clause 21 (2)
and does not specifically instruct postponement : M Hornson & Co
(Leech) Lad v Leeds City Council (1980) 14 BLR 118.
If instructions to postpone the execution of work are given they may :
(1) provide grounds for claiming an extension of time (see clause
23(e)); and/or
(2) give grounds for a claim for direct loss and/or expense (see clause
24(I)(e)); and/or
(3) give grounds for the contractor to detennine his employment under
the contract (see clause 26(I)(c)(iv)).
Clause 22

Dama es for non-coinplet'on

22 if the Contractor fails to complete the Works by the Date for Coinple-
lion stated in the appendix to these Conditions or within any extended
time fixed under clause 23 or clause 32(I)(c) of these Conditions and
the Architect certifies in writing that in his opinion the same ought Tea-
sonably so to have been completed, then the Contractor shall pay or
allow to the Employer a sum calculated at the rate stated in the said
appendix as Liquidated and Ascertained Damaoes for the period during
which the Works shall so remain or have remained incomplete, and the
Employer may deduct such sum from any monies due or to become due
to the Contractor under this Contract.

This clause provides the machinery whereby tile parties can agree in
advance the damages 10 be payable by the contractor if he fails to
complete the \\'orks by the completion date stated in the Appendix, of
within any, extended period authorized by the architect under clause 23
or clause 32(I )(c). 11 also provides a contractual mechanism for their
recovery. When liquidated damages are agreed, the employer's only
remedy for late completion is a sum not exceeding the specified amount.
He does not have the option of claiming unliquidated damages.
Should no date for completion be inserted in the Appendix, then no
liquidated damages will be payable since there is then no date from
which liquidated damages can run, There must be a definite date to act
as a starling point and if for some reason the completion date has gone,
the employer's right to liquidated damages will be lost : Slim Chio HMOt
v Wong red Fui [1983] I MLJ 151.
This is a very real possibility under the PAM form because, as will
be seen, the extension of time clause is defective, and if no extension
of time is grantable and granted under the contract for acts of hindrance
or prevention by the employer which cause delay to completion, this
will have the effect of putting time for completion "at large". in other
words, the provision for liquidated damaoes will be Tendered unenforce-
able by any delay caused by the employer and not covered by the
extension of time clause : Peak Consti. "ciion (Live, pool) Ltd v MCKin-
ney Foundations Ltd (1976) I BLR 111, which is the leading modem
English case, also holding that a provision for liquidated damages must
be consumed conti. a PI'ofei'entem.
 Damages 101' non-completion 83

it the Appendix entry is left blank, then no liquidated damages are

recoverable, but in such a case the employer would be able to recover
general (unliquidated) damages by legal action on the basis of his actual
proven loss. If the liquidated damages clause fails, the employer is
also able to recover general damages by way of legal action, possibly
subject to a ceiling on their amount equivalent to that of the failed
provision.
The difficult English case of Tern/oc Ltd v Ei. rill Properties Ltd (1987)
12 ConLR 109 should also be noted. in that case "NIL" was inserted
in the Appendix entry for the amount of liquidated damages and the
period over which payment was to be made was left blank. it was held
that this constituted an agreement that no damages would be payable
by the contractor for late completion and that it was not open to the
employer to claim general damages instead. Nourse LJ said :
The damages payable in respect of late completion of the works are one
head of the general damages which might be recoverable by an employer
for the contractor's breach. Their character is not in any way altered
according to whether the rate at which they are payable is agreed by the
parties in advance, so that they become liquidated, or detennined by the
court after the breach, so that they become unliquidated.
Section 75 of the Contracts Act 1950 deals with the effect of a sum
named in a contract which is payable in cases of breach of contract,
and in Malaysia "there is no difference between penalty and liquidated
damages" : Maniam v The State of Peruk [1957] MLJ 75.
Section 75 provides :
When a contract has been broken, if a sum is named in the contract as
the amount to be paid in case of such breach, or if the contract contains
any other stipulation by way of penalty, the party complaining of the
breach is entitled, whether or not actual damage or loss is proved to have
been caused thereby, to receive from the parry who has broken the
contract reasonable compensation not exceeding the amount so named or,
as the case may be, the penalty stipulated for.
Although this provision does away with the distinction in English law
between liquidated damages and penalties, it is still important for the
figure inserted in the Appendix to be a genuine pre-estimate of the
likely loss suffered by the employer if the Works are not completed on
time or, of course, a lesser sum.
The reason for this was explained by Roberts CJ in Ch"rig Syn Kheng
Electrical Co Bhd v Regional Coltstr"ction Sdn Bhd [1987] 2 unJ 763
who said that the effect of section 75 is that all liquidated damages
clauses are to be treated as if they had been penalties under the fomier
English law. The leanied judge said :
This means that the amount provided for liquidated damages will only be
enforced in favour of the plaintiff if it can be shown that this amount was
a genuine pre-estimate of the damages likely to flow from the specified
 84 Cirruse 22

breach. TITe amount of loss or damaoe which has actually occurred must be
a major factor in deciding whether the amount provided for was an honest
pie-estimate of the likely loss or damaoe. if 111e actual loss or damaoe suffered
is very much less than the sum agreed, the court will refuse to enforce the
agreement to pay at specified sum by way, of liquidated damages.
Section 75 apparently perniits the recovery of liquidated damages
"whether or not actual damage or loss is proved to have been caused"
by the breach of late completion, but Professor Sinnadurai says, "the
cases seem to suggest that the plaintiff cannot recover sinipficilei. the
suni fixed in the contract, whether as a penalty or liquidated damaoes.
The plaintiff is required to prove the actual damages he has suffered" :
Low of Colliinci in Malaysio ond Singoj?oi'e . Coses und Coi??,?lei?100',
2nd edition, 1987, Butterworths, page 671. Later (page 703) he adds
that in every case "the court has to be satisfied that every sum of money
payable by way of liquidated damages is reasonable. Upon the
court being satisfied that the said sum is a genuine pre-estimate and
that it represents a reasonable sum for the loss suffered, it may order
the said sum to be paid as damages".
in practical tenns, therefore, the architect must make an actual cal-
CUIation of the likely loss to the employer and any temptation to in-
crease the figure should be avoided as otherwise it may well be found
not 10 be "reasonable compensation". The amount of damages oldered
by the court in these circumstances cannot exceed the specified amount, ,
and so the figure inserted in the Appendix is a limitation on the anIOUnt
for which the contractor is liable.
Cmuse 22 deals only \\, ith damaoes for' late completion and confers
on the employer a right to deduct liquidated daniaoes "from any moneys
due or to become due to the Contractor under this Contract", re from
interim certificates or from retention moneys.
For this provision to operate it is necessary for the architect to CGr-
tify "in writing that in his opinion [the Works] ouoht reasonably" to
have been completed by the Date for Completion. it follows that a
certificate can only be given under clause 22 after the Date for Coin-
PIetion (or any extended Date for Completion) has passed. The issue of
the clause 22 certificate of delay (clause 3(8) applies to its issue) is a
coltdrtion PI'ecedeiit to the employer's noht to liquidated damaoes ; this
has been so decided in England in A1gi'ey Collti'actoi's Ltd v Tenth Moot
Housing Society Lid ( 1972) I BLR 45 and Token Coltsti'MCIioii Co Lid
v Chin'Ito11 Estates Lid (1973) I BLR 48.
The architect can issue his clause 22 certificate at any time prior to
the issue of the final certificate. Once he has issued the final certificate
under clause 30(6) then, if no notice of arbitration has been given by
either party in accordance with clause 30(7), the architect becomes
functus offICio and is thereafter precluded from issuing any valid CGr-
tmcate under clause 22 : see the Briolish case of H Foiiv, earl^i. Lid v
Asden Sec",. mes Ltd (1979) 12 BLR 40.
 Daniages 101' non-completion 85

it is suggested that, before the certificate is issued the architect must

have pertonned his duties as regards adjudicating upon any outstanding
applications for extensions of time under clauses 23 and 33(I)(c). When
a clause 22 certificate has been issued and a subsequent cause of delay
arises which entitles the contractor to a further extension of time, it is
thouoht that a further clause 22 certificate can be issued, although there
is no express provision for the cancellation of the existing certificate
and the issue of a fresh one,
If, in those circumstances, there has been an over-deduction of 11qui-
dated damages, than the sums over-deducted would have to be repaid
to the contractor. There is an Irish decision (Department of the Envi-
1'0nmenf for' Northern 11'eland v Farrans (Consrr"ction) Lad (1981) 19
BLR I) which suggests that where more than one certificate is issued
under clause- 22 as further extensions of time are granted with the result
that liquidated damages fall to be repaid, the contractor is entitled to
interest thereon as special damages. This decision is generally thought
to be wrong and it is unlikely that it would be followed by the Malay-
SIan courts, since the deduction of liquidated damages in reliance on an
earlier and valid certificate of non-completion cannot conceivably be
made a breach of contract retrospectiveIy.
Once the clause 22 certificate has been issued, the contractor is to
"pay or allow" to the employer liquidated and ascertained damages
"calculated at the rate stated in the . . . Appendix . . . for the period
during which the Works" remain incomplete, thus providing a simple
contractual machinery to produce a readily calculable mathematical
result. The provision will be unenforceable if it is expressed in a mariner
which is inconsistent with the contract provisions to which it relates.
For example, in the English case of Binma!I & 08den Ltd v Sh<f-
field C, fy Council (1983) I ConLR 30, a housing contract was let on
ternis identical with the PAM fonn. it provided for liquidated damages
upon the contractor's failure to complete "the Works" by the date for
completion, but the Appendix expressed the rate for liquidated damages
as "at the rate of f20 per week for each uncompleted dwelling". The
contract made no provision for sectional completion, but clause 16(c)
provided for a proportionate reduction in the liquidated damages if the
employer took possession of parr of the Works before completion of
the whole. The employer sought to claim liquidated damages for some
of the dwellings at the rate stated in the Appendix. Although the inten-
tion of the parties was reasonably plan, it was held that on the true
interpretation of the contract no liquidated damages could be claimed
in the circumstances.
in effect, it was held that the Appendix applied to the whole of the
Works, to to all the dwellings, not just some of them, and that clause
16 could not operate when the rate in the Appendix was expressed as
it was. 11 is submitted that this decision applies to a contract in PAM
fomi since clause 16, although headed "Sectional Completion", is actu-
ally in the same terms as the corresponding provision which was the
subject of decision in the Enolish case.
The employer is given an express right to deduct the liquidated
damages from moneys due or to become due from the contractor under
the contract, to from any certificates issued under clause 30(I) or from
moneys in hand, to retention money. The architect must, of course, certify
the full amount due to the contractor under clause 30 and it is for the
employer to deduct the liquidated damages from the sum so certified
and it is not for the architect to do so. it the certified sums and any
retention moneys are insufficient to cover the liquidated damages due,
then the sum due is recoverable as a debt by nomial court procedures.
Clause 23

Extension of time

23 Upon it becoming reasonably apparent that the progress of the Wor s is

delayed, the Contractor shall forthwith give wrttten notice of the cause
of the delay to the Architect, and if in the opinion of the Architect t e
completion of the Works is likely to be or has been delayed beyond the
Date for Completion stated in the appendix to these Conditions or beyon
any extended time previously fixed under either this clause or c ause
32(I)(c) of these Conditions,
(a) by force majeure, or
(by by reason of any exceptionally inclement weather, or
(c) by reason of loss or damage occasioned by any one or more of the
contingencies referred to in clause 201Al, IBl or [C] of these Con-
ditions or
(d) by reason of civil collii, lotion, local combination of workmen, s ' e
or lockout affecting any of the trades employed upon the Works or
any of the trades engaged in the preparation, manufacture or trans-
portalion of any of the goods or materials required for the or s
or,

(e) by reason of Architect's instructions issued under clauses I(2), 11(I)

or 21(2) of these Conditions, or
(f) by reason of the Contractor not having received in due time neces-
say instructions, drawings, details or levels from the Architect or
which he specifically applied in writing on a date which having
regard to the Date for Completion stated in the appendix to these
Conditions or to any extension of time then fixed under this clause
or clause 32(I)(c) of these Conditions was neither unreasonably
distant from nor unreasonably close to the date on which it was
necessary for him to receive the same, or
(g) by delay on the part of nominated sub-contractors or nominated
suppliers which the Contractor has taken all practicable steps to
avoid or reduce, or
(h) by delay on the part of artists, tradesmen or others engaged by e
Employer in executing work not fomning part of this Contract, or
(i) by reason of the opening up for inspection of any work covere up
or of the testing of any of the work materials or goods in accor-
dance with clause 6(3) of these Conditions (including making good
in consequence of such opening up or testing), unless the irispeg-
tion or test showed that the work materials or goods were not in
accordance with this Contract or
* 0) by the Contractor's inability for reasons beyond his control and
which he could not reasonably have foreseen at the date of tins
 88 CIOiise 23

Contract to secure labour goods or materials as are essential to the

proper can'ying out of the Works.

then the Architect shall so soon as he is able to estimate the length of

the del^, be>, ond the dale or time aforesaid make in writing a fair and
reasonable extension of time for coinpletioii of the Works. Provided
always that the Contractor shall use constantly his best endeavours to
prevent delay and shall do all that may reasonably be required 10 the
satisfaction of the Architect to proceed with the Works.

*Footnote - Sri'ike owl if $11b-CIO!Ise co is 1701 10 o17ply.

This important clause is the main provision under WITich any alteration
to the completion date is made. (Clause 32(I)(c) requires the architect
to grant the contractor an extension of time in respect of reinstatement
after war damage. )
Clause 23 provides for the architect to grant an extension of time on
specified grounds and an extension of time is orantable on those grounds
and no other. The architect has no inherent power to extend the period
for completion and in the absence of an express provision such as clause
23 he would have no power to do so. Failure by the architect properI
to exercise the power to extend lime, where any, dela}, to completion is
caused by the employer or those for whom he is responsible in law,
relieves the contractor from his Iiabilit\, to pay or allow liquidated
damages (Dodd v C/I"lion 118971 I QB 562) and the time for cample-
lion becomes "at large", to the contractor's oblioation is then to coin-
PIete "within a reasonable time".
The 'operation of clause 23 modifies the liability of the contractor to
complete the Works by the date for completion specified in the Appen-
dix (clause 21) and to pay or allow liquidated damages for the breach
of late completion. (dause 22). 11 imposes a duo, on the architect to
grant "a fair and. reasonable extension of time for completion of the
Works" in specified circumstances. One effect of extendin the eriod
for completion is to prevent the architect from issuing his clause 22
certificate of delay. He cannot certify late completion under clause 22
until the revised completion date has passed.
Clause 23 is gravely defective in many important respects and is in
need of urgent amendment. The grounds on which an extension in^, be
granted are very limited and do not cover many common delaying events,
eg failure by the employer to supply materials to the contractor, failure
to give agreed access and failure to give possession of the site on the
due date. it such events occur and cause delay to completion the an'chi-
tect has no power to grant an extension of time with the result that time
will be "at large" and the employer will lose his noht to liquidated
damages. This is made clear by the leading English case of Peak
Consti. "ctioiz (Dyeipoo/) Ltd v MCKiitney Fowldotio, us Lid (1970) I BLR
I I and it is somewhat surprising that clause 23 should continue to be
used in its present fomi.
 ET!ensi'on of tinie 89

Clause 23 is widely misunderstood by both architects and contrac-

tors. The grant of an extension of time under clause 23 does not carry
any automatic or other entitlement to extra money, whether by way of
extension of preliminaries or otherwise.
11 is also settled law that the grant of an extension of time under
clause 23 is not a condition precedent to the recovery of direct loss
and/or expense under clause 24. This follows from the important Eng-
lish case of H Fairweothei' & Co Ltd v Londo}I Bolo"811 of Wandswoi'th
(1988) 39 BLR 106.
Considerable light is thrown on the operation and effect of clause 23
by the English case of London B0, .o118h of Melton v Skin!ey H!!gh
Ledch Ltd (1985) 32 BLR 51, which was concerned with a contract in
tentis identical 10 the PAM fomi, and the main principles laid down are
directly applicable to clause 23. The following points from the judg-
merit are relevant:

( I ) The giving of notice by the contractor is not a condition precedent

to the performance by the architect of his duties under the clause.
(2) If the architect is of the opinion that the progress of the Works is
being or is likely to be delayed beyond the completion date be-
cause of one or more of the specified events, he must estimate the
delay and grant an appropriate extension. He owes this duty to
both the employer and to the contractor.
(3) Failure by the contractor to give notice under clause 23 when it
becomes reasonably apparent to him that the progress of the Works
is delayed is a breach of contract. The architect can take the
contractor's breach into account in assessing the extension of time,
to the contractor must not benefit from his breach by receiving a
greater extension than he would have received had the architect
on notice at the proper time have been able to avoid or reduce the
delay by some instruction.
(4) A document can be a valid notice even if it does not specify a
cause of delay with sufficient detail for the architect to decide
whether the event falls within paragraphs (a) to co because differ-
Grit criteria apply to the notice and the architect s opinion under
the clause. The intention of the contractor's notice is to warn the
architect of the current situation regarding progress. it is then
up to the architect to monitor the position in order to form
his opimon and if necessary to seek further infonnation from the
contractor.
Vinelott I observed :

The first part of clause 23 looks to a situation in which it is apparent

to the contractor that the progress of the Works is delayed (my
emphasis), that is, to an event known to the contractor which has
resulted or will inevitably result in delay. The second part looks to a
situation in which the architect has fomied an opinion that completion
is likely to be or has been delayed beyond the date for completion. it
is possible that the architect might know of events (in particular "delay
 90 Clause 23

on the part of artists, tradesmen or others endaged by the employer in

executing work not forming part of this contract") which is likely k
cause delay in completion but whicli \\ ill not cause an actual or pro
spective del^, in the progress of the work which is apparent to thc
contractor.

(5) The contractor's duty is to give the architect as much information

as he can about the cause of delay and so assist the architect ir
pertonning his duty. The contractor's failure to provide infomia-
lion if requested is also a factor which the architect can take into
account in assessing the extension of time.
The foregoing points should be borne in mind when readino the re-
mainder of this section.
in the usual course of events, the initiative for Iakino action under
clause 23 will come from the contractor when he realizes that the
progress of the Works is delayed. The contractor is not required to give
notice of a delay which will be caused by some expected future event
however probable its occurrence may be. He . has only to give notice
when it becomes reasonably apparent to him that the progress of the
Works is delayed; it seems that the contractor is bound to notify the
architect of all delays to progress and not merely those caused by events
listed in the clause.
The contractor's notice must be in writing and it must specify a cause
of delay which has started to affect progress. The contractor musi oiye
written notice as soon as it has become apparent to him that the proo-
ress of the Works is delayed and if he does not do so he is in breach
of contract. However, if the contractor fails to give written notice
promptly or at all this does not relieve the architect of his duty under
the clause. He must consider the matter independently in the light of
his knowledge of the progress of the Works and of other matters affect-
ing or likely to affect their progress.
On receipt of the contractor's wrttten notice, the architect must decide
whether the cause of delay specified by the contractor falls within
paragraphs (a) to (j), If in his view it is not then, subject to the
contractor's right to challenge that view in arbitration, no extension of
time arises.
it the architect concludes that the cause of delay is covered by
paragraphs (a) to (j) he must decide whether completion of the Works
is likely to be or has been delayed beyond the current completion date.
in fonning his opinion, the architect is entitled to have regard to the
proviso to the clause, namely, that "the Contractor shall use constantly
his best endeavours to prevent delay . . .".
If the architect decides that the completion date will not be affected,
he should notify the contractor of his decision, although this is not
expressly stated. If the contractor wishes to challenoe that decision he
must give notice of arbitration.
Where the architect decides that the delaying cause either has de-
layed completion or is likely to mean a failure to complete on time he
 Extension of time 91

must then "make in writing a fair and reasonable extension of time for
completion of the Works". The contract says that he must do this "as
soon as he is able to estimate the length of the delay" and no time limit
is specified.
it is submitted, however, that the views of Roper I in the New Zealand
case of Fernbrook TrQding Co Lid v Taggai't I 19791 I NZLR 556 are
of assistance. The learned judge said :
I think that it must be implicit in the normal extension of time clause that
the contractor is to be infomied of his new completion date as soon as
reasonably practicable. it the sole cause is the ordering of extra work, then
in the nomial course extensions should be given at the time of ordering, so
that the contractor has a target for which to aim. Where the cause of delay
lies beyond the employer, and particularly where its duration is uncertain,
then the extension may be delayed, although even then it would be a reason-
able inference to draw from the ordinary extension clause that the extension
should be given a reasonable time after the factors which will govern the
exercise of the larchitect'sl discretion have been established. Where there
are multiple causes of delay, there may be no alternative but to leave the
final decision until just before the issue of the final certificate.
A rider should be added to this statement since where the event
causing delay is the employer's responsibility, the architect should grant
an extension before the current completion date has passed. it he fails
to do so, it is thought that time will become "at large" and the em-
ployer will forfeit his right to liquidated damages : see the English
decision of Miller v London County Council (1934) 151 LT 425.
The position is different where the event causing delay is outside the
control of the employer or the architect. in that case, the architect may
grant an extension of time even after completion of the Works as appears
from the English case of Amalgamoted Build^^g Contractors Ltd v
Wattham Holy Cross Urban District Council 119521 2 All ER 452.
The effect of the cause of delay on completion is to be assessed at
the time when the Works are actually being carried out and not when
they were programmed to be carried out. This has been so decided in
England in Waiter Lawrence & Son Ltd v Commercial Union Proper-
ties (UK) Ltd (1986) 4 ConLR 37 which involved a contract on all
fours with the PAM fomi. in that case it was held to be so even though
the contractor was in CUIpable delay.
The contractor's entitlement is to "a fair and reasonable extension of
time" and the length of the extension of time must relate to the effect
of the delaying event on contract progress.
The dual prowso to the clause is important, and deals with matters
which the architect will take into account in consideting the grant of an
extension of time. The architect's decision as to whether or not the
contractor has used "constantl his best endeavours to revent dela is
subject
j yto review
., by____.
an, arbitrator in case of dispute,
. I and the better view
is that compliance witri~the proviso does not require the contractor to
expend substantial sums of money.
,
 92 Clause 23

The contractor's obligation "to do all that may reasonably be re-

quired to the satisfaction of the Architect to proceed with the Works"
is not, it is suggested, any more than a Deneral oblioation "to show
willing" and do what the contract requires. The second part of the proviso
does not empower the architect to order acceleration of the prooress of
the Works or instruct the contractor to put in extra resources.
The delaying events which trigger off a claim to extension of time
are listed in lettered paragraphs. The cause or causes of delay of which
the contractor has given notice must fall under the events listed if they
are to qualify for an extension of time.
The causes of delay which may give rise to an extension of time fall
Into two groups:
[A] Paragraphs (a) to (d), These are the fault of neither party.
(g) and a)
[B] Paragraphs (e), (f), (h) These are the responsibility of the
and (1) employer.
Group [A] causes do not call for any additional payment by the Gin-
ployer under the express terms of the contract or otherwise. They merely
entitle the contractor to an extension of time. Group [B] may, quite
independently of any extension of time, Give rise to a claim for direct
loss and/or expense under clause 24.

Paragraph (a) - Force majeure

This is a tenn derived from French law and is used "with reference to
all circumstances independent of the will of man and which it is not in
his power to control" : Lebeo"pill v Ci. ispill [1920] 2 KB 714. The
tenn must be interpreted in the light of the nature and general terms of
the contract and in this form force majeure has a restricted meanin
because such things as war, sinkes, fire and exceptional weather are
dealt with expressly in the contract.

Paragraph (b) - Exceptionally inclement weather

This is one of the commonest grounds on which a claim for extension
of time is made. The emphasis is on the exceptional nature of the
inclement weather and the meaning of the terni is to be found b
considering two factors. First, the kind of weather that may be ex ected
at the site at the particular time when the delay occurs. Second, the
stage which the Works have reached. Reference to local weather rec-
ords over a considerable period of time may be helpful in showin that
the weather is "exceptional" for that area, to exceedin what in a
the evidence of past years be reasonably expected. The contractor is
expected to programme the Works making due allowance for normal
 E. tiension of lime 93

inclement weather, to the sort of weather which is to be expected in the

area and at the time of year during the course of the Works. Heavy
rainfall during the monsoon period on the east coast of Peninsular
Malaysia would not, therefore, be within the phrase.

Paragraph (c) - Insurance contingencies

These are : fire, storm, tempest, lightning, flood, earthquake, aircraft or
anything dropped therefrom, aerial objects, riot and civil commotion :
see clause 201Al, [B] and IC]. On the ordinary reading of the wording
it seems that the contractor is entitled to an extension of time even
when the contingency is caused by the default or negligence of his own
employees' However, in these circumstances it is doubtful whether the
in denimty in clause 18 is wide enough to cover the employer's loss of
liquidated damages. A purposive interpretation of clause 23 as a whole
is that the contractor should not be entitled to an extension of time for
anything that is his fault.

Paragraph (d) - Strikes and similar events

The full list of events is civil commotion, local combination of work-
men, sinke or lock-out affecting any of the trades engaged in the
preparation, manufacture or transportation of any of the goods or
materials required for the Works. Civil coriumotion is the stage between
a riot and a civil war, while "local combination of workman" probably
covers obstructive industrial activities falling short of a strike.
The paragraph applies to strikes in two kinds of trade. First, those
employed upon the Works themselves; second, those engaged in the
preparation, manufacture or transportation of any of the goods or
materials required for the Works, eg hauliers bring goods to the site. 111
the English case of BOSko!is Westminster Constri, orlon Ltd v Liverpool
City Council (1983) 24 BLR 83 a strike by workers employed by a
statutory public water undertaking directly by the employer to execute
work not fomiing part of the contract was not covered by clause 23 (d).
in other words, a strike or other event referred to in paragraph (d) must
be one in which the trades mentioned in the paragraph are directly
involved.

Paragraph (e) - Architect's instructions

The instructions referred to are:

Clause I(2) : instructions regarding discrepancies in or divergences

between the Contract Drawings and/or Contract Bills.
94 Clause 23

Clause I I (I ) : instructions requiring a variation.

Clause 21 (2) : Instructions postponing the execution of any Work undei.
the contract.

Other necessary instructions which are received late from the architect
may, of course, give rise to a claim under paragraph (f).

Paragraph co - Late instructions

The instructions referred to are any instructions which the contract

empowers or requires the architect to give. The reference is to lieces-
sai'y instructions, drawings, details or levels. The restrictions in the
paragraph should be noted. Although clause 3(4) obliges the architect
to provide the contractor with necessary infonnation "as and when from
time to time may be necessary" and his failure so to do is a breach of
contract for which the employer is liable, in order to found a claim for
extension of time under clause 23 the contractor must have made a
specific written application to the architect for the information and he
must do this at the right time. The contractor's application must have
been made "on a date which having regard to the tcurrent completion
datel was neither unreasonably distant from nor unreasonably close to
tlie date on which it was necessary for hini to receive the same".
One of the many points at issue in the English case of Londqn
Bo, ough of 1421'ton v Slantcy Hugh Ledch Lid (1985) 32 BLR 51 was
whether a programme which set out in diagrammatic fonn the planned
sequence for the work and indicated the dates by which the various
items of infonnation were required was a specific application in writing
made at the correct time. Vinelott I held that it was. in other words, the
submission of a programme by the contractor at an early stage may be
sufficient to meet the requirements of paragraph (f) at least for the earlier
part of the contract. The dates specified for delivery of the required
infonnation must not be either unreasonably distant from. or umeason-
ably close to the date on which the contractor needs the infonnation.
The learned judge emphasized that if the work did not progress sinctly
in accordance with the programme some modification might be required.
"It does not follow that ithe programmel was a sufficiently specific
application made at an appropriate time in relation to every item of
inforrnation required", he said, "more particularly in light of the delays
and the rearrangement of the programme of work".

Paragraph (g) - Delay by nominees

Delay on this ground is very common, and the contractor must be able
to show that he has taken all practicable steps to avoid or reduce the
delay if he is to be entitled to an extension of time for completion.
 Ex!ension of time 95

What these steps are is not specified but they may well include some
reprogramming. in fact, the paragraph has a limited meaning because
of the decision of the English House of Lords in Westminster Corpora-
tion v I loryis & Sons Ltd 119701 I All ER 943, where it was laid
down that "delay on the parr of nominated sub-contractors" was con-
fined to delay in completing the sub-contract works.
Thus, if as in that case a nominated sub-contractor ostensibly coin-
PIetes his sub-contract, but is later found to be in breach and has to
realm to site to remedy the breach. that is not "delay on the part of"
the nominated sub-contractor. in those circumstances, therefore, the
contractor is not entitled to an extension of time. By analogy the same
ruling applies to such delays by nominated suppliers.
The House of Lords said :

the sub-contractor is nor in delay so long as, by the sub-contract

completion date, he achieves such apparent completion that the contractor is
able to take over, notwithstanding that the work so apparently completed
may be defective.
On the other hand, if the breach is discovered before the period for the
sub-contract works is completed or the period for the supply of goods
or mater to/s I'S completed so that completion is then delayed beyond
the completion date in the sub-contract while the sub-contractor
supplier remedies the breach, this would amount to "delay on the part
of" the normnee and thus gives rise to a right to extension of time.
The distinction is, with respect, highly artificial and no account seems
to have been taken of the fact that the paragraph was intended in
practice as an essential protection for ,the contractor. Its wording needs
reconsideration.

Paragraph (h) - Employer's licensees

Clause 29 permits the employer to engage "artists, tradesmen and

others" to carry out work "not fomimg part of this Contract" while the
Works are being executed. in England, perhaps rather surprisingIy, it
has been held that the words "or others" are not to be construed ej"sdem
generis, with the result that statutory undertakers who were not carry-
ing out their statutory functions engaged under a direct contract with
the employer fell within the description : Henry Boot Construction Ltd
v Central Loncashire New Town Development Corporation (1980) 15
BLR I.
The ej"sdem generis rule of interpretation is that where there is a list
of specific things foUowed by general words, the general words will be
treated as refeinrig to things "of the same kind" as those specifically
mentioned rather than to other things.
Under paragraph (h) the employer accepts responsibility for "delay
on the parr of" such people. Presumably this is restricted to delay in the
96 Clause 23

execution of their work and does not extend to delay caused by their
returning to carry out remedial work after purported completion : see
Wesri?liftsiei' Coipoi. ajio, ? v I Jolt, is & Soils Lid 119701 I All ER 943.

Paragragh (i) - Testing and inspection

Clause 6(3) Ginpowers the architect to issue instructions for opening up

or inspecting any work covered up for testing and, unless the Contract
Bills provide otherwise, or the results establish disconfomnity with the
contract, the cost is added to the Contract Sum. This provision ensures
that such instructions may also give rise to an extension of time if the
results of the tests show that the workmanship and materials are in
accordance with the contract.

Paragraph co - Inability to obtain labour and materials

This is an optional provision, but it should only be deleted where it is

reasonable in the circumstances to expect tenderers to take the risk of
labour and materials not being available. if it applies, it gives a limited
protection for the contractor. The securing of labour and materials must
not only be beyond the contractor's control, but also the shortage must
have been one that could not have reasonably been foreseen at the date
the contract was entered into.
Flowcharts 2 and 3 illustrate the duties of the contractor and of the
architect under clause 23.
 E. tieiisi'on of time 97
Flowchart 2
Extension of time : contractor's duties (clause 23)

Examine relevant
START Progress delayed events

No

Forthwith give written Force majeure

notice of the cause of the
delay to the architect
No

Yes Exceptionally
inclement weather
Use best endeavours 10
minimise delav No

Yes Clause 20
contingencies

No
Do all reasonably
required Yes Civil
commotion etc

No

Yes
AIS

No

Yes Late
information

No

Nominated
sub-contractor

No

Artists &
tradesmen

No

inspection
and testing
No

Unforeseen
shortages*

No

Notify architect of
delay in wiring

* May be omitted
\
98 Clause 23

Flowchart 3
Extension of time : architect's duties (clause 23)

No No No

Includes Yes Cause Yes Examine

START Reasonable falls within those
cause of
notice listed Clause 23
delay

Force majeure

No
Works
Excepiionally No
delayed beyond
inclemeni wealher
coinpleiion
dale
No Yes

Clause 16
No Contractor used
contingenc, CS
be SI endeavours
No
\'CS
Civil
commotion
No Contract
done all reasonably
No d
q

AIS Yes

Any \'es
No more claims
Late Requested
information in writing in No
time
Go To
No No NEXT
ITEM
Nominated Yes
subcontractor Took steps
to reduce

No No

Artists & Yes So soon as he is able

Contractor
tradesmen blameless 10 estimate length of
delay beyond completion
No No dale, architect must make
in writing a fair and
reasonable extension
Inspection Work in Yes of lime
and testing accordance with
contract

No
No
Unforeseen Yes STOP

shortages*
No
No
Any Yes
more claims

*OPTIONAL
Reject claim

Refer to Conditions
Clause 24

Loss and expense caused by

disturbance of regular progress
of the works

24 (1) if upon written application being made to him by the Contractor

the Architect is of the opinion that the Contractor has been involved in
direct loss and/or expense for which he would not be reimbursed by a
payment made under any other provision in this Contract by reason of
the regular progress of the Works or of any part thereof having been
material!51_affected by:
(a) the Contractor not having received due time necessary instructions,
drawings, details or levels from the Architect for which he specifi-
cally applied in writing on a date which having regard to the Date
for Completion stated in the appendix to these Conditions or to any
extension of time then fixed under clause 23 or clause 32(I)(c) of
these Conditions was neither unreasonably distant from nor uruea-
sonably close to the date on which it was necessary for him to
receive the sinne; or
(b) the opening up for inspection of any work covered up or the testing
of any of the work materials or goods in accordance with clause
6(3) of these Conditions (including making good in consequences
or such opening up or testing), unless the inspection or test showed
that the work, materials or goods were not in accordance with this
Contract; or
(c) any discrepancy in or divergence between the Contract Drawings
and/or the Contract Bills; or
(d) delay on the part of artists, tradesmen, or others engaged by the
Employer in executing work not forrning part of this Contract; or
(e) Architect's instructions issued in regard to the postponement of any
work to be executed under the provisions of this Contract;
and if the written application is made within a reasonable time of it
be corning apparent that the progress of the Works or of any part thereof
has been affected as aforesaid, then the Architect shall either himself
ascertain or shall instruct the Quantity Surveyor to ascertain the amount
of such loss and/or expense. Ally amount from time to time so ascertained
shall be added to the Contract Sum, and if an Interim Certificate is
issued after the date of ascertainment any such amount shall be added
to the amount which would otherwise be stated as due in such Certificate.

(2) The provisions of this Condition are without prejudice to any other
rights and remedies which the Contractor may possess.
99
100 CIOiise 24

The objective of clause 24 is to reimburse the contractor for dii. ect loss
and/or expense which he has suffered or incurred as the direct result of
certain specified events and for whicli he is not reimbursed by payment
made under "any other provision" of the contract. it provides a
mechanism for the settlement of the more common contractor's monetary
claims.
A claim can only be made under the provision if "regular progress
of the Works or any part thereof" has been nioiei'iany dyected by one
or more of the stated events, to a claim can only arise as a ITect con-
sequence of one of the five specified matters.
Some, but not all, of the matters listed in clause 24(I) amount to
breaches of contract for which the employer is responsible. In that case,
clause 24( I ) provides an alternative means of recovery to a claim for
damages at common law, such common law claims being expressly
preserved by clause 24(2). The benefit to the contractor of a claim under
clause 24(I) is that he receives payment under the contractual
mechanism. A written application to the architect by the contractor at
the right time is a condition precedent to a successful claim under clause
24(I ).
The term "direct loss and/or expense" is a convenient shorthand which
means that what is recoverable is the equivalent of damages at common
law according to the ordinary principles in section 74 of the Contracts
Act 1950, to "compensation for any loss or damaoe caused to him . . .
which naturally arose in the usual course of things from the breach, or
which the parties knew. when they made the contract, to be likely to
result from the breach of it . . . . Such compensation is not to be given
for any remote and indirect loss or damaoe sustained . " : see the
English cases of Winight Ltd v pH & T (Holdings) Ltd (1968) 13 BLR
26 and FG Miniei. Ltd v Wets/? Health Technical Services 01,801tisaiion
(1980) 13 BLR I, which are decisive on the meanino of "direct loss
and/or expense" being equivalent to a claim for damages at common
law.
A claim under clause 24( I) is not a means of turning a loss-making
contract into a profitable one, The only purpose of the clause is to
ensure that the contractor is not out of pocket as a result of the speci-
fled events materialIy affecting "regular progress of the Works". The
word dii. ect is important; the loss and/or expense must have been caused
directly by the event relied on.
Clause 24(I) does not oblige the contractor to make a written appli-
cation. it merely governs the steps to be taken if an application is made.
in London Boi'ough of MeI. ton v Sinnley Hugh Ledch Ltd (1985) 32
BLR 51, the English High Court emphasized that the machinery of the
clause is not exhaustive of the contractor's remedies and referred to the
express wording of clause 24(2). Accordingly, the contractor is entitled
to pursue a claim for damages as an alternative if he so desires pro-
vided, of course, that the event relied on amounts to a breach of con-
tract for which the employer is responsible. The contractor can only
recover his loss once. Per Vinelott J in London Bo, 'ough of Me I'ton v
 Loss and expense callsed by di^1111'bance of leg"!or progress of the works 101
Sinn/ey Hugh Leoch Ltd (1985) 32 BLR 51:
Under clause 24 the contractor can call on the architect to ascertain the
direct loss and/or expense suffered and to add the loss when ascertained to
the contract sum. The contractor will then receive reimbursement promptly
and without the expense and delay of a claim for damages. But the contrac-
tor is not bound to make an application under clause 24(I). He may prefer
to wait until completion of the work and join the claim for damages for
breach of the obligation to provide instructions, drawings and the like in
o00d time with other claims for damages for breach of obligations under the
contract . . . .

The Tenris of clause 24(I ) should be carefully noted. The architect is

only required to ascertain (or instruct the quantity surveyor to ascer-
tain) the amount of the direct loss and/or expense already suffered or
incurred by the contractor if :
(1) the contractor makes a written application stating that he has
incurred direct loss and/or expense which is not reimbursable under
any other contractual provision; and
(2) application is made within a reasonable time of it becoming
apparent that the progress of the whole or part of the Works has
been material!y dyected by one or more of the specified matters;
and
(3) the architect forrns the opinion that direct loss and/or expense has
been incurred as set out in the contractor s application. If he foams
an opinion favourable to the contractor it is his duty to ascertain
or instruct the quantity surveyor to ascertain the loss or expense
suffered or incurred by the contractor, and his failure to do so
timeously is a breach of contract for which the employer is liable.
The written application need not be in any particular fomi, but it must
be such as to enable the architect to know upon what question he is
required to fonn an opimon. Although not expressly stated, the contractor
must provide the architect with sufficient inforrnation to enable him to
fonn an opinion as to the validity of the claim. He must also provide
the architect (or quantity surveyor) with sufficient further infonnation
to enable the amount of the direct loss and/or expense incurred to be
ascertained. If the inforrnation provided by the contractor is insufficient,
the architect or quantity surveyor is entitled to ask for further infonnation.
it is for the contractor to prove his claim on the balance of probabilities
by means of satisfactory evidence, eg records of actual loss.
The architect may delegate the duty of ascertaining the amount of
loss and/or expense to the quantity surveyor and in practice he will
usually do so. However, although the architect may use the quantity
surveyor to ascertain the amount of direct loss and/or expense, it is
probable that he is not bound by the quantity surveyor s ascertaimnent.
This follows from the views expressed by Lord Radcliffe in the English
case of RB Burden Ltd v Swansea Corporation 119571 3 All ER 243,
approved and adopted in Shen Yuan Pai v Dato Wee Hood Teck [1976]
I MLJ 16.
102 Clai, se 24

As already stated the architect s failure to ascertain, or instruct e

quantity surveyor to ascertain, the amount of loss and/or expense, is a
breach of contract for which the employer may be liable in am a, es.
The architect must perform this duty within a reasonable time o re-
CGivino reasonably sufficient information from the contractor; he is no
entitled to defer ascertainment of the contractor's claim unti a ater
stage.
6f course, a claim for direct loss and/or expense under clause 24(I )
cannot be enforced by legal action in the absence of an arc itect s
certificate. But equivalent sums may be so claimed by way o an an ion
for damages for breach of contract, provided that the contractor
establishes that he has suffered some damage. Unless the employer
establishes that there are no matters in respect of which the contractor
is entitled to claim under clause 24(I), it necessarily follows that the
contractor must have suffered some damage as a result of the arc itect's
failure to ascertain amounts due : see the important decision o I e
English Court of Appeal in Ci. oudoce Ltd v London Boi'oug/? of Lo"I-
belli (1986) 6 ConLR 70, which is authority for the propositions here
advanced.
A claim under clause 24(I) is' related to the degree to which one of
the matters specified in paragraphs (a) to (e) has affected regular prog-
ress of the Works. Once the contractor is satisfied that one of the matters
has affected the regular progress of the Works, he should niake a whiten
application to the architect "within a reasonable time of it be coinin*;
ISOl apparent" and thus avoid having his claim rejected as being out of
time. in the case of continuing losses, successive applications may e
required because an application can only relate to loss and/or expense
which lids been incu, .I. ed; it cannot relate to anticipated loss an
expense.
Once the amount of the contractor s claim has been OScei'joined, t e
sum must be included in the next interim certificate. The process o
ascertainment and settlement is a continuous one because in many cases
the full financial consequences of the kind of disturbance covered by
this provision are not immediately apparent.
To summarize the position, if a claim under clause 24(I) is to be
successful it must :

(1) Be made in time. it not in time then, whatever its merits, the
architect may reject it. However, architects should be careful in
this regard since the employer may, by his conduct, be estopped
from objecting to a late claim: Rees & Kii. by Ltd v Swanseo City
Council (1985) 5 ConLR 34.
(2) Show that the regular progress of the Works or part of them has
been affected by one or more of the matters specified.
(3) Be supported by relevant information and details of the loss and/
or expense incurred to the date of the application.
(4) Be of such a nature that the sum claimed is not recoverable, if
recoverable at all, under any other clause in the contract.
 Loss and expense caused by disrt, ,. borice of I'eg!1101' PI'ogress of Ihe wo, 'ks 103
The following five events are specified as giving rise to a claim by the
contractor.

Paragraph (a) - Late information

This paragraph is very badly drafted. However, it emphasizes that the

contractor must have made a specific application for the instructions,
etc and that application must not have been made too early or too late.
The timino of the application and the date when it is necessary for the
contractor to receive the information is to be judged by the current
contractual date for completion and not by any date shown on any
programme submitted by the contractor : see the English case of Glen-
lion Consiit, ction Ltd v The GIIinness Ti. 11st (1987) 11 ConLR 126.
The architect is, of course, under a duty (clause 3(4)) to provide the
contractor "as and when from time to time may be necessary" with
"such drawings or details as are reasonably necessary either to explain
and amplify the Contract Drawings or to enable the Contractor to carry
out and complete the Works in accordance with the Conditions". His
failure to do so amounts to a breach of contract, but is not sufficient in
itself to ground a contractual claim under clause 24(I)(a). it such a
claim is to be made (and dealt with by the architect) under the teams of
the contract the contractor must have made a specific wrttten applica-
tion at the correct time : see London Borough of Merton v Sinnley
Hugh Legch Ltd (1985) 32 BLR 51, discussed when considering clause
23(f) above.
The "instructions" referred to are any written instructions which the
architect may validly give under the conditions and which the contrac-
tor needs and for which he has applied in writing.
The "drawings and details" include those which the architect must
furnish under clause 3(4), but which he has failed to do and for which
the contractor has made a specific written request.
The "Levels" referred to are those which the architect must deter-
mine under clause 5, but which he has not detemiined and for which
the contractor has made a similar request.
This same matter may also, quite independently, give rise to a claim
for extension of time under clause 23(f).

Paragraph (b) - Opening up for inspection

I~
This refers to the architect's p erg to issue instructions under clause
6(3). There will only be claim here the tests are in favour of t^e
contractor. The same matter may also give rise to an independent c aim
for extension of time under clause 23(i).
I

' I"" \owl ;"^'

.,!!. C'P" TeX, 1910. !\ ^,'!Alt, *,
Sb, b .Ajar, , beta^, ;I
, 21^IA, , ,,
 I04 Clause 24

Paragraph (c) - Discrepancies between drawings and bills

This refers to clause I(2) and delay, etc resultino from cleanno up the
discrepancies or divergencies referred to there. Clause I(2) requires the
contractor to notify the architect if he discovers such a discrepancy or
divergence. The same ground may independently give rise to an exten-
sion of time under clause 23(e). ~

Paragraph (d) - Delay by employer's licensees

This refers to the employer's clause 29 noht to engage artists, trades-
men and others to carry out work not formino part of the contract but
contemporaneously with it. See clause 23(h) as to the separate noht to
an extension of time for delay caused.

Paragraph (e) - Postponement of work

This refers to the architect's power to issue instructions in regard to the

postponement of any work to be executed under the contract under clause
21(2) and the delay that will almost inevitably result from such an
instruction. The same matter may, and independently, give rise to an
extension of time under clause 23(e).
CIOuse 24(2) preserves the contractor's other nohts and remedies.
For example, if the employer is in breach of contract, the contractor
may sue at common law. in some instances, he may also have the
contractual right to detennine his employment under the contract, eg
under clause 26(I ) where some of the grounds set out correspond to
some of the matters listed in clause 24(I).
Flowcharts 4 and 5 illustrate the duties of both contractor and archi-
tect under clause 24.
 Loss and e. tpense caused by di^Iu, 'bance of legtila, ' progress of the woi'ks 105
Flowchart 4
Loss and/or expense : contractor's duties (clause 24)

START

Direct
Regular Yes Examine matters
progress materialIy loss and/or
listed
affected expense

No No

Reimbursable Yes Late

Yes
under another contract infonnation
provision

No
No

Yes
Inspection
and testing
Apply in writing to
architect within
reasonable time of it No
becoming apparent
progress has been Yes
affected 24(I) Discrepancy
or
divergence

No

Yes
Artists &
tradesmen

No

Yes A1
postponement
of work

No
STOP
106 Clause 24

Flowchart 5
Loss and/or expense : architect's duties (clause 24)

START

No No No No

Noi Regular Made

Application under other
CS
progress material I> in reasonable
un writing provisions allecied lime

Yes

Examine in a ers

1.1e Reques, ed Did Yes

information un wniing un contracior conrribuie
reasonable 10 dinurbance
lime
.

No No No

Work
Irispeciion in accordance ". iih
and legung contraci
Archiiect or qu"1111y
No No surveyor must
ageeri. In claim

Discrepancy Yes
or
divergence

No

Artists & Yes Contracior

Tradesmen blameless

No No

Reject claim
AIS
Yes
postponement of
work

No

Refer 10 conditions
Clause 25

Determination by employer

25 (1) If the Contractor shall make default in any one or more of the fol-
lowing respects, that is to say:
(a) If he without reasonable cause wholly suspends the carrying out of
the Works before completion thereof or
(b) If he fails to proceed regularly and diligently with the Works, or
(c) it he refuses or persistently neglects to comply with a written
notice from the Architect requirlng hint to remove defective work
or improper materials or goods and by such refusal or neglect the
Works are materialIy affected, or
(d) If he fails to comply with the provisions of clause 17 of these
Conditions,
then the Architect may give to him a notice by registered post or re-
corded delivery specifying the default, and if the Contractor either shall
continue such default for fourteen days after receipt of such notice or
shall at any time thereafter repeat such default (whether previously
repeated or not), then the Employer without prejudice to any other rights
or remedies, may within ten days after such continuance or repetition
by notice by registered post or recorded delivery forthwith detennine
the Employment of the Contractor under this Contract provided that
such notice shall not be given unreasonably or vexatiously.
(2) in the event of the Contractor becoming bankrupt or making a
composition or arrangement with his creditors or having a winding up
order made or (except for purposes of reconstruction) a resolution for
voluntary winding up passed or a receiver or manager of his business or
undertaking duly appointed, or possession taken by, or on behalf of the
holders of any debentures secured by a floating charge, of any properly
comprised in or subject to the floating charge, the employment of the
Contractor under this Contract shall be forthwith automatically deter-
mined but the said employment may be reinstated and continued if the
Employer and the Contractor his trustee in bankruptcy liquidator re-
ceiver or manager as the case may be shall so agree.
(3) in the event of the employment of the Contractor being detennined
as aforesaid and so long as it has not been reinstated and continued, the
following shall be the respective rights and duties of the Employer and
Contractor:

(a) The Employer may employ and pay other persons to carry out and
complete the Works and he or they may enter upon the Works and
use all temporary buildings, plant, tools, equipment, goods and
107
 108 Clause 25

materials intended for, delivered to and placed on or adjacent to the

Works. and may purchase all materials and goods necessary for the
carrying out and completion of the Works.
(b) The Contractor shall, if so required by, the Employer or Architect
within fourteen days of the date of determination, assion to the Em-
ployer without payment the benefit of any agreement for the supply
of materials or goods and/or for the execution of any work for the
purposes of this Contract but on the terms that a supplier or sub-
contractor shall be entitled to make any reasonable objection to any
further assignment thereof by the Employer. in any case the Em-
ployer may pay any supplier or sub-contractor for any materials or
goods delivered or works executed for the purposes of this Contract
(whether before or after the date of delemiination) in so far as the
price thereof has not already been paid by the Contractor. The
Employer's rights under this paragraph are in addition to his rights
to pay nominated sub-contractors as provided in clause 27(c) of
these Conditions and payments made under this paragraph may be
deducted from any sum due or to become due to the Contractor.
(c) The Contractor shall as and when required in writing by the Archi-
tect so to do (but not before) remove from the Works any tern-
porary buildings, plant, tools, equipment, goods and materials be-
longing to or hired by him. If within a reasonable time after any
such requirement has been made the Contractor has not compiled
therewith, then the Employer may (but without beino responsible
for any loss or darnage) remove and sell any such properly of the
Contractor, holding the proceeds less all costs incurred to the credit
of the Contractor.
(d) The Contractor shall allow or pay to the Employer in the manner
hereinafter appearing the amount of any direct loss and/or damaoe
caused to the Employer by the detemiination. Until after coinple-
tion of the Works under paragraph (a) of this sub-clause the
Employer shall not be bound by any provision of this Contract to
make any further payment to the Contractor, but upon such coin-
PIetion and the verification within a reasonable time of the account
therefor the Architect shall certify the amount of expenses properly
incurred by the Employer and the amount of any direct loss and/or
damage caused to the Employer by the delemiination, and if such
amounts when added to the monies paid to the Contractor before
the date of detennination exceed the total amount which would have
been payable on due completion in accordance with this Contract,
the difference shall be a debt payable to the Employer by the
Contractor; and if the said amounts when added to the said monies
be less than the said total amount, the difference shall be a debt
payable by the Employer to the Contractor.

CIO"se 25 deals with the employer's right to "detennine the employ-

merit of the contractor" and sets out the procedures to be followed when
this occurs. The contract itself does not come to an end but remains in
being, albeit in a modified form : see the Tanzanian case of Myna
Consti'"ction Co Ltd v Tanzania H@,. bowl. s Anthoi'by (1990) 46 BLR
 Dere, .mina!ion by employer 109

19.1t is the contractor's employment under the contract which is deter-

mined and the parties' rights after a valid determination are governed
by the express contractual provisions. The arbitration agreement (clause
34) survives the determination,
The contractual power of detennination is given to the employer
"without prejudice to any other rights or remedies he has, eg to treat
the contract as discharged for repudiatory breach, namely a breach which
goes to the root of the contract : Siophiotoon v Lim Siew Hui [1963]
MLJ 305.
Clause 25(I) sets out four different defaults by the contractor which
may give rise to delemnination of his employment. it the contractor has
committed one or more of these defaults, the architect may issue a notice
by registered post or recorded delivery which must specify the default
either by naming it or setting out in full the relevant paragraph(s) of
sub-clause (1). The contractor can then take one of three courses
(1) He can dispute the notice, to deny that he has defaulted as
alleged.
(2) He can remedy the default and infonn the architect as soon as
possible after receipt of the notice how the default is being
remedied. The time-limit of 14 days should be noted, to the con-
tractor must begin to remedy the default within that period. it the
contractor is in fact putting the default right, the architect must
accept that.
(3) He can continue the default and risk the consequences of his failure
to remedy it.
it he adopts the first course, the contractor should give notice of arbi-
tration under clause 34 on the grounds that the notice of default was
wrongly given, thus protecting his position.
Should the contractor admit the default and remedy it, he must ensure
that he does not repeat it. Ally repetition of a default of which notice
has once been validly served does not require a further 14-day notice
of default. For example, if the contractor defaults by failing to proceed
regularly and diligently, and in response to the architect's notice of
default resumes proper working, but subsequently defaults in the same
respect, the architect need not serve a further notice. in such a case the
employer can proceed to detennine the contractor's employment under
the contract without more ado. This is the purpose of the words in
parenthesis in the 11th line.
it the contractor adopts the third course and continues his default for
14 days after receipt of the architect's notice (or repeats a default after
remedying it), the employer has ten days in which to decide whether to
proceed under the clause or not. If he decides to terminate the
contractor's employment, he must serve on the contractor a detennina-
tion notice. This should be served by registered post or recorded denv-
ery and is effective from the moment the notice is received by the
contractor and clause 25(3) applies.
110 CIQuse 25

The only way in which a notice of determination validly served can

be challenged is on the basis that it was served "unreasonably or vexa-
Iiously". There is Enolish case law on tile meaning of this phrase.
in IM Hill & Sons Lid v London 801,1181? of Camden (1980) 18
BLR 31, the Endlish Court of Appeal has expressed the view that the
use of the word "unreasonably" in this context is meant to protect a
parry where there is "something accidental or purely incidental so that
the Court could see that [the other party] was taking advantage of the
other side in circumstances in which, from a business point of view, it
would be totally unfair and almost smacking of sharp practice".
in John Jan, is Ltd v Rockdole Housing Associoiion Ltd (1986) 10
ConLR 51, the same court took the view that "unreasonably" is a general
tenn which can include anythino which can be objectiveIy judged to be
unreasonable, while "vexatiously" connotes an ulterior motive to op-
press or amoy.
Because of the seriousness of the consequences of action under clause
26(I), it is suggested that the sinct letter of the clause should be fol-
lowed. A WTOnoful or otherwise invalid deterrninaiion of the contractor's
employment would amount to a repudiatory breach of contract by the
employer. in particular, the times laid down and the contents of the
notices should be sinctly observed, and so should the requirement as to
service by registered post or recorded delivery. Indeed, it is recoin-
mended that the notices should be served by registered post to the address
stated in the contract because then. under clause 2(4) such notice "shall
be deemed served on the Contractor".
Although there are English decisions which suogest that the contract
provisions about the mode of service are merely directory and not
mandatory as the words suggest (see, eg Goodwill & Sons v Fowceti
(1965) 195 E & G 27) the contrary view has been taken in New South
Wales and in Singapore and is to be preferred : Ei'ikssoi? v W/laney
t1971j I NSWLR 397; Centi. o1 PI'ovident Fund BOQi. d v H0 80ck Kee
(1981) 17 BLR 21.
The defaults which ingger the operation of the determination proce-
dure may now be considered.

Paragraph (a) - Suspension of work

The default of wholly suspending the Works must be without I'easo"-

able cause. A "reasonable cause" would be, for example, the failure of
the architect to provide necessary instructions or, indeed, the occur-
Tence of any of those matters referred to in clause 26(I )(c) would pi. inIQ
focie provide a reasonable cause for suspension. The wording is "wholly
suspends" and so anything less than that is insufficient.
^-

Delei. mindri'on by employer 11 I

Paragraph (b) - Failure to proceed regularly and diligently

This default is a breach of the contractor's obligation in clause 21 to
proceed regularly and diligently with the Works after being given
possession of the site. it is a most difficult ground to establish in prac-
lice, and essentially it is a question of fact.

Paragraph (c) - Failure to remove defective work

This is a breach of the contractor's obligation under clause 2(I) to
comply with instructions. The particular instructions referred to in this
paragraph are those under clause 6(4). The default must have "materI-
ally affected" the Works. The contractor must either refuse or pel'sis-
leii!11, neglect to comply with a written notice from the architect requir-
ing him to remove defective work or materials before the paragraph
can be invoked, and a simple failure by the contractor to comply with
a clause 6(4) instruction could not be said to be "persistent".
Attention has already been drawn to the curious feature of this form
of contract that the architect is given no specific power during the course
of the Works to instruct that defective work be remedied but only to
instruct its total removal from the Works.

Paragraph (d) - Assignment or sub-letting without consent

The defaults here are (1) assigning the contract without the consent of
the employer under clause 17(I); and (2) sub-letting part of the Works
without the consent of the architect under clause 17(2).
Clause 25(2) deals with the position where the contractor is in finan-
cial difficulties as evidenced by insolvency, eg bankruptcy under the
Bankruptcy Act 1967, and related matters. As soon as one or more of
the listed events has occurred the contractor's employment under the
contract is automatically detennmed. After such determination, the
contractor's employment may be reinstated by agreement between the
employer and, for example, the liquidator.
Clause 25(3) contains the provisions which govern the relationship
between the parties after the contractor's employment under the con-
tract has been validly determined. it refers specifically to the possibility
that the employer may revoke the detennination and instruct the con-
tractor to continue with the work, although this is unlikely to happen in
practice.
Once the contractor's employment has been validly deterrnined and
so long as it has not been reinstated and continued", the rights and
duties of the parties are governed by clause 25(3). Although there is no
express provision that on delennination the contractor must give up
possession of the site, it is suggested that he is bound to do so, even if
 I 12 CIOi, se 25

he is disputing the grounds or validity of the determination. This is

implicit in the reasoning of the Supreme Court of New Zealand in
Mo}:field Hold^718s Ltd , Moona Reef Ltd [1973] I NZLR 309 which is
infiniteIy to be preferred to the English authorlty to the contrary (London
Bolo"gh of Hownslow, v TM^kenha, ?? Galde}? Del, elopments Ltd 119701
3 All ER 326) which is unlikely to be followed in any Commonwealth
jurisdiction.
However, for the avoidance of doubt it is desirable that clause 25
should be amended to provide that "without prejudice to any arbitration
or other proceedings in which the validity of the detennination is in
issue" then, on detennination, "the contractor shall oive up possession
of the site of the Works to the employer".
On detennination clause 25(3) provides :
Under paing, 'dpii (0) the employer has the right to engaoe another
contractor to carry out and complete the Works. Both the employer and
the completion contractor are given an express right to enter upon the
Works. They are also Ginpowered to purchase all materials and goods
necessary for the carrying out and completion of the Works. The para-
graph also purports to confer the right to use "all temporary buildings,
plant, tools, equipment, goods and materials intended for, delivered to
and placed on or adjacent to the Works". This provision can only extend
to goods, etc which belono to the contractor in law and cannot confer
rights in respect of items which belono to third parties : Dowbei' Wil-
nomso, I (Roofing) Lid v Humbei'side Cowlziy COM1zci1 (1979) 14 BLR
70 is an English case in point.
Poi'o81'Qph (b) obliges the contractor, if so required by either the
employer or the architect, to assign to the employer the benefit of any
'relevant contracts for the supply of goods and materials. 11 also Gin-
powers the employer to pay directly any supplier or sub-contractor for
any materials or goods delivered or work done but not already paid for
by the contractor, and is stated to be in addition to his right to a
nominated sub-contractors direct under clause 27(c). If the employer
makes such payments, he has the right to deduct them from any sum
due or to become due to the contractor.
Pal'o81'0ph (c) requires the conti'actor to remove from site "any
temporary buildings, plant, tools, equipment, goods and materials be-
longing to or hired by him" upon being required in wrttino to do so by
the architect. it goes on to confer on the employer a power of sale in
respect of such items if the contractor fails to comply with the architect's
instruction within "a reasonable time". This right is once again restricted
to those items which are the contractor's property in law and camot
extend to items hired by him. The employer is exempted from nabilit
for any loss or damage to the items should he exercise this power. The
employer is to hold "the proceeds less all costs incurred to the credit of
the Contractor".
Fordgi'@ph (d) provides for financial settlement following the deter-
mination. Its effect is that the employer may claim any direct loss and/
 Determinori'on by employer I 13

or damage he has suffered as a result of the determination and to suspend

payment of any money that might be due to the contractor at the date
of delennination, until after the completion contractor has completed
the Works. The expenses incurred by the employer in getting the contract
completed, together with the direct loss and damage are set-off against
any moneys that might be due to the contractor. if, as is usually the
case, the sums due to the employer exceed those due to the contractor,
the balance is (in theory at any rate) recoverable from the contractor.
"Direct loss and/or damage" means that what is recoverable by the
employer is the equivalent of the compensation recoverable for loss or
damage caused by a breach of contract : see section 74 of the Contracts
Act 1950.
Flowchart 6 illustrates delennination by the employer.
114 Clause 25

Flowchart 6
Determination by employer

START

Notice of
Con. rustor No
Wholly delenninaiion by
Architeci may serve
suspends work slops dejauli within
without reasonable default nullce 25(11 7 davs employer 25(I)
cause
Yes
No

No further aciion
Falls 10 Yes buy employer can
proceed regularly and delennine without
diligently further notice 11
default repealed
No 25(I)

F. 115 10
Yes
comply with A1 and
works material Iy
riflec, ed

No

F"13 Yes
10 comply with
clause h

No

Yes AUIomaiic Take legal advice

Bankrupt etc deterin trialion 2512)

No
Take legal .dvice
employer may
General Yes delennine .her 28
mobilisation days unless works
31 pr. c, ICally completed
or was damaged
No

Arbirraior decides if
just and equi"ble
31

Yes

Employer may give Yes

notice of Arbitr, lion Employer
Clause 201Cl deler, funorion within notice within reinsnies contractor
loss or dam. ge 28 daysifjusi and 7 days
equitable 201Cl(b)(i) No
No No

Carry out Cam' CUI

provisions of clause provisions of
26(2) Iexcepi clause clause 25(3)
2621(b)(, ill
Clause 26

Determination by contractor

26 (1) Without prejudice to any other rights and remedies which the Con-
tractor may possess, if
(a) The Employer does not pay to the Contractor the amount due on
any certificate within the Period for Honouring Certificates named
in the appendix to these Conditions and continues such default for
seven days after receipt by registered post or recorded delivery of
a notice from the Contractor staring that notice of detemiination
under this Condition will be served if payment is not made within
seven days from receipt thereof; or
(b) The Employer interferes with or obstructs the issue of any certifi-
cate due under this Contract; or
(c) The carrying out of the whole substantially the whole of the un-
completed Works (other than the execution of work required under
clause 15 of these Conditions) is suspended for a continuous period
of the length named in the appendix to these Conditions by reason
of:

co 10, ce male", e, or
(ii) loss or damage occasioned by any one or more of the contin-
gencies referred to in clause 20(A) or clause 20tBl of these
Conditions (if applicable), or
(in) civil coriumotion, or
(iv) Architect's instructions issued under clauses I(2), 11(I) or
21(2) of these Conditions, or
(v) the Contractor not having receiv?d in due time necessary in-
structions, drawings, details or levels from the Architect for
which he specifically applied in writing on a date which hav-
ing regard to the Date of Completion stated in the appendix
to these Conditions or to any extension of time then fixed
under clause 23 or clause 32(I)(c) of these Conditions was
neither unreasonably distant from nor unreasonably close to
the date on which it was necessary for him to receive the
same, or
(vi) delay on the part of artists, tradesmen or others engaged by
the Employer in executing work not fomiing part of this
Contract, or
(vii) the opening up for inspection of any work covered up or of
the testing of any of the work materials or goods in accor-
dance with clause 6(3) of these Conditions (including making
good in consequence of such opening up or testing), unless
116 Cirruse 26

the inspection or test showed that the work materials or good

were not in accordance with this Contract,

(d) The Employer becomes bankrupt or niakes a composition or ar-

rangement with his creditors or has a winding up order made o1
(except for the purposes of reconstruction) a resolution for volun-
tary winding up passed or a receiver or manager of his business o1'
undertaking is duly appointed, of possession is taken by or on behalf
of the holders of any debentures secured by a floating charoe, or
any property comprised in or subject to the floating charge,
then the Contractor may thereupon by notice by registered post or
recorded delivery to the Employer or Architect forthwith detemiine the
employment of the Contractor under this Contract; provided that such
notice hall not be given unreasonably or vexatiously.
(2) Upon such determination, then without prejudice to the accrued
rights or remedies of either party or to any liability of the classes
mentioned in clause 18 of these Conditions which may accrue either
before the Contractor or any sub-contractors shall have removed his
temporary buildings, plant, tools, equipment, goods or materials or by
reason of his or their so removing the same, the respective rights and
liabilities of the Contractor and the Employer shall be as follows, that
Is to say:

(a) The Contractor shall with all reasonable dispatch and in such manner
and with such precautions as will prevent injury, death or damaoe
of the classes in respect of which before the date of determination
he was liable to indemnify the Employer under clause 18 of these
Conditions remove from the site all his temporary buildings, plant,
tools, equipment, goods and materials and shall give facilities for
his sub-contractors to do the same, but subject always to the provi-
sions of sub-paragraph (iv) of paragraph (b) of this sub-clause.
(b) After taking into account amounts previously paid under this Con-
tract the Contractor shall be paid by the Employer:
a) The total value of work completed at the date of detennination.
(ii) The total value of work begun and executed but not completed
at the date of detennination, the value being ascertained in
accordance vJith clause I I(4) of these Conditions as if such
work were a variation by the Architect.
(iii) Any sum ascertained in respect of direct loss and/or expense
under clauses 11(6), 24 and 33(2) of these Conditions (whether
ascertained before or after the date of detennination).
(iv) The cost of materials or goods properly ordered for the Works
for which the Contractor shall have paid or for which the
Contractor is legally bound to pay, and on such payment by
the Employer and materials or goods so paid for shall become
the property of the Employer.
(v) The reasonable cost of removal under paragraph (a) of this
sub-clause.
(vi) Any direct loss and/or damage caused to the Contractor by
the detemiination.
 Dele, 'minori'o11 by conir@CIOr I 17

Provided that in addition to all other remedies the Contractor upon such
delerrnination may take possession of and shall have a lien upon all
unfixed goods and materials, which may have become the property of
the Employer under clause 14 of these Conditions until payment of all
monies due to the Contractor from the Employer.

Clause 26 (1) sets out the grounds on which the contractor can deter-
mine his employment under the contract. The right of delennination is
also expressed to be "without prejudice to any other rights or remedies
which the Contractor may possess", thus preserving the contractor's
rights under any other provision of the contract and at coriumon law.
Most of the events referred to in the clause are not breaches of contract
by the employer and those that are are not necessarily repudiatory in
their effect. it the employer wrongfully prevents completion of the
contract, this is a repudiatory breach. Thus, in Smith Constr"ciion Co
Ltd v Phit Kin\, atrid [1955] MLJ 8, the employer's refusal to issue a
promised architect's certificate was held to amount to repudiation of
the contract. However, it is often a difficult question of both law and
fact whether a particular breach is repudiatory in character.
C!@14se 26(I) confers on the contractor a right to determine his
employment under the contract - not a right to treat the contract as at
an end - by serving notice on the employer or the architect by regis-
Iered post or recorded delivery. No particular fomi of notice is speci-
fled but it is suggested that it should be drafted with care and refer to
the cause of detennination in precise tenns. The detemiination takes
effect "forthwith", to upon service of the notice.
The right of detennination is once again subject to the proviso that
it must not be effected "unreasonably or vexatiously" and the coriumen-
tary on that phrase and on the service of notices generally under the
preceding clause is equally relevant : see page 78.
The grounds which give rise to a right in the contractor to detennine
his employment - some of which are not even breaches of contract -
are set out in the sub-clause. They are the following.

Paragraph (a) - Failure to pay on certificates

Under clause 30(I) the contractor is entitled to payment by the em-
ployer of amounts certified as due to him by the architect within the
period stated in the Appendix. This period is customarily 14 days from
presentation of the certificate. Failure so to pay is a breach of contract
on the employer's part.
Prompt payment of certified announts is essential to the contractor's
cash flow, and in some cases the employer may be held to have repu-
diated the contract by his failure to pay instalments when due. For
example, in Bon Hong 100 Mines Ltd v Chen & yap Ltd [1969] 2 MLJ
I 18 Cluiisc 26

83, an employer's deliberate and unjustified refusal to pay what was

already due coupled with his unjustified order to the contractor to stop
work was held to be a repudiatory breach.
However, not every failure to pay a certificated antount will amount
to a repudiatory breach and it is therefore desirable that the contractor
should be given an express contractual remedy against non-payment of
certificated amounts. in yoiig Mok Hill v Uniied Mold)^ Sidles Swgoi'
Indusn. ies Lid 119661 2 MLJ 286, Raja Azlan Shah J (as he then was)
held that a contractor was not entitled to treat the contract as repudiated
for mere non-payment of a progress payment and on the facts and in
the circumstances the contractor had repudiated the contract by aban-
doning it.
Clause 26(I)(a) provides that if the employer does not pay, the CGr-
titled amount in due time, the contractor may issue a notice stating that
he will detennine his employment under the contract unless payment is
made within seven days of receipt of the notice. The notice must be
served by registered post or recorded delivery and its service is a
condition precedent to the contractor's right of detennination.
The wording is interesting; the employer's default is in failing to pay
to the contractor "the amount due on any certificate", but it is sug-
gested that this must mean "the anIOUnt properly due", to less any
deductions authorized by the contract, such as liquidated damages.

Paragraph (b) - Interference with certificates

This paragraph gives a right to the contractor to determine his employ-

merit if the employer "interferes with or obstructs" the issue by the
architect of ally certificate, to not only certificates of payment but other
certificates as well.
The leading English case on this topic is RB Bw, den Lid v Swanseo
Coipoiniioii 119571 3 All ER 243, which makes it clear that there must
be actual internieddling by the employer with the certification process
rather than mere negligence or omission. in that case, the employer had
appointed a quantity surveyor to make valuations under a building
contract in terms similar to the FAM fomi. The quantity surveyor made
a wrongful valuation which he declined to chanoe and the architect
certified the amount valued by the quantity surveyor. The contractors
purported to delemiine their employment on the ground that the quan-
tity surveyor's action constituted interference or obstruction by the
employer with the issue of the certificate.
The House of Lords held that it did not; the conduct found against
the quantity surveyor did not amount to obstruction of the certificate. it
merely resulted in the issue of a certificate for a smaller amount and
that was a matter for arbitration.
This was applied in Ling Heng Toll Co v Bo, "eo Development Coi. -
POJ'ation Sth? Bhd [1973] I MLJ 23 where contractors unsuccessfulIy
 Deleinii'norion by con". acroi. 119

alleged that the employers had obstructed or intermeddled with the issue
of an interim certificate by wrtting them a letter suggesting that they
should make a further claim for another progress payment. Close con-
SUItation between architect and employer is to be expected in a contract
of this nature : see the New Zealand case of Han'ick v Nelson Cm'lion
Cons!1.11ciioii 119641 NZLR 72.

Paragraph (c) - Suspension of the works

Paragraph (c) in fact sets out seven sub-grounds not all of which are
the fault of the employer, and many of the grounds are controversial in
o1ving rise to a unilateral right of determination, the more so as the
contractor is entitled to receive as compensation for the detennination,
mreJ' oita, the loss of profit and overhead contribution which he would
have received had the contract proceeded to completion even where the
event giving rise to deterrnination is outside the control of either party :
see clause 26(2)(b)(vi) which refers to "direct loss and/or damage" caused
to the contractor by the detennination.
The contractor has a right to determine his employment under this
paragraph where the carrying out of the whole or substantially the whole
of the uncompleted Works is suspended and this suspension has lasted
for a continuous period named in the Appendix which is one month in
all cases except ground (ii) when it is to be three months, unless
another period is specified in the Appendix. The paragraph has no appli-
cation to the rectification of defects arising during the defects liability
period under clause 15 and so even if such works are suspended for the
appropriate period this is not a ground for detemiination. The suspen-
sion must have been caused by one or more of the specified events,
upon which detailed comment is not necessary and readers are referred
to the discussion of the events specified in clause 23.
There appears to be nothing in the sub-clause to prevent the contrac-
tor invoking the deterrnination provisions evjen though the event relied
on is his own fault.

Paragraph (d) - Employer's insolvency

The employer's insolvency is made a ground for delerrnination by this
paragraph and mirrors the corresponding provision in clause 25(2), save
that deteiiiitiiation on this ground is not automatic and there is no express
reference to the possibility of the contractor's employment being
reinstated. The final part of clause 26(I) sets out the procedure to be
followed by the contractor if he wishes to exercise his right to deter-
mine his employment. Determination is effected by notice served on
the employer or the architect by registered post or recorded delivery.
This notice should specify the ground relied on and the exercise of the
120 Clause 26

right is subject to the proviso that notice shall not be served unreasona-
bly or vexatiously : see the discussion on page 78.
CIOi!se 26(2) sets out the rights and duties of the parties after a valid
notice of determination has been given by the contractor under clause
26(I). The phrase "without prejudice to the accrued rights or remedies
of either party" is obscure but refers to, eg the contractor's right to
accept a repudiatory breach of contract by the employer in appropriate
circumstances.

The phrase "without prejudice to any liability of the classes

mentioned in clause 18" refers to the liability under clause 18(I) for
Injury to persons and under clause 18(2) for damage to property. it
makes clear that the liabilities assumed and indemnities Given in clause
18 apply before and during the removal by the contractor and his sub-
contractors of their property, etc under clause 26(2)(a).
Paingi. @ph (Q) requires the contractor to remove his property from
site. He camot leave it there indefinitely.
Palug, '@ph (b) sets out six heads under which the contractor is able
to secure full payment for work done up to the date of detemiination,
including claims under clauses I I (6) and 24(I ), payment for goods and
materials ordered for the Works up to date and for which he has paid
or is legally bound to pay, the cost of taking away his property, and
any direct loss and/or damage, eg loss of profit, which he has been
caused by the delennination. *

"Direct loss and/or damage" is equivalent to what could be recov- '

ered as damages for breach of contract under section 74( I ) of the
Contracts Act 1950: Wi. dighi Ltd v pH & T (Hold^^gs) Lid (1968) 13
BLR 26. This provision extends to what may be ternied "neutral events"
to those which are outside the control or sphere of responsibility of the
employer, except that where the detennination is because of loss or
damage caused by the insurance risks under clause 201Cl, there is no
entitlement to direct loss and/or damage : see clause 20[C](b)(ii).
The proviso to the clause is far ranging. in addition to all other
remedies he has on delerrnination, the contractor is given a right to
detain "all unfixed goods and materials which may have become the
property of the employer under clause 14" as security for all moneys
due to him under the contract. There is no power of sale, but merely a
possessory lien.
Flowchart 7 illustrates delennination by the contractor.
 Dele, mina!ion by con!I'dCIO, ' 121

Flowchart 7
Determination by contractor

START

Yes

Notice of
Yes Contrac. or may Employer
Employer serve dejauli notice slops dejaul, in
delermina, 10n bv
falls 10 pay 2611/1ai 7 d"vs coni, acior 26/11

No

Inlederes or Yes
ob, umeis certificate

No

Yes
Force
majeure

No

Ye*
201AjtBl
contingencies

No

Civil Yes
commotion

No

A1 Yes Work Yes

under 112). 11:1) or . suspended for period
21(11 in appendix

No No

Laie Yes
infomaiion

No

Mists & Yes

tradesmen

No
^

Yes
his recuon and
testing

No

Yes
Employer
bankrupt

No

Yes
Genenl
mobitisation
Arbtua. or deades
No
it just and
equi"ble

Yes

Yes Contractor may Arbitration

Clause 201Cj nonce within
loss or damage ave notice of
delenmnaUon widun 7 days
No
28 days if just and No
equiiable 201cl(bXi)
Carry our Carry out
provisions of clause provisions of
26(2) Iexcept clause clause 26(2)
26(21(b)(vi)l
Clause 27

No in ated sub-contractors

27 The following provisions of this Condition shall apply where prime cost
sums are included in the Contract Bills or arise as a result of Architect's
instructions given in regard to the expenditure of provisional sums in
respect of persons to be nominated by the Architect to supply and fix
materials or goods or to execute work.
(a) Such sums shall be expended in favour of such persons as the
Architect shall instruct, and all specialists or others who are nomi-
nated by the Architect are hereby declared to be sub-contractors
employed by the Contractor and are referred to in these Conditions
as 'nominated sub-contractors'. Provided that the Architect shall not
nominate any person as a sub-contractor against whom the Con-
tractor shall make reasonable objection, or (save where the Archi-
rect and Contractor shall other otherwise agree) who will not enter ,

into a sub-contract which provides (hirei. offo):

(i) That the nominated sub-contractor shall carry out and coin-
PIete the sub-contract Works in every respect to the reason-
able satisfaction of the Contractor and of the Architect, and
in conforrnity with all the reasonable directions and require-
merits of the Contractor.
(ii) That the nominated sub-contractor shall observe, pertomi and
comply with all the provisions of this Contract on the part of
the Contractor to be observed, perlonned and complied with
(other than clause 201Al of these Conditions, if applicable) so
far as they relate and apply to the sub-contract Works or to
any portion of the same.
(iii) That the nominated sub-contractor shall indemnify the Con-
tractor against the same liabilities in respect of the sub-con-
tract Works as those for which the Contractor is liable to
indemnify the Employer under this Contract.
(iv) That the nominated sub-contractor shall idemnify the Con-
tractor against claims in respect of any negligence, omission
or default of such sub-contractor, his servants or agents or
any misuse by him or them of any scaffolding or other plant;
and shall insure himself against any such claims and produce
the policy or policies and receipts in respect of premiums paid
as and when required by either the Architect or the Contractor.
(v) That the sub-contract Works shall be completed within the
period or (where they are to be completed in sections) periods
therein specified, that the Contractor shall not without the

122
 Nominated $14b-con!Factors 123

written consent of the Architect grant any extension of time

for the completion of the sub-contract Works or any section
thereof, and that the Contractor shall infomi the Architect of
any representation made by the nominated sub-contractor as
to the cause of any delay in the progress or completion of the
sub-contract Works or of any section thereof.
That if the nominated sub-contractor shall fail to complete
the sub-contract Works or (where the sub-contract Works are
to be completed in sections) any section thereof within the
period therein specified or within any extended time granite
by the Contractor with the wrttten consent of the Architect,
and the Architect certifies in wrtting to the Contractor that
the same oucht reasonably so to have been completed, t e
nominated sub-contractor shall pay or allow to the Contractor
either a sum calculated at the rate therein agreed as liquidate
and ascertained damages for the period during which the sai
Works or any section thereof, as the case may be, shall so
remain or have remained incomplete or (where 00 such rate
is therein agreed) a sum equivalent to any loss or damage
suffered or incurred by the Contractor and caused by the failure
of the nominated sub-contractor as aforesaid.
ii) That payment in respect of any work, materials or goo s
comprised in the sub-contract shall be made within 14 days
after receipt by the Contractor of the Architect's certificate
under clause 30 of these Conditions which states as due an
amount calculated by including the total value of such work,
materials or goods, and shall when due be subject to the re-
tention by the Contractor of the sums mentioned in sub-para-
graph (vin) of paragraph (a) of this Condition.
vin) That the Contractor shall retain from the sum directed by the
Architect as having been included in the calculation of the
amount stated as due in any certificate issued under clause 30
of these Conditions in respect of the total value of work,
materials or goods executed or supplied by the nominated sub-
contractor the percentage of such value named in the appen-
dix to these Conditions as Percentage of Certified Value
Retained up to a total amount not exceeding a sum w to
bears the same ratio to the sub-contract price as the urue-
duced sum named in the appendix to these Conditions as Limit
of Retention Fund bears to the Contract Sum; and that the
Contractor's interest in any sums so retained (by whomsoever
held) shall be fiduciary as trustee for the nominated sub-coq-
tractor (but without obligation to invest); and that the nomi-
nated sub-contractor's beneficial interest in such sums shall
be subject only to the right of the Contractor to have recourse
thereto from time to time for payment of any amount whic
he is entitled under the sub-contract to deduct from any sum
due or to become due to the nominated sub-contractor; an
that if and when such sums or any part thereof are release to
the nominated sub-contractor they shall be paid in full.
(ix) That the Architect and his representatives shall have a rig t
124 CIO"se 27

of access to the workshops and other places of the nominated

sub-contractor as mentioned in clause 9 of these Conditions.

(b) The Architect shall direct the Contractor as to the total value of the
work, materials or goods executed or supplied by a nominated sub-
contractor included in the calculation of the amount stated as due
in any certificate issued under clause 30 of these Conditions and
shall forthwith infonn the nominated sub-contractor in writing of
the amount of the said total value. The sum. representing such total
value shall be paid by the Contractor to the nominated sub-contrac-
tor within 14 days of receiving from the Architect the certificate
less only a) any retention money which the Contractor may be
entitled to deduct under the tentis of the sub-contract, and (ii) any
sum to which the Contractor may be entitled in respect of del^, in
the completion of the sub-contract Works or any section thereof.
(C) Before issuing any certificate under clause 30 of these Conditions
the Architect may request the Contractor to furnish to him reason-
able proof that all amounts included in the calculation of the amount
stated as due in previous certificate in respect of the total value of
the work, materials or goods executed or supplied by any nomi-
nated sub-contractor have been duly discharged, and if the Contrac-
tor fails to comply with any such request the Architect shall issue
a certificate to that effect and thereupon the Employer may himself
pay such amounts to any nominated sub-contractor concerned and
deduct the same from any, sums due or to become due to the
Contractor.

(d) (i) The Contractor shall not grant to any nominated sub-contrac-
tor any extension of the period within which the sub-contract
Works or (where the sub-contract Works are to be completed
in sections) any section thereof is to be completed without
the wrttten consent of the Architect provided always that the
Contractor shall inforrn the Architect of any representations
made by the nominated sub-contractors as to the cause of any
delay in the progress or completion of the sub-contract Works
or of any section thereof, and that the consent of the Archi-
rect shall not be unreasonably withheld.
(ii) If any nominated sub-contractor fails to complete the sub-
contract Works or (where the sub-contract Works are to be
completed in sections) any section thereof within the period
specified in the sub-contract or within any extended time
granted by the Contractor with the wrttten consent of the
Architect, then if the same ought reasonably so to have been
completed the Architect shall certify in wrtting accordingly;
immediately upon issue the Architect shall send a duplicate
of any such certificate to the nominated sub-contractor.
I. , ,

(e) If the Architect desires to sectire final payment to any nominated

sub-contractor before final payment is due to the Contractor, and if
h sub-contractor
such hassansfactorily
sub-contractor has t'sfactoril limefrinified
indemnifiedthe
theContractor
Contractor
against
g '. any latent
. defects, then the Architect
\ *.,,.. , may in an interim
Certificate include an amount to cover the said final payment, and
thereupon the Contractor shall pay to such nominated sub-contractor
 Nominored sub-conrrac!ors 125

the amount so certified. Upon such final payment, the amount named
in the appendix to these Conditions as Limit of Retention Fund
shall be reduced by the sum which bears the same ratio to the said
amount as does such sub-contractor's sub-contract price to the
Contract Sum, and save for latent defects the Contractor shall be
discharged from all liability for the work materials or goods executed
or supplied by such sub-contractor under the sub-contract to which
the payment relates.
I

(f ) Neither the existence nor the exercise of the foregoing powers nor
anything else contained in these Conditions shall render the Bin-
ployer in any way liable to any nominated sub-contractor.
(g) (i) Where the Contractor in the ordinary course of his business
directly carries out works for which prime cost sums are in-
cluded in the Contract Bills and where items of such works
are set out in the appendix to these Conditions and the Archi-
tect is prepared to receive tenders from the Contractor for
such items, then the Contractor shall be pennitted to tender
for the same or any of them but without prejudice to the
Employer's right to reject the lowest or any tender. it the
Contractor's tender is accepted, he shall not sub-let the work
or any part thereof without the consent of the Architect:
Provided that where a prime cost sum arises under Architect's
instructions issued under clause 11(3) of these Conditions it
shall be deemed for the purposes of this paragraph to have
been included in the Contract Bills and the item of work to
which it relates shall likewise be deemed to have been set out
in the appendix to these Conditions.
(ii) It shall be a conditiQ_n of any tender accepted under this
paragraph that clause I I of these Conditions shall apply in
respect of the items of work included in the tender as if for
the reference therein to the Contract Drawings and the Con-
tract Bills there were references to the equivalent documents
included in or referred to in the tender.

Clause 27 is the longest and the most complicated provision in the

contract which is, perhaps, not surprising since it makes an elaborate
attempt to at;51 with some of the legal and practical problems which
arise when sub-contractors are nontinated by the architect. it does so
imperfectly.
The system of nominating specialist sub-contractors is widespread
and it is said to have a number of advantages for the employer. 11 enables
the architect to select a sub-contractor to carry out particular specialist
work, such as air-conditioning. it pennits the design input by a special-
ist which is often essential. it is also said that it allows the employer to
obtatii the most competitive price for the execution of the work.
Some of these advantages are more apparent than real and the use of
the system of nomination causes many difficulties which have not been
fully resolved by the courts. in particular, there are major problems
126 Clause 27

when the nominated sub-contractor causes delay to the main contract

works or defaults on his oblioations.
Before examining the provisions of clause 27 in detail, it is desirable
to say something about the position of sub-contractors under the
general law.

Relationship between parties

Where there is a chain of contracts between the employer, main con-

tractor, sub-contractors and suppliers, the only contractual relationship
which exists is between the actual parties to each of the contracts in the
chain. This is a consequence of the doctrine of privity of contract, which
means that only the padies to a contract have the noht to sue on it,
apart from special and limited circumstances which are not relevant to
the present discussion.
Put another way, prtvity of contract means that only the parties to a
contract can acquire rights and liabilities under it. Thus, a third party,
C, may neither take the benefit of, nor be burdened by, a contract
between A and B. The common law doctrine of prtvity of contract
applies in Malaysia : see Kepong Piospecting Lid v Schmidt [ 1968]
I MLJ 170, PC. ,^.*. ,
The application of the doctrine has important practical consequences.
Thus, the main contractor carries the legal responsibility for the sub-
contractor's work so far as the employer is concerned. 11 is to the main
contractor whom the employer will look if something goes wrono,
and traditionally the contractor accepts full responsibility for the work
of all sub-contractors, nominated or otherwise.
The classic position was stated by Collins LJ in Milchell v Guildf'old
Union Gun, .didns (1903) I LGR 857 :
The contractor has . . . accepted the primary obligation of completing the
work within the given time . . . the contractor has accepted . . . as between
himself and the owners, the primary obligation in respect of the sub-
contractor's work just as much as with regard to the other.
Under the PAM fonn, the main contractor is liable to the employer for
all d^faults in the work of his sub-contractors, both nominated and
d6iiiesfic, irrespective of whether the sub-contractor's default consists
in his design, fabrication or workmanship. it is true that clause 23(g)
provides for the architect to grant an extension of time to the main
contractor for delay on the part of nominated sub-contractors which he
has taken all practicable steps to avoid or reduce, but this does not
affect the fundamental principle. The employer camot bring a contrac-
tual claim directly against a sub-contractor because there is no privity
of contract between them. ,,.
The way in which the employer must pursue a claim aoainst a sub-
contractor is to sue the main contractor for breach of the main contract.
in turn, the main contractor sues the defaulting sub-contractor. The
 Nominaled 511b-coni!'actors 127

converse is also true, since the sub-contractor cannot bring a contrac-

Iual claim directly against the employer. ,
One way out of this difficulty would be to allow the employer to sue
a negligent sub-contractor in tort for negligence, and in England this
was allowed by the maiortiy of the House of Lords in IIJnioi' Books Ltd
v Ve!'Ichi Co Lid [1983] I AC 520 so that if, under the main contract,
the architect granted the contractor an extension of time to reflect delay
brought about by a nominated sub-contractor's defective work, the client
could recover his loss by suing the sub-contractor directly for negli-
gence. ~For good or ill, 111nioi' Books Ltd is now a dead-letter and has
been effective Iy overruled in a series of recent cases, namely, D & F
Esraies Ltd v Chill'c/I Commissionei's 101. England (1988) 15 ConeR
35; Simaait General Colltiucting Co v PITking!on Glass Ltd 119881 I
All ER 791; Gi'earei' Nom^gham CO-OPe!'alive Society Ltd v Cementa-
lion Piling & Foilnda!ions Lid (1988) 17 ConLR 43.11 is thought that
the position is the same in Malaysia.
11 is possible for there to be a limited contractual relationship be-
tween the employer and a nominated sub-contractor where there is an
express or implied collateral'Contract. in such circumstances the em-
ployer will have a-remedy if there is a breach of the ternis of the
collateral contract. 4, - -- 1.1. .-/-,
There are many Malaysian cases on collateral contracts which pro-
CGed on the basis "that an oral promise, given at the time of contracting
which induces a party to enter intQ a contract, ovenides any inconsis-
tent written agreement" per Raja Azlan Shall CJ (as he then was) in
Ton Swee Hoe Co Ltd v All HUSsain Bros [1980] 2 unJ 16, where his
Lordship relied on a number of English decisions.
The position appears to be that if a sub-contractor made statements
to a prospective employer about the quality of his work or his skills,
and because of those statements the employer instructed his architect to
nominate that sub-contractor, a contract could arise between the em-
ployer and the nominee, which would be collateral to the sub-contract
between the main and sub-contractor. The employer would have a right
to sue the sub-contractor directly for breach of the collateral contract if
his workmanship proved defective. The English cases of Shank!in Piei'
Ltd v Dete/ Products Ltd [1951] 2 KB 855; Greater London Council v
Ryarsh Brick Co Ltd (1985) 4 COILR 85 illustrate the proposition.
in the Shanktrn Pier case, the plaintiffs made a contract with a third
party to repair and repaint the pier. Under its tenns, the plaintiffs had
the right to specify the materials to be used. The defendants induced
them to specify the use of their particular brand of paint by giving
them assurances as to its quality. The paint was applied by the third
party and was totally unsatisfactory. The plaintiffs successfully sued
the defendants for breach of their undertaking on the basis that there
was a collateral contract by which in return for the plaintiffs' specify-
ing that the defendants ' paint be used, the defendants guaranteed its
suitability.
128 CIOi, se 27

However, where there is a limited but direct contractual relationship

because the employer and the nominated sub-contractor have entered
into a direct warranty agreement, its provisions will be the exclusive
basis of the relationship between the parties and the employer will have
no parallel or alternative claim in tort for purely economic (financial)
loss.
So in the English case of G, 'eotei' Notiiiigh@"I CO-OPei'at tve Society
Ltd v Cente, notion Piling & FoundQtions Ltd (1988) 17 ConLR 43,
where under the terms of a collateral contract Cement ation warranted
that they would exercise all reasonable skill and care in designing the
works and in selecting goods and materials. They also undertook to
perform the sub-contract in such a way as 10 avoid the main contractor
becoming entitled to an extension of time under clause 23(g). Owing to
the negligence of one of their employees, neighbouring property was
damaged, and investigation showed that the system of piling needed to
be reconsidered. Pinno work was suspended until the piling had been
redesigned and completion was delayed. The English Court of Appeal
held that Cement ation were not liable for the heads of financial loss not
associated with physical damage, to additional costs of the revised piling
scheme, the main contractor's direct loss and/expense claims, and the
employer's losses due to late completion.
Woolf LJ said :
,

Where . . . the sub-contractor has entered into a direct contract and ex-
pressly undertaken a direct but limited contractual responsibility 10 the
building owner, I regard the direct contract as being inconsistent with any
assumption of responsibility that has been expressly undertaken. This does
not affect the sub-contractor's nomial liability in tort (!^101' pel'sonol injury
o1' physicol damage - author's note) but does negative the existence of the
exceptional circumstances needed for liability for economic loss.
Great care, therefore, is needed in drafting any collateral contract or
warranty agreement. Even where one exists, this does not provide an
exception to the docttine of prtvity of contract but is rather an applica-
tion of it. The rule is that each party has contractual rights only against
the party above or below him in the contractual chain. This is so even
where, as with most standard form sub-contracts, some tenns of the
main contract are incorporated by reference.
11 has also been correctly held in England that the existence of a col-
lateral contract does not affect the rights of the main contractor against
the employer. Thus, a claim under the collateral contract between the
employer and a nominated sub-contractor could not give rise to any
set-off or counterclaim against a main contractor's claim under the main
contract : George E Toyloi' & Co Ltd v G Pel'cy 71'enthom Ltd (1986)
16 BLR 15.
In the UK the use of direct warranty agreements between the Gin-
ployer and nominated sub-contractors is standard practice and an earlier
version of the current standard form was considered in the Gi'eate, ' Not-
-
 Nom!'nared sub-con!Factors 129

ti'righom case. There is no coinparable fomi in Malaysia and, in the

result, the employer is without redress where, for example, he suffers
financial loss because of delay on the part of a nominated sub-contrac-
tor for which an extension of time is granted to the main contractor
under clause 23(g) or because of the need for re-nomination where the
original nominee fails.

Clause 27

The position under clause 27 may now be considered in detail, and this
is best done by breaking the clause down into an introduction and three
parts. ~
The Inti. od"ction is contained in the first six lines down to the pro-
viso in clause 271a). Pa, .t I is contained in clause 27 (b) to (f); port 2
is set out in the proviso to clause 27(a) and paragraphs co to (ix); part
3 is contained in clause 27 (g).

introduction

The clause only applies where there are prime cost (PC) sums. These
can arise in three ways :

(1) where they are included in the Contract Bills;

(2) where they arise as a result of an architect's instruction under clause
11(3) for expenditure of provisional sums;
(3) where the architect issues a variation instruction under clause 11(I)
making the variation the subject of a PC sum.
Prime cost sums are to be expended in favour of such persons as the
architect shall instruct, to nominated sub-contractors, and unlike the Eng-
lish parent fonn there is no provision that the contractor is to have the
benefit of a cash discount. There is no contractual definition of PC
sum, but in the well-known English case of North-west Metropoliton
Regional Hospital Board v TA Bickerton & Son Ltd [1970] I All ER
1039, Lord Reid said that it refers to :
. . . certain parts of the works reserved for sub-contractors to be nominated
by the employer . . . . So the tendering contractor has no concern either with
the details of this work or the price to be paid for it . . . . The employer
obtains tenders from specialist selected by him for the prime cost work and
then when he has made his contract with the contractor, he instructs the
contractor to enter into a contract with the sub-contractor whom he nomi-
nates on terms which he dictates, having settled these teams with the nonti-
nated sub-contractor . . . . "prime cost sums can be read as meaning the
sums which become payable for prime cost work . . . . I would therefore
read this clause as directing that sums payable in respect of prime cost work
130 Cl""se 27

"shall" be expended in favour of nominated sub-contractors and 110 one else

(italics supplied).
Of course. "the Works" which the contractor has undertaken to coin-
PIGte, his Lordship said, include "prime cost work to be done by
nominated sub-contractors so that the [main] contractor is in breach of
his contract with the employer if these works are not duly carried out
and completed [and] the [main] contractor is liable if prime cost works
are defective" when they are completed.
Prime cost sums can be either the tender figure of the sub-contractor
the architect intends to nominate, to oci"@I PC sums or else the architect's
estimate of what the work will cost, re an esiimoted PC sum. Estimated
PC Sums must be distinguished from Provisional Sums. If an estimated
PC Sum is included in the Contract Bills it implies that the architect
will nominate a sub-contractor for that work under clause 27.
The expenditure of a Provisional Sum is a matter for the architect's
discretion.
Case law has established that a second nomination must be made if
the original nominated sub-contractor fails. This is so even though clause
27 contains no express provision to this effect. The point was estab-
lished in the Bickei. ion case, where it was made clear that the main
contractor has neither the right nor the duty to cam, out the PC work
himself. in that case, the nominated sub-contractor's failure was be-
cause of his insolvency and in fact the original sub-contractor did nQ'
work at all, but the principle is of general application. it is implicit in
the contract that wherever a nominated sub-contractor repudiaies the
sub-contract, the employer is under a duty to re-nominate since the main
contractor is neither bound nor entitled to do the work himself.
in Pel. cy Bilton Ltd v G, 'eote, ' London Council (1982) 20 BLR I,
another decision of the House of Lords in England, a nominated sub-
contractor for mechanical services went into liquidation during the
carrying out of the sub-contract works and was already some 40 weeks
behind programme. The sub-contractor nominated as a replacement
withdrew before starting work, and the third finn was nominated. The
House of Lords held that the employer is bound to make an effective
Tenomination and is therefore responsible for any loss due to delay in
making the Tenomination, but the financial loss arising from the nomi~
nated sub-contractor's withdrawal falls on the contractor.
The important point is that the architect must make a fresh nomination
within a reasonable time of the contractor making an application for a
Tenomination instruction to the architect. it the architect does not make
an effective Tenomination with reasonable promptness the contractor will
be entitled to an extension of time under clause 23(f) - which applies
to delay caused by the contractor not having received instructions "in
due time" - and will also be entitled to recover any direct loss and/or
expense which he suffers or incurs under clause 24(I)(a).
 Nominated sub-con!rectors 131

A later decision of the English Court of Appeal - Fairc!ough Build-

ing Ltd v Rimddlon Borough Council (1985) 3 ConLR 38 - discusses
the issue of what is a reasonable time and emphasizes that the architect
is entitled to have regard to the employer's interests by seeking tenders
from possible replacements. it also establishes that the main contractor
is not responsible for defects in prime cost work which arise before
completion where the original nominated sub-contractor drops out. The
Tenomination instruction must, therefore, cover both remedial and
completion work if it is to be effective.

Part I - Sub-clauses (b) to co

Clause 27(b) to (f) set out some of the obligations of the employer
and the contractor when a sub-contractor has been nominated by the
architect.
Clause 27(b) deals with the valuation and inclusion in certificates of
sums in respect of the work of nominated sub-contractors. in any cer-
tmcate issued under clause 30, the architect must inform the contractor
what figure of "total value" in respect of the nominated work, materials
or goods is included in the sum certified. He must also infomn the
nominated sub-contractor in writing of that "total value" included in
the certificate. The contractor's obligation is to pay that "total value" to
the nominated sub~contractor within 14 days of receipt of the certifi-
cate less :

(1) retention as provided in the sub-contract;

(2) "any sum to which [he] may be entitled in respect of delay in
completion of the sub-contract Works or any section thereof".
Reference should be made to clause 27(d)(ii) as to the importance of
the architect's certificate of delay which is a condition precedent to this
deduction being made.
The tenns of the sub-contract as to the exercise of any right of set-
off must be complied with, but there is no special rule applicable to the
PAM contract which excludes any right of set-off which the contractor
may possess : Gilbert-Ash (Northern) Ltd v Modern Engineering (Bris-
tat) Ltd [1973] 3 All ER 195; Mottram Consultants Ltd v Bernard Sun!ey
& Sons Ltd 119751 LIR 197.
it may seem strange that the deductions which clause 27(b) periltits
the contractor to make do not include "sums previously paid". Such
sums will, of course, be taken into account and deducted and the sub-
contract will provide for that deduction.
The period of grace for the contractor to pay over the sum due to the
nominated sub-contractor is 14 days from receipt of the architect's
certificate. Under clause 30(I) the period of grace which the employer
has is 14 days from presentation of the certificate by the contractor,
unless a different period is inserted in the Appendix.
132 cmiisc 27

ClaMse 27(c) makes limited provision for direct payment to the

nominated sub-contractor by the employer of anIOUnts previously certi-
fled but not paid by the contractor. Before issuing any certificate under
clause 30, the architect ,?10}. (not must) require the contractor to provide
him with "reasonable proof" that amounts for payment to nominated
sub-contractors included in previous certificates have been paid. it the
contractor does not provide that "reasonable proof", eg a receipt, the
architect must issue a certificate to that effect, and the employer in a},
then pay the nominated sub-contractors direct. If he does make direct
payment, he may recover the sums so paid by deducting them from
amounts certified as due to the contractor.
The application of a similar provision in an earlier English version
of the form in the event of the contractor becoming insolvent was
considered in Re Tour o11d Fillc/I Lid [1954] I All ER 127 and its
effectiveness against the contractor's liquidator was upheld. it is thought
that the decision applies to the revised wording.
Clause 27(d) deals with delay in the completion of the sub-contract
works by the nominated sub-contractor and the circumstances in which
the contractor may grant an extension of time to the nominated sub-
contractor.

Paragraph (i) provides that the contractor "shall not grant" any ex-
tension of time to a nominated sub-contractor without the written consent
of the architect, which must not be unreasonably withheld. That con-
sent is a condition precedent 10 the granting of an extension of lime;
and this requirement must be stepped-down in the sub-contract. The
contractor must infomi the architect of any representations which the
sub-contractor has made to him about the cause of any delay. Exact
observance of these provisions is essential.
Paragraph (ii) is badly phrased and the nature of the architect's
certificate under this clause is widely misunderstood. it requires the
architect to certify his opinion that the sub-contractor ought reasonably
to have completed his work or the relevant section within whatever
period was stated in the sub-contract or is applicable following the grant
of any extension of time by the main contractor. it should not state
what that period is, nor should it state the date by which, in the
architect's opinion, the work should have been completed. A duplicate
of the clause 27(d)(ii) certificate must be sent to the sub-contractor.
This certificate is a condition precedent to the contractor deducting "any
sum to which [he] may be entitled in respect of delay in completion"
under clause 27(b).
CIQuse 27(e) provides the machinery whereby the architect can se-
cure early final payment to a nominated sub-contractor. Early final
payment is not mandatory. If the architect wishes to ensure final pay-
merit to a nominated sub-contractor before issuing the final certificate
he may include its amount in an interim certificate, but only "if such
sub-contractor has satisfactorily indemnified the Contractor against any
latent defects" in the sub-contract works, for which the contractor remains
 Normina!ed sub-contractors 133

responsible. The contractor is then bound to pay the nominated sub-

contractor the amount certified, which will include any retention atInb-
utable to the sub-contract works. When the final payment is made, there
will be a proportionate reduction in the amount of the retention held.
Clause 2717') refers to the fact that there is no prtvity of contract
between the employer and the nominated sub-contractor "Neither the
existence nor the exercise of any of the foregoing powers nor anything
else contained in these Conditions shall render the Employer in an
way liable to any nominated sub-contractor".

Part 2 - Clause 27(a) proviso and paragraphs (i)-(ix)

The proviso to clause 27(a) is extremely important since it affects the
architect's power of nomination. it confers upon the contractor a right
to make "reasonable objection" to a proposed nominee and, unless the
architect and contractor mutually agree, the architect calmot nominate a
person who will not enter into a sub-contract which includes the initti-
mum specified ternis.
The first part of the proviso gives the contractor a right to make
reasonable object!'on to any person whom the architect proposes to
nominate. 'No person agQinst whom the contractor shall make reason-
able object!'on" shall be nominated. The contractor's objection does not
have to be in writing; it may be oral. However, in practice any objec-
tion should be made in wrtting. it attracts qualified privilege in respect
of any defamatory matter it contains, that is, it would only lose its
privilege if the contractor were actuated by malice or he published his
objection beyond those who have an interest to receive it, to the em-
ployer and the architect. If the architect rejects the contractor's objec-
tion, the architect's decision is open to arbitration.
However, the contractor's noht to make reasonable objection is not
as satisfactory as might at first sight appear but it is essential that the
contractor should persist in his objection if it is based on reality.
For example, in England in Percy Bilton Ltd v Greater London
Council (1982) 20 BLR I the third nominee's sub-contract completion
date was later than the main contractor's completion date, but the main
contractor did not persist in making objection and so was stuck with
the nominee.
Clearly it is a reasonable objection that the proposed nominee's
progranmie is incompatible with the main cQntractor's programme and
the contractor should persist in his objection; if he does not then he
will be in the same position as was the contractor in the Bi!ton case.
Previous unsatisfactory deathigs with the proposed sub-contractor are
clearly reasonable grounds for objection, as is his financial instability
or his known technical incompetence.
The second part of the proviso is of equal importance since it pre-
vents the architect (in the absence of agreement with the contractor)
134 Clotise 27

from nominating "any person . . . who will not enter into a su -con-
tract" which includes the tentis set out in paragraphs (i) to (ix). The. re-
sponsibility for ensuring that the eventual sub-contract is coinpati e
with the provisions of this sub-clause is that of the contractor who niust
see that the actual sub-contract accords with this part of the proviso.
Pal. agi'ap/I (i) is so framed as to place' the sub-contractor under a
similar obligation to that undertaken by the contractor under clause I(I. ).
The sub-contract must, therefore, provide that the sub-contractor wi
carry out and complete the sub-contract works to the satisfaction o
both the contractor and the architect (although in practice this dual
requirement may have no significance) and in conformity with all
reasonable directions and requirements of the contractor under the su -
contract.
Poi. agi'ap/? (17) is intended to ensure that the relevant main contract
provisions are incorporated into the sub-contract, save for clause 201Al
Of applicable). it clause 20[A] applies then the contractor must Insure
the full value of all work and materials - including those of any
nominated sub-contractor - against loss or damage by the stated ris s.
Pal'o81'@pit (in) is intended to ensure that the sub-contract mirrors
the indemnities given by the contractor and for the same liabilities (see
clauses 7 and 18), while paragraph (Iv) is to make clear that the
nominated sub-contractor accepts liability for claims caused by the sub-
contractor's negligence, omission or default and against 'any misuse,
. . . of any scaffolding or other plant", backed up by corresponding in-'
surance and an express indemnity.
The contents of poiugi. dpi? (i\,) are self-explanatory and tie in with
the contractor's obligations, including the provisions of clause 27(d). it
is essential that any supporting sub-contract should define the causes o
delay entitling the sub-contractor to an extension of time to cover delay
caused by the main contractor or those for whom he is responsible and
those events in clause 23 which entitle the contractor to an extension of
time.
Fomgi. aph (vi) is to ensure that the sub-contract mirrors the provi-
sions of clause 27(b) and (d)(Ii), and it envisages that the sub-contract
will (unusually) provide either for liquidated damages or for the recov-
ery of general damages. Where the sub-contract stipulates liquidated
damages they will almost invariably operate as a limitation on the
nominated sub-contractor's liability.
Paing, .aph (vii) ensures that the sub-contract reflects the method of
payment prescribed in the main contract, while pal'ag, 'aph (vin) is
intended to deal with retention money on the sub-contract works and
the relation of that retention to the main contract provisions. The net
result is that there is only one retention held by the employer but there
are several interests therein, to those of the contractor and the various
nominated sub-contractors.
Under clause 9, the architect and his representatives are given a rights
of access to the site and workshops and other places of the contractor.
 Noin?mored sub-conr, actoi. s 135

if the sub-contract includes provision in the ternis of paingi'aph (ix) the

architect and his representatives will have a similar right of access to
the sub-contractor's workshops, etc

Part 3 - Clause 27(g)

This is a related provision to cover the situation where the contractor

wishes to carry out work reserved for nominated sub-contractors. Be-
fore he can do so, three conditions must be satisfied :
(1) The work involved must be work which the contractor does
directly in the ordinary course of his business. This is presumably
to prevent the contractor from putting in as his own a tender which
he has obtained from a third party with the intention that, if
successful, he will sub-let the work.
(2) The items of work must be set out in the Appendix, where the
relevant entry reads "Prime cost sums for which the Contractor
desires to tender".
(3) The architect must be prepared to accept such tenders from the
contractor. The architect's decision as to which, if any, of the
tenders he is prepared to accept would not appear to be subject to
review in arbitration under clause 34.

it the item is not in the Contract Bills as a PC sum, but the architect
wishes to nominate a sub-contractor to carry out work which is the
subject of a provisional sum, the effect of the proviso is that the archi-
Iect must allow the contractor the benefit of clause 27(g)(I). The con-
tractor thus has the opportunity of competing for such work.
it the contractor is successful in his tender, he must not sub-let the
work without the architect's consent and there is no provision that such
consent should not be unreasonably withheld.
CIOuse 27(g)(ii) tries to make it clear how variations, etc on works
for which the contractor's tender has been successful are to be valued.
Clause I I is made applicable, but the references in that clause to the
Contract Drawings and Contract Bills are to be read as "references to
the equivalent documents included or referred to in the tender".
Clause 28

N minate supplie s

28 The following provisions of this Conditions shall apply where prime

cost sums are included in the Contract Bills, or arise as a result of
Architect's instructions given in regard to the expenditure of provisional
sums, in respect of any materials or goods to be fixed by the Contractor.
(a) The tenns prime cost when included or arising as aforesaid, shall
be understood to mean the net cost to be defrayed as a prime cost
after deducting any trade or other discount and shall include the
cost of packing carriage and delivery. Provided that, where in the
opinion of the Architect the Contractor has incurred expense for
special package or special carriage, such special expense shall be
allowed as part of the sums, ' actually paid by the Contractor.
(b) Such sums shall be expended in favour of such persons as the
Architect shall instruct, and all specialists merchants, tradesmen or
others who are nominated by the Architect to supply materials or
goods are hereby declared to be suppliers to the Contractor and are
referred to in these Conditions as 'nominated suppliers. ' Provided
that the Architect shall not (save where the Architect and Contrac-
tor shall otherwise agree) nominate as a supplier a person who will
not enter into' a contract of sale which provides (litre, ' atio):
(i) That the materials or goods to be supplied shall be to the rea-
sonable satisfaction of the Architect
(ii) That the nominated supplier shall make good by replacement
or otherwise any defects in the materials or goods supplied
which appear within such period as is therein mentioned and
shall bear any expenses reasonably incurred by the Contrac-
tor as a direct consequence of such defects, provided that:-
(1) where the materials or goods have been used or fixed
such defects are not such that examination by the Con-
tractor ought to have revealed them before using or fix-
Ing;
(2) such defects are due solely to defective workmanship or
material in the goods supplied and shall not have been
caused by improper storage by the Contractor or by misuse
or by any act or neglect of either the Contractor the
Architect or the Employer or by any person or persons
from whom they may be responsible.
(iii) That delivery of the materials or goods, supplied shall be
commenced and completed at such times as the Contractor
may reasonably direct.

136
.

No, 'millored SMPptiei's 137

(c) All payments by the Contractor for materials or goods supplied by

a nominated supplier shall be in full and shall be paid within 30
days at the end of the month during which delivery is made.

Clause 28 deals with nominated suppliers and, in its own way, is just
as complex as clause 27.1t also opens with an introduction which states
that its provisions only apply where a PC sum occurs in respect of any
matei'ials o1' goods to be fixed by the contractor.
This will be the case where (1) PC sums are included in the Contract
Bills; of (2) where they arise as a result of an architect's instruction on
provisional sum expenditure under clause 11(3); or (3) as a result of a
variation instruction. in the last two cases the instruction will fall to be
valued under clause 11.
Although not expressly stated, nominated suppliers have no contrac-
Iual relationship with the employer; the contract of sale is with the
contractor : see clause 28(b).
Clause 28(@) defines prime cost for purposes of this clause as "the
net cost to be deftayed as a prime cost after deducting any trade or
other discount and shall include the cost of packing, carriage and
delivery". The proviso is important. Where, in the opinion of the archi-
tect, the contractor has incwrred expenses for special packing or
cadage, these are to be allowed as part of the sums actually paid by
the contractor.
Clause 28(b) imposes a duty on the architect to nominate a supplier.
it is clear from the use of the word "shall" in this sub-clause that the
architect is obliged to issue instructions on expending PC sums, etc.
Indeed, by analogy with the case law on nominated sub-contractors
already discussed (and in particular the case of TA Bickerton & Son Ltd
v North-west Metropolitan Regional Hospi!o1 Board 119701 I All ER
1039) if a first nomination fails before the nominated supply work is
completed, there is a duty on the architect to Tenominate and the con-
sequences of his failure to do so are the same.
All specialists, tradesmen or others so nominated by the architect are
"nominated suppliers" and are expressly stated to be ' suppliers to the
contractor .
The proviso limits the architect's powers to nominate as suppliers to
those who will enter into a supply contract with the contractor which
includes the ternis set out in paragraphs (i) to (in), unless the architect
and the contractor agree otherwise. The ternis set out are not to be the
only tenns of the contract which will, of course, be subject to the Sale
of Goods Ordinance 1957. The practical effect of this provision is that
if a supplier whom the architect wishes to nominate refuses to accept
any or all of the ternis set out, the contractor camiot be forced to accept
the nomination. The contractor has no right to make reasonable objec-
tion to a proposed noriimated supplier as he does in the case of pro-
posed nominated sub-contractors.
138 Clause 28

The contract of sale must contain the following provisions :

(1) That the materials or goods supplied are to be to the reasonable
satisfaction of the architect. This satisfaction should, of course, be
expressed through the contractor.
(2) This provision is of importance to the contractor who is respon-
sible to the employer if the goods and materials fixed by him
prove defective. 11 attempts to deal with the situation by requiting
the nominated supplier by his contract "to make good by replace-
merit or otherwise any defects in the materials or goods supplied
. . . and bear any expenses reasonably incurred by the contractor
as a direct consequence of such defects", to the cost of removal
and refixing, subject to two sensible provisos.
However, it may be doubted if the tie-up between the length of
the contractor's responsibility to the building owner under the statu-
tory provisions on limitation, to six years from the date of supply,
and "such period as is" mentioned in the supply contract is
sufficient protection for the contractor, and this is a point which
contractors should bear in mind.
(3) This is intended to give the contractor some control over deliver-
ies from nominated suppliers, but is couched in nebulous ternis.
Clause 28(c) provides that all payments by the contractor to a nomi-
nated supplier niust be "in full" and payment must be made within 30 '
days of the end of the month during which delivery was made. The'
payment of nominated suppliers is not linked in any way to payments
from the employer to the contractor, and in some cases the contractor
will have to pay suppliers before he himself is paid.
it has to be said that the whole of this clause is in need of urgent
revision.
Clause 29

Artists and tradesmen

29 The Contractor shall pennit the execution of work not fomiing part of
this Contract by artists, tradesmen or others engaged by the Employer.
Every such person shall for the purposes of clause 18 of these Condi-
tions be deemed to be a person for whom the Employer is responsible
and not to be a sub-contractor.

Without a provision of this kind, the employer would have no right to

have work caded out on the site by his licensees during the currency
of the contract, since clause 21(I) entitles the contractor to "possession
of the site". Under that provision he is prima facte entitled to exclusive
possession for the currency of the project. Clause 29 provides an ex-
ception to the principle that the contractor is to be in sole control of the
Works. The provision is limited in its scope.
CIO"se 29 refers to "work not fomiing part of this Contract", to work
which is to be done on and about the contract Works, but which the
contractor is not required to do. The contractor is to pennit such work
to be canied out by "artists, tradesmen and others" directly engaged by
the employer.
it has been held in England that the ej"sdem generis rule does not
apply to the interpretation of this phrase and so that "others" is not to
be limited to similar kinds of people as "artists" and "tradesmen"
Hen}y Boot Construction Ltd v Central Lancashire New Town Deve!-
oninent Corporation (1980) 15 BLR I.
Deeds, wills and statutes are nomially construed ej"sdem generis, 16
where there is a list of specific things followed by general words, the
general words are treated as refeLLxiig to things "of the same kind" as
those specifically mentioned. The rule is not necessarily strictly applied
to coriumercial contracts, but if correct this decision could raise prob-
Iems in practice. The intention plainly is only to pennit work to be
carried out by artists, eg sculptors, tradesmen of the building industry
and skilled ancillary workers, so that the clause contemplates work of
an artistic or specialist craft nature only.
The employer's licensees who are on the site by virtue of itlis clause
are not persons for whom the contractor is responsible under clause 18,
which is the indenimty clause. The employer is responsible for them
and they are not sub-contractors.

139
140 Clause 29

Delays caused by these artists, tradesmen and others may give rise to
a claim for extension of time under clause 23(h) and to a claim for
direct loss and/or expense for any disturbance of regular progress of the
Works under clause 24(I)(d). Lengthy delay caused by them may be a
ground for determination by the contractor under clause 26(I)(c)(vi).
Clause 30

Certificates and payments

30 (1) At the Period of Interim Certificate named in the appendix to these

Conditions the Architect shall issue a certificate stating the amount ue
to the Contractor from the Employer, and the Contractor shall, on pre-
senting any such certificate to the Employer, be entitled to payment
therefor within the Period for Honouring Certificates named in the ap-
pendix to these Conditions. Interim valuations shall be made whenever
the Architect considers them to be necessary for the purpose of ascer-
taming the amount to be stated as due in an Interim Certificate.
(2) The amount stated as due in an interim Certificate shall, subject to
any agreement between the parries as to stage payments, be t e tota
value of the work properly executed and of the materials and goo s
delivered to or adjacent to the Works for use thereon up to and includ-
ing a date not more than seven days before the-date of the said certi I-
cate less any amount which may be retained by the Employer (as pro-
vided in sub-clause (3) of this Condition) and less any instalments
previously paid under this Condition. Provided that such certificate shall
only include the value of the said materials and goods as and from such
time as they are reasonably, properly and not prematurely brought to or
placed adjacent to the Works and then only if adequately protected
against weather or other casualties.
(3) The Employer may retain the percentage of the total value of t^e
work, materials and goods referred to in sub-clause (2) of this Condi-
tion which is named in the appendix to these Conditions as Percentage
of Certified Value Retained. Provided always that when the sum of the
amounts so retained equals the amount named in the said appendix as
Limit of Retention Fund or that amounts as reduced in PUTSuance o
clause 16(f) and/or clause 27(e) of these Conditions, as the case may
be, no further amounts shall be retained by virtue of this sub-clause.
(4) The amounts retained by vime of sub-clause (3) of this Condition
shall be subject to the following rules:
(a) The Employer's interest in any amounts so retained shall be
fiduciary as trustee for the Contractor (but without obligation
to invest) and the Contractor's beneficial interest therein shall
be subject only to the right of the Employer to have recourse
thereto from time to time for payment of any amount which
he is entitled under the provisions of this Contract ,to deduct
from any sum due or to become due to the Contractor.

141
142 Clause 30

(b) On the issue of the Certificate of Practical Completion the Archi-

tect shall issue a certificate for one inoiety of the total amounts
then so retained and the Contractor shall, on presenting any such
certificate to the Employer, be entitled to payment of the said inoiety
within the Period for Honouring Certificates named in the appendix
to these Conditions.
(c) On the expiration of the Defects Liability Period named in the
appendix to these Conditions, or on the issue of the Certificate of
Completion of Makino Good Defects, whichever is the later, the
Architect shall issue a Certificate for the residue of the amounts
then so retained and the Contractor shall, on presenting any such
certificate to the Employer, be entitled to payment of the said resi-
due within the Period for Honouring Certificates named in the
appendix to these Conditions.
(5) (a) The measurement and valuation of the Works shall be completed
within the Period of Final Measurement and Valuation stated in the
appendix to these Conditions, and the Contractor shall be supplied
with a copy of a Summary of the priced Bills of Variation not later
than the end of the said Period and before the issue of the Final
Certificate under sub-clause (6). of this Condition.
(b) Either before or within a reasonable time after Practical Coinple-
tion of the Works the Contractor shall send to the Architect all
documents necessary for the purposes of the computations required
by these Conditions including all documents relating to the accounts
of nominated sub-contractors and nominated suppliers.
(c) in the settlement of accounts the amounts paid or payable under the
appropriate contracts by the Contractor to nominated sub-contractor
or nominated suppliers, the amounts paid or payable by virtue of
clause 4(2) of these Conditions in respect of fees or charges for
which a provisional sum is included in the Contract Bills, the amount
paid or payable in respect of any insurances maintained in coinpli-
ance with clause 19(2) of these Conditions the tender sum (or such
other sum as is appropriate in accordance with the terms of the
tender) for any work for which a tender made under clause 27(g) of
these Conditions is accepted and the value of any work executed
by the Contractor for whicli a provisional sum is included in the
Contract Bills shall be set against the relevant prime cost or provi-
sional sum mentioned in the Contract Bills or arising under
Architect's instructions issued under clause 11(3) of these Condi-
lions as the case - may be, and the balance, after allowing in all
cases pro I. @to for the Contractor's profit at the rates shown in the
Contract Bills, shall be added to or deducted from the Contract
Sum. Provided that no deduction shall be made in respect of any
damages paid or allowed to the Contractor by any sub-contractor or
supplier.
(6)
So soon as is practicable but before the expiration of 3 months from the
end of the Defects Liability Period stated in the appendix to these
f Ih c . . Completion of making good defects under clause
 Certificates and payments 143

referred to in paragraph (b) of sub-clasue (5) of this Condition, which-

ever is the latest, the Architect shall issue the Final Certificate. The
Final Certificate shall state:

(a) The sum of the amount paid to the Contractor under Interim
Certificate and the amount named in the said appendix as Limit of
Retention Fund, and
(b) The Contract Sum adjusted as necessary in accordance with the
teams of these Conditions,
and the difference (if any) between the two sums shall be expressed in
the said certificate as a balance due to the Contractor from the Em-
ployer or to the Employer from the Contractor as the case may be.
Subject to any deductions authorised by these Conditions, the said balance
as from the fourteenth day after presentation of the Final Certificate by
the Contractor to the Employer shall be a debt payable by the Employer
to the Contractor or as the case may be as from the fourteenth day after
issue of the Final Certificate shall be a debt payable by the Contractor
to the Employer.
(7) Unless written request to concur in the appointment of an arbitrator
shall have been given under clause 34 of these Conditions by either
party before the Final Certificate has been issued or by the Contractor
within 14 days after such issue, the said certificate shall be conclusive
evidence in any proceedings arising out of this Contract (whether by
arbitration under clause 34 of these Conditions or otherwise) that the
Works have been properly carried out and completed in accordance with
the tentis of this Contract and that any necessary effect has been given
to all the tentis of this Contract which require an adjusttnent to be made
to the Contract Sum, except and in so far as any sum mentioned in the
said certificate is erroneous by reason of:
(a) Fraud, dishonesty or fraudulent concealment relating to the Works,
or any part thereof, or to any matter dealt with in the said centfi-
cate; or
(b) Any defect (including any omission) in the Works, or any part
thereof which reasonable inspection or examination at any reason-
able time during the carrying out of the Works or before the issue
of the said certificate would not have disclosed; or
(c) Ally accidental inclusion or exclusion or any work, materials goods
or figure in any computation or, any arithmetical error in any
computation.
(8) Save as aforesaid no certificate of the Architect shall of itself be con-
clusive evidence that any works materials or goods to which it relates
are in accordance with this Contract.

CIO"se 30 regulates payment under the contract. it sets out the way in
which the Contract Sum, as adjusted by the various provisions in the
contract, is to be paid over to the contractor.
144 Clause 30

Interim certificates and valuations

Clauses 30(I ) and 30(2)

Clause 30(I) provides for the issue of interim certificates by the archi-
^ct. both, ^;^^:4'I^:^^~" ,:'^;;!,':rt',:;;:',^;"
If no period is stated there, they must be issued at intervals of a calen-
dar month. The architect's failure to issue interim certificates is a breach
of contract for which the employer is liable. in England it has been
held that the mere signature by the architect of a certificate does not
amount to its issue since the dictionary meaning of the transitive verb
"to issue" means, inte, ' offa, "to send forth; to give or send out authori-
tatively or officially; to put into circulation".
This was so held by the English High Court in London Bo, ough of
Camden v Thomas MCInei. ney & Sons Ltd (1986) 9 ConLR 99 where
the contract was in ternis identical to FAM fomi. The architect signed
certificates but they were never sent out because a subsequent mspec-
tion revealed defective work. On the facts, the signing of the final
certificate did not constitute giving of the opinion under clause 30(7)
that the Works had been "properly caded out and completed in accor-
dance with the tenns of this contract". Since it was not issued, it was
of no effect. A final or other certificate only Fomes to life as a docu-,
merit which is legally enforceable as a certificate when the architect
issues it as required by clause 3(8).
The issue of an interim certificate to the contractor (see clause 3(8))
does not of itself entitle him to payment, but it is a condition precedent
to payment : Ling Heng Toh Co v Borneo Development Coino, .ajion
Sdn Bhd [1973] I MLJ 23. The period for bonouting the certificate
dates from its PI'esentotion to the employer, which presumably means
its actual receipt by him. The contractor is then entitled to payment
within the period named in the Appendix, which will be 14 days from
presentation unless a different period is specified.
Clause 30(I ) refers to the contractor being "entitled to payment there-
for" within the named period, to payment of the amount certified by the
architect as due to him. in L"benhom Fide!^71^s & Investment Co Lid v
South Feinbrokeshire District Council (1986) 6 ConLR 85, the English
Court of Appeal held that this means the contractor is entitled to pay-
merit of the sum actually stated in the interim certificate to be due to
the contractor from the employer, even if the certificate contains a latent
or patent error. (The clause of the contract in issue was in identical
terms to clause 30. ) in that case, a negligent architect made invalid
deductions on the face of interim certificates and the employer refused
to pay sums in excess of the amounts actually shown as due. This was
held not to be a breach of contract.
Clause 30(I) merely requires the employer to pay the sum stated in
the certificate as being due to the contractor and by doing fulfils his
 Cer!ofic@!es and payments 145
contracttial obligation. Where a certificate is erroneous, the contractor's
remedy is to request the architect to make an adjustment in another
certificate; or if he declines to do so, to take the dispute to arbitration.
in their nature, interim certificates are only an approximate valuation
of the work done and the amount of any interim certificate is subject to
adjustment in subsequent certificates. By issuing an interim certificate
for payment the architect is not thereby expressing a final view of the
state of the Works. He is entitled to take a fresh view each time he
issues an interim certificate and his opinion does not become conclu-
SIve until he issues the final certificate.
11 was also emphasized that the issue of an interim certificate is a
condition precedent to payment under the contract and so the contrac-
tors were not entitled to recover the full amount which they alleged as
properly due to .them either on the basis of an implied term that the
employer would properly secure the architect's performance of his duties
under the contract or otherwise,
The employer's obligation, then, is to pay the amount stated as due
within (usually) 14 days from rece!77t of the interim certificate, to he
has a period of grace. The contractor's entitlement to payment is sub-
ject to the employer's contractual rights of deduction, eg liquidated
damages under clause 22, and any tight of set-off. Mere non-payment
of a certificate does not of itself entitle the contractor to treat the contract
as at an end and if he does so by abandoning the contract he will be
treated as himself being guilty of repudiatory breach : Yong Mok Hin v
United Malay Sugar Industries Ltd 119661 21v^it, I 286.
The English case of KITby & Gay/'ord Ltd v Sel^hco"rt Ltd (1976) 3
BLR 104 is of interest in connection with the issue of interim certifi-
cates under clause 30(I). There, a contract for alteration works was in
ternis identical to the PAK^I fomi and the employer challenged the sixth
interim certificate, contending that no written variation orders had been
given. He withheld payment. The Court of Appeal found for the
contractor, holding that in the absence of proper evidence that the
variations were not properly ordered, the interim certificate must be
honoured, pending practical completion.
"So long as a certificate is good on the face of it and is within the
authority given by the contract [to the architect] then it is in accordance
with the conditions. it must be honoured" said Lord Denning MR. This
does not mean that a certificate is as good as cash, and if an employer
raises a bona lide arguable contention that an interim certificate may
have been over-valued, he is entitled to have the issue arbitrated and
the contractor will not necessarily be entitled to sunrrnary judgment,
when he would be entitled to interest for late payment : see Contracts
Act 1950, section 74, illustration (n) and Woon Hoe Kon & Sons Sdn
Bhd v Bunchr Raya Development Bhd [1973] I MLJ 60.
To arrive at the amount due in interim certificates, interni valuations
are to be made by the quantity surveyor, whenever the architect consid-
ers them mecess@17. interim valuations are not, therefore, mandatory,
 I46 Clause 30

but even where the architect dispenses with them he is still under the
duty laid down in clause 30(2) to include what that sub-clause says an
interim certificate must cover.
If the contractor feels that an interim certificate has not been prop-
erly prepared, he can request the architect to make an adjustment in the
next interim certificate, or give notice of arbitration under clause 34.
However, no interim certificate is final and conclusive (see clause 30(8))
ancl is subject to review in the final certificate. Consequently, it is
doubtful whether it is worthwhile to challenge an interim certificate b
giving notice of arbitration.
Clause 30(2) lays down what matters are to be covered by an in-
tenm certificate, and two items are to be included. The sub-clause is
stated to be "subject to any agreement between the parties as to stage
aments"andth'
payments , and this envisages thath
theh I
employer and the contractor may
agree that payments are not to be due until certain fixed stages of the
Works are completed. in that case, clause 30(2) would have to be read
subject to the agreement for stage payments.
Under clause 30(2) the two items to be included are :

Total value of work properly executed

This includes, of course, work executed by sub-contractors.
Despite the reference to "work properly executed" by issuing an ,
interim certificate for payment, as already indicated, the architect is not '
thereby expressing a final view of the state of the work. He is entitled
to take a fresh view each time he issues an interim certificate and his
opinion does not become conclusive until he issues the final certificate
under clause 30(7). The primary purpose of the issue of interim certifi-
cates is to ensure that the contractor receives regular payments as the
work progresses.

Total value of materials and goods delivered to or

adjacent to the works for use thereon

The resinctions on what materials and goods are to be included are :

(1) They must be delivered to or adjacent to the Works. Denve to
the contractor's yard is not sufficient unless, of course, the ard is
adjacent to the Works. "Adjacent" means lying near or contiguous
to the Works.
(2) Delivery must have taken place up to and including not in o1'e than
seven days before the date of the certificate.
(3) The materials and goods must have been reasonably, properly and
not prematurely brought to or adjacent to the Works.
(4) The materials and goods must be adequately protected against the
 Cell"cnies alld paynieJi!s 147

weather or other casualties. These other casualties will include theft

and the various insurance risks.

The question of adequate protection of the materials or o00ds is a matter

best discussed with the clerk of works if one is appointed, although of
course his decision would not bind the employer or the architect. If the
contractor is anxious to get their value certified, it would be advisable
to get the architect to agree in writing that the goods and materials
meet the requirements of the proviso.
Under the provisions of clause 14, these materials and o00ds become
the employer's property once they are certified and paid for, provided
the contractor has a valid title to them, although the contractor remains
responsible for any loss or damage to them : see the discussion of
ownership under clause 14. There is no power in the architect to in-
clude the value of off-site goods and materials in interim certificates
From the total value of the two specified items, amounts previously
stated as due in interim certificates and retention (clause 30(3)) are
deducted, and the contractor receives the nett figure - less, of course,
any other deductions which the employer is entitled to make, eg 11qui-
dated damaoes under clause 22.
There are other items which must be included in interim certificates :

(1) variations under clause 11 : clause 11(5);

(2) direct loss and/or expense : clauses 24(I) and 33(2);
(3) payments made and costs incurred by the contractor under other
clauses : clauses 40) (fees and charges); 5 (levels and setting out);
7 (royalties and patent rights); 15(2) (defects, shrinkages or other
faults); 20[B] and 201C] (insurance premiums paid by contractor).
From the terms of clause 30(2) it would not appear that any retention
can be deducted from such amounts.

Retention

Clauses 30(3) and 30(4)

The primary purpose of a retention fund is to protect the employer. it
is money held by the employer as a safeguard against defective or non-
pertonmance by the contractor and acts as a safeguard for the employer
against the contractor's possible failure to complete the contract and
against defective work.
Clause 30(3) provides that the employer may retain a percentage of
the total value of work, materials and o00ds ascertained under clause
30(2). The percentage of certified value retained is called "the Relen-
lion Percentage" and is of a percentage to be inserted in the relevant
Appendix entry which should not nonnally exceed 10 per cent. Despite
the words "the employer may retain", it is plain from clause 30(2) that
148 Cluwse 30

tlie sum to be retained should be deducted by the architect in tlie CGr-

tmcate. WITen the Retention Percentage reaches the percentage speci-
fled in the Appendix as 1116 limit of letention fund (which will not
normally exceed 5 per cent. of the Contract Sum) 1116 employer Inay
retain no furtlier sums.
Moreover, where either before or after practical completion the
employer has taken partial possession and there has been a half or
complete release of retention under clause 16(f) or early final payment
has been made to a nominated sub-contractor (with corresponding re-
lease of the relevant share of retention under clause 27(e)) the total
Retention Percentage is reduced by a corresponding amount.
Clause 30(4) sets out the nature and purpose of retention and the
rules on its treatment.
Poi'ogi'dpii (0) states that the emp10>, 61's interest in the amounts
retained is to be "fiduciary as trustee", thus making the retention trust
money in the employer's hands. Thus, in the event of the employer's
insolvency, the retention would not be available for the employer s
creditors. in Lee Kuni Clani v byo1. ikot Kliku/? Mai'u Sth Bhd [1988]
I CLI 52 the High Court had to consider whether the retention sum in
the hands of the employer was attachable at the instance of a judgment
creditor of the contractor by way of garnishee proceedings. The con-
tract was on PAM ternis.
in a very careful judgment, Peh SWGe Chin I held that the retention
money was so attachable; it was an existing debt. The learned judge
said:

The retention sum in this case is an existing debt and in fact an existing
indebted sum that involves the payment, notionally and irresistibly PUTSuant
to an interim certificate issued by the architect, by the garnishee to the
judgment-debtor and the latter's payment in turn back 10 the garnishee for
retention . . . with the garnishee holding the money as trustee for the judg-
merit-debtor.

A trustee is under an obligation not to mingle trust moneys with his

own, and in practice this means that the employer must establish a
separate trustee account. in the English case of Ro}, ock Consti. "ciioii
Ltd v Loin?petei' Meal Co Lid (1979) 12 BLR 30, the plaintiffs entered
into a contract in the English ICT 63 forrn which contained clause 30(4)
in the same terms as the FAM clause 30(4). The English High Court
held that clause 30(4) required the employers to establish a separate
fund because otherwise it would have no practical application. The
retention moneys belongs beneficialIy to the contractor.
The Rayuck case was cited with approval by Peh Swee Chin I in the
Lee Kan7 Ch"11 case, who added that "one cannot lose sight of the fact
also that the retention sum was deducted from value of work already
and actually done and materials already and actually supplied as certi-
fled by the architect to be due",
it would, in fact, be better for the clause to be amended so as to state
expressly that the employer is obliged to open a separate and specially-
 errrit@tes and paymen!s 149

designated bank account as has been held to his duty. That duty can
be enforced by injunction.
it is a moot point as to whether the contractor is entitled to interest
on the retention moneys; it is said that since the employer is not obliged
to invest the retention fund there is no obligation on him to pay inter-
est. However, it is a basic principle of equity that a trustee is not
permitted to benefit from trust moneys and in view of the silence of the
contract on this matter it is suggested that the contractor is entitled to
interest earned on retention moneys.
Although the retention is trust money, the employer is given certain
rights of recourse to it under the tenns of the contract. Clause 30(4)(a)
states that, notwithstanding the employer's fiduciary position, he is
entitled "to have recourse thereto from time 10 time for payment of any
amount which he is entitled under the provisions of this contract to
deduct from any sum due or to become due to the Contractor".
The employer's right of recourse under the ternis of the contract
appears to be confined to the following :
(1) His rights under clause 2(I) to reimburse himself for the con-
tractor's failure to carry out valid architect's instructions when he
has exercised his default powers to employ others'
(2) The recovery of liquidated and ascertained damages under clause
22.
(3) Deductions under clause 15(2) if he elects not to have defects
made good by the contractor.
(4) The recovery of insurance premiums paid under clause 19(3) and
clause 201Al(I) if the contractor fails to insure as required.
(5) Direct payments to nominated sub-contractors under clause 27(c).
in Lee Kam Ch"n v Sy@rikot KMk"h Mai" Sdn Bhd 119881 I CLI 52 the
court also expressed the view that there was "no doubt that for dam-
ages and loss to be quantified by a court or an arbitrator later, for alleged
breach of contract on the parr of the [contractor, the employer] would
have the right to dip into such retention money for satisfaction" assum-
ing, of course, that the retention had not been paid over.
Paragraph (b) provides that one inoiety, to half of the retention
percentage is payable on the issue of the practical completion certifi-
cate under clause 15. This payment is against the architect's certificate
and is on the same tenns as for interim certificates under clause 30(I).
Paregroph (c) deals with the release of the second half of the Teten-
tion percentage. Once the contractor's liability to remedy defects under
clause 15 is discharged, the second half of the percentage is released to
him. This occurs either when the defects liability period expires or when
the architect issues his Certificate of Completion of Making Good
Defects whichever is the later.
The architect must then issue a certificate releasing the residue and
the contractor is entitled to payment on the same conditions as for interim
certificates under clause 30( I). Thus, on the assumption that all defects
150 Clause 30

are remedied before the expiry of the defects liability period, six months
from the date of practical coinpletion is the niaximum time that can
elapse before payment becomes due, unless a longer defects 11a i ity
period has been specified in the Appendix.

Final settlement : Adjustment of contract sum

Clauses 30(5) to 30(8)

CIOuse 30(5) sets out the manner in which the Contract Sum is to be
adjusted and the various steps needed before a final certificate can be
issued.
Poingi'onhs (0) and (b) are procedural. Poingi'@PIT (0) stipulates that
"the measurement and valuation of the Works must be completed within
a period of six months from practical completion, unless another period
is inserted in the relevant Appendix entry to clause 30(5).
By the end of this "period of final measurement and valuation the
contractor must be given a copy of the summary of the priced bills of
variations, which is the quantity surveyor s final valuation of all van-
allons and the total sum by which the Contract Sum is to be adjusted.
The other adjustments to the Contract Suni are dealt with in clause
30(5)(c) and (6).'
Under po, .agi. ant (b) the contractor must provide all the documen- .:
tation necessary for computing any, amounts due under o11 the contract
tenns. He must do this either before or within a reasonable time after
practical completion. The documents must be provided to the architect
and the documentation to be provided extends to documents relating
to the accounts of nominated sub-contractors and nominated suppliers' .
Read together paragraphs (b) and (c) contemplate that all the purely
quantity surveying functions will be completed within a period of six
months after practical completion which is the same period as the defects
liability period. There is no requirement that the contractor be supplied
with a draft final account or that his "agreement" to such an account is
required, though this is the common and sensible practice. The time-
table envisaged by these provisions is honoured more in breach than by
observance.
Palngraph (c) sets out other matters which must be dealt with in the
settlement of the accounts. These are :

(I ) amounts paid or payable to nominated sub-contractors;

(2) amounts paid or payable to nominated suppliers;
(3) amounts paid or payable for fees and charges under clause 4(2) if
covered by a provisional sum in the Contract Bills;
(4) amounts paid or payable for insurance under clause 19(2) for which
a provisional sum was provided;
(5) amounts due for work done by the contractor under clause 27(g)
for work covered by a PC Sum.
 Cei I^cores and payments 151

Each of these amounts must be ascertained and set against the appro-
prtaie PC or Provisional Sum and the Contract Sum is adjusted accord-
ingly. The sub-clause specifically refers to the contractor s normal right
to insert a profit percentage in respect of PC Sums, but is not a coin-
prehensive code.
The proviso that "no deduction shall be made in respect of any
damages paid or allowed to the Contractor by any sub-contractor or
supplier" is self-explanatory since such settlements are not relevant to
the adjustment of the Contract Sum.
Clot, se 30(6) provides a timetable for the issue of the final certificate
which is the last certificate issued by the architect in connection with
the contract. On its issue, the architect becomes functus offICio, to his
authotity under the contract is at an end unless notice of arbitration has
been given within the permitted time under clause 30(7), and he is
precluded from issuing any further valid certificates.
The final certificate should be issued "as soon as practicable", re so
soon as the necessary calculations have been carried out but in any
event the final certificate must be issued not later than three months
after the occurrence of whichever of the following three events occurs
last :

( I) the end of the defects liability period;

(2) the date of issue of the Certificate of Completion of Making Good
Defects under clause 15(4);
(3) the date of receipt by the architect of the necessary documentation
from the contractor under clause 30(5)(b).
The issue of the final certificate is mandatory and failure to issue it
within the time and in the mumer specified is a breach of contract for
which the employer is liable. Traditionally, architects have delayed
issuing a final certificate until the last possible moment because of its
conclusive effect, but the contract is clear in its tenns and the architect
is bound to issue the certificate in accordance with the prescribed
timetable.
The final certificate must state :
(I ) the sum of the amounts already paid to the contractor under in-
tenm certificates and the amount named in the Appendix as the
Limit of Retention Fund;
(2) the Contract Sum as adjusted in accordance with the contract;
(3) the difference between these two items either as a balance due
to the contractor or to the employer : see Chew Sin Leng Con-
sir"cti'on Co Ltd v Cosy Housing Development Pte Ltd [1988]
I lv^it, I 131.

Subject to any deductions authorized by the conditions, eg liquidated

damages under clause 22, the balance shown is a debt payable either by
the employer on the 14th day after the issue of the final certificate.
Clause 30(7) deals with the nature and effect of the final certificate.
Subject to three exceptions, and unless notice of arbitration has been
152 Clausc 30

given under clause 34 by either party before its issue or by the contrac-
tor within 14 days after its issue, the final certificate "shall be conclu-
sive evidence in any proceedings arising out of this Contract . . . that
the Works have been properly carried out and completed in accordance
with the tenns of this Contract and that any, necessary effect has been
given to all the terms of this Contract which require an adjustment to
be made to the Contract Sum . . .".
The effect of the final certificate is not, therefore, merely financial
and the meaning of the words "conclusive evidence in any proceedings
arising out of this contract" was considered by the House of Lords in
P & M Ko\'e Lid v Hosiei' & DJtkiitso, ? Ltd 119721 2 All ER 121 where
their lordships held, by a maiotity, that these words prevented any further
legal action, including legal proceedings started long before the centfi-
cate was issued.
This decision has been followed in Malaysia on many occasions, eg
in Shell Yuan PCi v Doro Wee Hood Teck 119761 I MLJ 16, which is
also authority for the view that it is for the architect to delennine the
form and nature of the final certificate as he thinks fit.
'i'he final certificate is "conclusive evidence" not only of the adjust-
merit of the Contract Sum, but also "that the Works have been properly
carried out and completed in accordance with the terms of this Con-
tract" which is, to say the least, hardly in the employer's interest since
effectiveIy it excuses the contractor from liability for what could be *
serious breaches of contract. although the exceptions discussed below-'
may in fact be of some assistance.
in fact, in the light of clause 30 (7)(b) it is clear that the contractor's
liability for latent defects is preserved and, so far as defective work is
concerned, the final certificate will only relieve the contractor of nabil-
ity in respect of patent defects, to those which reasonable inspection
ought to have revealed.
The final certificate incorporates the value of all interim certificates.
it seems that even if the quantification of the balance due under it is
mistakenly based on sums certified rather than sums certified and paid,
the certificate is nonetheless not reviewable by the arbitrator under clause
34 because it is "conclusive evidence that any necessary effect has been
given to. all the terms of this Contract which require an adjustment to
the Contract Sum".
As between the employer and the contractor, therefore, the final
certificate becomes conclusive evidence of the matters specified in clause
30(7) unless arbitration proceedings have been commenced as speci-
fled. To avoid its conclusive ness the employer must make a request to
concur in the appoininient of an arbitrator prior to its issue.
The exceptions relate only to financial matters - "except and in so
far as any sum mentioned in the said certificate is erroneous by reason
of" :

fraud, dishonesty or fraudulent concealment relating to the whole

or part of the Works or to any matter dealt with in the certificate;
 Celloficores and paymen!s 153

(2) any defect in the whole or part of the Works which reasonable
inspection ought to have revealed;
(3) any accidental inclusion or exclusion of any work, materials, goods
or figure in any computation or any arithmetical error in any
computation.

Clanse 30(8) provides that apart from the conclusive nature ascribed to
the final certificate by clause 30(7), no other certificate (interim centfi-
cate, certificate of practical completion, certificate of making good
defects, etc) is considered conclusive evidence that any work, materials
or goods are in accordance with the contract. This emphasizes the
different nature and crucial importance of the final certificate.
Clause 31

O tbrea f hostilities

(I ) If during 111e currency of this Contract there shall be an outbreak

of hostilities (whether war is declared or not) in which Malaysia shall
be involved on a scale involving the deneral niobilisation of the armed
forces of the government in the State or States of Malaysia then either
the Employer or the Contractor may at any time by notice by Tetristered
post or recorded delivery to the other, forthwith determine the employ-
merit of the Contractor under this Contract:
Provided that such a notice shall not be given
(a) Before the expiration of 28 days from the date on which the order
is given for general mobilisation as aforesaid, or
(b) After Practical Completion of the Works unless the Works or any
part thereof shall have sustained war damage as defined in clause
32(4) of these Conditions.

(2) The Architect may within 14 da}, s after a notice under this Con:
dition shall have been given or received by the Employer issue instruc-
tions to the Contractor requiring tile execution of such protective work
as shall be specified therein and/or the continuation of the Works up to
points of stoppage to be specified therein, and the Contractor shall comply
with such instructions as if the notice of determination had not been
given.
Provided that if the Contractor shall for reasons beyond his control be
prevented from completing the work to which the said instructions relate
within 3 months from the date on which the instructions were issued, he
may abondon such work.
(3) Upon the expiration of 14 days from the date on which a notice of
determination shall have been given or received by the Employer under
this Condition or where works are required by the Architect under the
preceding sub-clause upon completion or abandonment as the case may
be of such works, the provisions of sub-clause (2) (except sub-para-
graph (vi) of paragraph (b)) of clause 26 of these Conditions shall apply,
and the Contractor shall also be paid by the Employer the value of any
work executed PUTSuant to instructions given under sub-clause (2) of
this clause, the value being ascertained in accordance with clause I I'(4)
of these Conditions as if such work were a variation required b the
Architect.

*'Footnote - Tile pal. lies he I. eio ill Ihe eveni of Ihe owlbi'eok of hos!ithi^s
in@), at oily tin?e by ogi'eeme, ?I betH, een Ihem rimke such Iui'Ihei' o1' o1hei'
ai'I'd 118enients OS lirey Ihink fir 10 meei 1/1e cii'cwmsioiices.

154
 0111bituk o1' fros!Jinits 155

11 is not thought necessary to discuss this clause in detail. Briefly, it

pennits the parties to delennine the employment of the contractor where
hostilities occur and in which Malaysia is involved as evidenced by a
general mobilization. The architect is Ginpowered to order protective
works.
The footnote to the clause reminds users that in the event of the
outbreak of hostilities, the parties may at any time aoree to make fur-
ther or other arrangements.
Clause 32

War da age

32 (1) in the event of the Works or any part thereof or any unfixed ina-
tenals or goods intended for, delivered to and placed on or adjacent to
the Works sustaining war damage then notwithstanding anything ex-
pressed or implied elsewhere in this Contract:
(a) The occurrence of such war damage shall be disregarded in coin-
puting any amounts payable to the Contractor under or by virtue of
this Contract.
(b) The Architect in^, issue instructions requiring the Contractor to
remove and/or dispose of any debris and/or damaged work and/or
to execute such protective work as shall be specified.
(c) The Contractor shall reinstate or make good such war damage and
shall proceed with the carrying out and completion of the Works,
and the Architect shall grant to the Contractor a fair and reasonable
extension of time for completion of the Works.
(d) The renioval and disposal of debris or damaged work, the execu-
lion of protective works and the reinstatement and making good of
such war damage shall be deemed to be a variation required by the
Architect.

(2) If at any time after the occurrence of war damage as aforesaid either
party serves notice of determination under clause 31 of these Condi-
tions, the expression 'protective work' as used in the said clause shall
in such case be deemed to include any matters in respect of which the
Architect can issue instructions under paragraph (b) sub-clause (1) of
this Condition and any instructions issued under the said paragraph prior
to the date on which notice of detennination is given or received by the
Employer and which shall not then have been completely complied with
shall be deemed to have been given under clause 31(2) of these Condi-
tions.

(3) The Employer shall be entitled to any compensation which may at

any time become payable out of monies provided by Parliament in respect
of war damage sustained by the Works or any part thereof or any unfixed
materials or goods intended for the Works which shall at any time have
become the property of the employer.
(4) in this condition the expression "war damage" means:
(a) damage occurring (whether accidentally or not) as the direct
result of action taken by the enemy, or action taken in coin-
bating the enemy or in repelling an imagined attack by the en-
Giny;

156
 W(11 dunioge 157

(b) damage occurring (whether accidentally or my I) as t e ITect

result of measures taken under proper aut onty to avoi
spreading of, or otherwise to mitigate. I e consequ
damage as aforesaid;
(c) accidental damage occurring as the direct resu
co of any precautionary or preparatory me aspres a
proper authority with a view to preventin, a
the carrying out of any attack by the enemy; o
(ii) of precautionary or preparatory measures invo vi ,
do in a of work on land and taken under proper aut or' y '
any way in anticipation of enemy action,
being, in either case, measures involving a substantia ,
properly: f h' ub-
Provided that the measures mentioned in paragrap (c) o
condition do not include the imposing of restrictions o
lights or measures taken for training purposes.
For the purposes of this sub-condition. such action again
is referred to in paragraph (a)
(i) shall, in relation to any ship or aircraft taking part in suc a ,
be deemed to continue until the ship or aircra t as re u
its base;
(ii) includes naval, military or air reconnaissances an pa r

it is not thought necessary to discuss this clause in a. y

Put shortly, it provides that if war damage (as define ) .occ ,
contract remains in force and the contractor gets an ex e
and payment for repaiting any war damage.
Clause 33

Anti uities

33 (1) All fossils, antiquities and other objects of interest or value which
may be found on the site or in excavating the sanie during the progress
of the work shall become the properly of the Employer. The Contractor
shall carefully take out and preserve all such objects and shall jinmedi-
alely or as soon as conveniently may be after the discovery of such
articles deliver the same into the possession of the Architect or of the
clerk of works uncleaned and as excavated.

(2) If in the opinion of the Architect compliance with the provisions

of the precedino sub-clause has involved the Contractor in direct loss
and/or expense for which he would not be reimbursed by a payment
made under any other provision in this Contract then the Architect shall
either himself ascertain or shall instruct the Quantity Surveyor 10 ascer- ,
tain the amount of such loss and/or expense. Any amount from time 10. .
time so ascertained shall be added to the Contract Sum, and if an in-
tenm Certificate is issued after the date of ascertainment ally such amount
shall be added to the amount which would otherwise be stated as due
in such Certificate.

This is a common-forrn provision dealing with the finding of antiqui-

ties and related archaeological items.
CIOuse 33(I) provides that "all fossils, antiquities and other objects
of interest or value" found on the site or during excavation are the
property of the employer. The "other objects" are to be construed
ej'"sdeni genei'is with "fossils" and "antiquities", to they must be of a
similar nature. When such objects are found, the contractor must forth-
with take the action set out in the sub-clause. in brief, the contractor
must carefully remove the item and give it to the architect or clerk of
works uncleaned and as excavated. The rapid decay of most archaeo-
logical material in a tropical climate means that only the most durable
objects of stone or metal have survived.
CIOuse 33(2) enables the contractor to claim for any direct loss and/
or expense caused to him by compliance with clause 33(I) and adopts
the machinery of clause I I (6).

158
Clause 34

Arbitration

34 (1) in the event that any dispute or difference should art;e e

the Employer or Architect on his behalf and the Contractor, ei g
the progress or after the completion or abandonment o e ,
any matter or thing of whatsoever nature arising I ereu
nection therewith (including any matter or thing left by I is con
the discretion of the Architect or the withholding by t e . rc '
any certificate to which the Contractor may claim to e on '
measurement and valuation mentioned in Clause 30(5)(a) o es
dinons or the rights and liabilities of the parries under ause , ,
or 32 of these Conditions), then such disputes or differences s
referred to arbitration.
Upon the disputes or differences having arisen any p . y y
written notice on the other parry that such disputes or i e .
be referred to an arbitrator to be agreed between the parties
agreement or absence of reply or reluctance to act y e p
then the party may, after the expiry of fourteen ays om
the notice to concur on the appointment of an ar mator, pp y
President or Vice President for the time being of Perm U 411
Malaysia to appoint an arbitrator and such arbitrator so app
by virtue of this agreement be deemed to be appointe wi g
merit and consent of the parties to the contract.
Upon appointment the arbitrator shall with despatc initia e
tion proceedings following the provisions of the j a i
(revised 1972). The hearing may be "ex pane" should either party, a ' g
been given due notice, fail to attend.
(2) Such reference, except on article 3 or article A of the IC eS
Agreement, or on the questions whether or not the issue o
tion is empowerd by these Conditions, whether or not a CG I I .
been improperIy withheld or is not in accordance wi ,
or on any dispute or difference under clauses 3 an
Conditions, shall not be opened until after Practical omp e i
leged Practical Completion of the Works or tennination or g
initiation of the Contractor's employment under t is on ,
dooment of the Works, unless with the written consent o p
or the Architect on his behalf and the Contractor.
(3) Subject to the provisions of clauses 2(2) and 300) 0 t .ese
ditions the Arbitrator shall, without prejudices to the genera icy.
powers, have power to direct such measurements andjor v
159
160 Cm, sc 34

may in his opinion be desirable in order to delennine the rights of the

parties and to ascertain and award any sum \\ hich ought to have been
the subject of or included in any certificate and to open up, review and
revise an>, certificate, opinion, decision, requirement or notice and to
determine all matters in dispute which shall be submitted to him in the
same manner as if no such certificate, opinion, decision, requirement or
notice had been given.
(4) The award of such Arbitrator shall be final and binding on the
parties.

This clause provides for the settlement of disputes under the contract
by arbitration. in the 1985 reprint of the form, it consists of two sub-
clauses, but in the reprint of 1986 three sub-clauses have been omitted,
and sub-clause (I ) stands alone. This commentary covers the clause in
its complete fomi and the wrtter has been advised that the omissions in
the 1986 reprint were unintended.
Clause 34(I) is the arbitration agreement and is wide in its scope.
Under its provisions there is referred to arbitration "any dispute or
difference between the employer or architect on his behalf and the
Contractor" which arises during the progress or after the completion or
abandonment of the works "as to any matter or thing of whatsoever
nature arising thereunder or in connection therewith' . The arbitrator's.
jurisdiction is broad and specifically extends to matters left to the:
architect's discretion, the withholding by the architect of ally certificate
to which the contractor alleges he is entitled, the measurement and
valuation of the Works as mentioned in clause 30(5)(a), and the rights
and liabilities of the parties on detemnination (clauses 25 and 26),
outbreak of hostilities (clause 31 ) or occurrence of war damage (clause
32).
The second paragraph of the sub-clause contains the machinery for
commencing arbitration. When a dispute or difference arises, either party
may serve written notice on the other that the dispute or difference be
referred to the arbitration of a person to be agreed. This is the notice to
concur in the appointment of an arbitrator, and while no special fomi
is required it is usual for the person making the request to submit to the
other party a list of at least three qualified persons proposed as arbitra-
tor, from which one may be selected. Failing agreement, or in the
absence of a reply or reluctance to act by the other party, after 14 days
from the dote of the notice to concur in the appointment of an arbitta-
tor, the person seeking arbitration can apply to the President or Vice-
President of Pertubuhan A1citek Malaysia (the Malaysian Association of
Architects) to appoint an arbitrator. Properly used, this provision pre-
vents its objective being frustrated.
Upon appointment - whether by agreement or in default by the
appointor - the arbitrator is to commence the arbitration proceedings
"with despatch" in accordance with the provisions of the Arbitration
Act 1952, as revised in 1972. The final sentence is important since the
parties agree that the arbitrator may proceed ex pal'Ie, to in the absence
 A1'bitr@!ion 161

of the other party, should either party fail to attend any meeting or
hearing after due notice.
Clause 34(2) (which, as noted above, is omitted in the 1986 reprint
of the fomi) is important if it is applicable since it places a limitation
on the commencement of the arbitration proceedings. Subject to the
exceptions discussed below, the arbitration reference camot be opened
"until after practical completion or alleged practical completion of the
Works or teamination or alleged termination of the contractor's em-
ployment ~ or abandonment of the Works' unless both parties consent
in writing. it should be noted that the architect is empowered to give
such consent on the employer s behalf.
Immediate arbitration is available in the following cases :
(1) The appointment of another architect or quantity surveyor under
Articles 3 or 4 on the death or ceasing to act of the named archi-
rect or quantity surveyor.
(2) Whether or not the issue of an architect's instruction is Ginpow-
ered by the contract, to the correctness of the architect s reply
when the contractor invokes clause 2(2).
(3) The alleged improper withholding of any certificate. Immediate
arbitration is appropriate, for example, if the contractor does not
receive an interim certificate.
(4) The alleged improper content of any certificate or, to quote the
contract wording "whether a certificate is not in accordance with
these Conditions". For example, if an interim certificate is alleged
to be undervalued and the architect has refused to adjust it.
(5) Ally matter arising under clause 31 (outbreak of hostilities) or
clause 32 (war damage).
The coriumon thread running through these matters is that such disputes
must, of their very nature, be settled rapidly.
Clause 34(3) - which is also omitted from the 1986 reprint - is
significant, since it enhances the powers of the arbitrator and, in effect,
enables him to substitute his own opinions and decisions for those of
the architect (or quantity surveyor) acting under the contract and con-
fors on him powers to "open up, review and revise any certificate,
opinion, decision, requirement or notice which would not extend to
the courts if the much-discussed English case of Northern Regional
Health Authority v Derek Crouch Construction Ltd (1986) 26 BLR I is
correct. See also the Singapore case of Central Provident Fund Board
v HO Bock Kee (1981) 17 BLR 21.
The arbitrator camot, however, go behind the final certificate which
is, by clause 30(7), made final and conclusive, nor can he review the
validity of an instruction acted upon by the contractor in reliance on
the architect's reply under clause 2(2) since in those circumstances the
instruction is "deemed for all the purposes of this Contract to have
been Ginpowered by" the clause named by the architect.
Clawse 30(4) - which is again ontitted in the 1986 reprint of the
forrn - states that the arbitrator's award is final and binding, which
162 Clause 34

would in any event otherwise be the case under the provisions of the
Arbitration Act 1952.
A grave practical defect in clause 30 is its failure to incorporate any
procedural rules governing the conduct of the arbitration, and this is a
matter with which the appointed arbitrator should deal as a condition of
his acceptance of the appointment.
Index

Architect (cont'd)
entitlements of,
Abandonment access to work, to, 35
determination of engagement, as to,
effect on payment. 2
10
non-payment, for, 145 79
outbreak of hostilities, upon, 154 possession, to defer giving,
pertomiance, of, 2 func!"s Qincio, when, 84, 151
Access instructions of,
clause on, 35 authorised under contract, to be, 20
site, to, see POSSESSION challenging validity of, 20
sub-contractor's premises, to, 35 clause on issuance of, 18
works, to, 35 completion of work, to postpone, 81
Agent compliance to be "forthwith", 20
foreman as, 34 dismissal of person from site, as to,
Antiquities 31,32
clause on, 158 expenditure of PC sums, as to, 42
contractor's obligations as to, 158 failure to comply with, 19-20
loss and/or expense for removing, 158 inspection of materials and goods,
ownership of, 158 as to, 30--31
Arbitration insure, to, 68
agreement, 160 late, extension of time for, 94
arbitrator, oral,
confimiation of, 21
appointtnent of, 160
effect of, 21
jurisdiction of, 160
powers of, to review, 161 restrospective validity of, 21
award of, binding effect of, 161-162 protective works, as to, 155, 156
clause on, 159 remedy defects, to, 55
commencement of, limits on tune removal of defective materials and
for, 161 goods, as to, 31-32
"with despatch", 160 review of, by arbitration, 161
notice of, 160 substitution of materials and goods
settlement of disputes by, 159 as to, 31
subjects of, 161 variations, as to, see VARIATIONS
time for commencement of, 160--161 writing, in, 20
Architect interim certificates, dispensing with,
clerk of work's directions, confirma- 145-146
lion by, 37 invalid deductions by, effect of, 144
death, 9 name and address in article 3.9
extension of time by, see errsNsioN notice to, see NoncE (architect, to)
OF TIME obligations of,
discrepancies in contract documents, act impartialy, to, 10
correct, to, 17 ascertain loss andor expense, to,
notice to, 17 101-102

163
164 111de. \

Architect (cont'd) Breach of contract

certificates, to issue, 144,151 contractor, by,
contractor's rates, as to, 25 notice of delay, failure to give, 89
drawings and inforrnation, to proceeding regularly and diligently
provide, 24-25,103 with work, failure as to, 111
length of delay, to estimate, 91 removal of defective work, failure
levels and setting out, as 10.29 as to. I I I
loss and/or expense, to ascertain, employer, by,
101 architect's failure,
necessary instructions, to give, 94 certificates, to issue, 144,151
reasonable diligence, to exercise, 24 drawings and infonnation, to
supplier. to nominate, 137 provide, 24-25,103
tort, in, 9-10 loss and/or expense, to ascertain,
qualifications, 9 102
"reasonable satisfaction" of, necessar}, instructions, to give, 94
meaning, 16 reasonable diligence, to exercise,
need for, 15 24-25
registration of, 9 centficaies, failure to pay on, 117
sub-letting, consent to, 62 invalid deductions by negligent
successor of, 9 architect, 144
contractor's objection to, 9 possession, failure 10 give, 78-79
employer's failure to nominate, 9 successor architect, failure to
immediate arbitration, as to, 161 nominate, 9
implied tenn as to nomination. 5 wrongful delennination of con-
Articles of agreement tractor's employment, 110
contract bills, and, 48
practice as 10 late execution of, I I
recitals, see RECITALS
scope of, Certificate of completion of making
article I mm 8 good defects
amicle 2 mm 8 importance of, 55
article 3 mm 9 Certificate of practical completion, re
article 4 mm 10 PRACricAL COMPLETION (certificate o0
Artist and tradesman Clerk of works
clause on, 139 authotity, limits of, 36
delay by, 140 clause on, 36
employer's responsibility for, 139 confinnation of directions of, 37
work done by, 139 employer's vicarious liability for,
Assignment, see also SUB-LEmNG 36-37
benefits, of, 112 supervision delegated to, 37
building contracts, under, 62 Condition
burden of, 62 meaning, 4
clause on, 61 Conditions of contract, see TERMS OF
consent by employer, CONTRACT
need for, 62 Contract
without, I I I absence of foma1,11-12
effect of, 62, 63 breach of, see BREACH OF CONTRACT
retention money, of, 62 delennination by employer, effect of
sub-letting compared, 61 108
Attestation clauses prtviiy of,
completion of, I I applicability to Malaysia of, 126
execution of, I I docttine of, 126
employer and sub-contractor
B between, 127-128
lack of, 133
Bill of reductions, 7 vination by variation, 40
 Index 165

Contract bills, see also CONTRACT Contractor (cont'd)

DOCUMENTS; CONTRACT DRAWl^Gs
articles of agreement, and, 48
basis of pricing, 7
improper practices, 7-8
bill of reductions. 7
contract drawings, signing by, 8
cost of testing and inspecting mater-
ials and goods, recovery of, 31
delemiination of employment of, see
DETERMINATION BY EMPLOYER

clause on, 47 entitlements of,

contractor entitled to, 7 contract bills. to, 7
correction of errors, contract documents, to, 24
items. in, 48 contract drawings, to, 8
prices, in, 49 inspection of contract documents. as
custody of, 24 to, 24
discrepancies with, interest on retention money, to, 149
contract drawings, 17 successor architect, objection as
loss and/or expense, claim to, 9
for, 104 liabilities of,
statutory requirements, 27 certificate of practical completion,
inspection of, 24 after issuance of, 54
interpretation of, 48 design, as to, 7
parties signing, 8 injury to persons or property, for, 64
recitals, stated in, 7 Insurance, as to, see INSURANCE
SMM fomi, in, 4748 remedy defects, to, 55
Contract documents, see also CON- nominated sub-contractors, responsibil-
TRACT BILLS; CONTRACT DRAWINGS icy for, 126
clause on, 23 obligations of,
custody of, 24 antiquities found on site, as to, 158
entitlement to, 24 article I, in, 8
importance of, 24 "carry out and complete works' , to,
obligations as to, 25 15.16
return of, 23,25 cause of delay, to inforrn, 90
statutory requirements, discrepancies clause on, 15
between, 27 "regularly and diligently", 79
Contract drawings, see also CONTRACT contract documents, as to, 25
BILLS; CONTRACT DOCUMENTS fees of statutory authority, to pay,
contractor entitled to, 8 27
custody of, 24 levels and setting out, as to, 29
discrepancies with, notices to architect, as to, see
contract bills, 17 NoncE (architect, to)
loss and/or expense, claim for, royalties, as to payment of, 33
104 suitability of materials and goods, as
statutory requirements, 27 to, 15
inspection of, 24 statutory requirements, to comply
parties signing, 8 with, 27
Contract sum vouchers, to furnish, 30-31
adjusttnents of, 50, 150 retention money held in trust for, 148
arithmetical error, as to, 50 sub-contractor,
article 2, in, 8 competing with, 135
clause on, 50 nomination of, objection to, 134
costs of erroneous setting out. 29 Mitten confirmation of architect's oral
errors in, 50 instructions by, 21
fees of statutory authority, 27-28 D
royalties for use of patented articles,
33 Damages
Contractor direct loss and/or expense claim coin-
agent of, see FOREMAN-IN-CHARGE pared, 100-101
breach of contract by, see BREACH OF late completion, for, 82
cowRAcr (contractor, by) liquidated, see LIQUIDATED DAMAGES
166 111dex
Default
notice of, 109
repetition of, effect of, 109
Defects liability period
clause on, 53
commencement date of, 54
contractor's liability for defects in, 54
length, 54
"relevant part", for, 59
schedule of defects, 55
sectional completion, for,
commencement of, 59
expiration of, 60
"snaggish list", 55
Delay
completion date, in, 90-91
damages for, 82
drawings etc, in giving, 103
employer's licensees, by, 95,98,104,
140
infonnation, in giving, 103
instructions, in giving, 94, 103
nominated sub-contractor, by, 95
notice of,
cause of, 90
wrtting, in, 90
postponement of work, resulting from,
104
renominating sub-contractor, in, 130
Determination by contractor
clause on, 115
entitlements of contractor upon, 120
events justifying,
certificates,
failure to pay on, 117
interference with, 118-119
insolvency of employer, 119
outbreak of hostilities, 155
suspension of work, 119
notice of, 117
Determination by employer
clause on, 107
effect, 108-109
entitlements of employer upon, I 12
events justifying,
assignment or sub-letting without
consent, I I I
outbreak of hostilities, 155
clause on, 154
proceeding regularly and diligently
with work, failure as to, 111
removal of defective work, failure
as to, I I I
suspension of work, 110
financial settlement upon, 77,112,114
Determination by employer (cont'd)
notice of, 77,109
procedure in respect of, 109
revocation of, I I I
wrongful, effect of, 110
Direct loss and/or expense
ascertainment of, delegation of,
101-102
claim for damages compared, 100-101
clause on, 99
conditions precedent to claim for, 101,
102
financing charges, includes, 46
grounds for claim,
discrepancies between contract
drawings and contract bills, 104
employer's licensees, delay by, 104
late inforrnaiion by architect, 103
postponement of work, 104
removal of antiquities, 158
tests and inspection showing con-
fomity with contract, 31,103
interim certificates, included in, 147
meaning, 45
variations, resulting from, 45
Domestic sub-contractor
nominated sub-contractor compared, *
62^13
E
Ejusdem generis, 95,139
Employer
assignment, consent to, 62
breach of contract by, see BREACH OF
CONTRACT (employer, by)
contract drawings, signing by, 8
delemiination by, see, DETERMINAnON
BY EMPLOYER
entitlements of,
antiquities found on site, 158
artists and tradesmen, to engage, 139
compensation for war damage, to,
156
contract drawings, to, 8
insurance policies,
effecting, as to, 69 ^
inspection, as to, 68
inspection of contract drawings and
bills, 24
retention money, to, 149
injury to persons or property, indem-
nity for, 6465
negligence of, resulting from, 64-65
insurance, liabilities as to, see
INSURANCE
interference with grant of time exten-
sion by, 10
 index 167

Employer (cont'd)
licensees of,
delay by, 95.98, 104, 140 Final certificate
responsibility for, 139 conclusive ness of, 15
obligations of, challenging, 152-153
completion of "relevant part", as to effect of, 152
payment of, 59^10 liquidated damages, on, effect of,
interest on retention money, to pay, 84-85
149 review of, by arbitration, 161
royalties, as to payment of, 33 signing and issuance of, importance of,
144
prtvity between sub-contractor and,
127-128 statements in, 151
successor architect, failure to nominate, time for issuing, 151
9 Force majeure, 92,156
unfixed materials and goods, owner- Foreman-in-charge
ship of, 51-52 agent of contractor, 34
vicarious liability for clerk of works, clause on, 34
36-37 "competent", to be, 34
warranties by sub-contractor to, 127 removal of, 34
Entire contract, see also PERFORMANCE
meaning, 2
performance,
abandonment of, 2 implied terms
payment for, 2-3 completion of work, as to postpone-
prevention of, 3 merit of, 81
quantum menut, 3 custom, by, 4
substantial, 2 materials, goods and wormanship, a
Express term, 4 to, 30
Extension of time PAMjlSM 69, in, see pan/ISM 69
cause of delay, contractor to give, 90 (implied tenns in)
clause on, 87 reasonable diligence by architect, as t
completion of works, after, 91 24
decision as to, review of, 91 statute, by, 4
effect of, 88 Injury to persons or property
events justifying, clause on, 64
employer's licensees, delay by, 95, indemnity by contractor,
98, 140 extent of, 67
exceptionany inclement weather, hails of, 64
92-93 limitation period, 65
force majeure, 92, 156 negligence of employer, resulting fro
insurance contingencies, 93 6465
labour and materials, inability to "property real or personal", 65
obtain, 98 Innominate term
late infomiation by architect, 25 meaning, 4
late instructions by architect, 94 Institution of Surveyors of Malaysia
nominated sub-contractor, delay by, ("ISM"), I
95, 129 insurance
Tenomination of sub-contractor, clauses on, 66, 70
delay in, 130 contingencies, extortsion of time for,
stokes, 93 contractor's liability,
tests and inspection showing confor- date for cessation of, 54
inity with contract, 31, 98 extent of, 67
inherent power of architect as to, 88 "full value", importance of, 74, 7
' interference with grant of, 10 now arising, 68
1681ndex
Insurance (cont'd)
materials included in interim centf
cales, as to, 73-74
new building, as to, 73
employer, by, 68.69
existing structures, of, 76
insurers approved, 69.74
new building, of, 75
failure to Insure,
contractor, by, 69
employer, by, 75.76
general all-risks cover, 74
joint names, in, 69,74
loss or damage, effect of, 74.75
payment of moneys, 75
policies and receipts, inspection of,
contractor, by, 76
employer, by, 68
practical completion, coverage unti
contractor, by, 73
employer, by, 76
professional fees subject of, 74
settlement of claim, 74
specified risks, of, 73
theft or vandalism, against, 73
Interim certificates
arbitration concerning, 146
clause on, 141
conclusive ness of, 146
cost of variations included in, 44
dispensing with, 145-146
errors in, 145
immediate arbitration as to, 161
issuance of,
failure as to, 144
importance of, 144
negligence in, 144
purpose of, 146
items included in, 147
materials and goods, for payment
146-147
nature of, 145
I interim, 145
JCT 63
criticisms of, I
implied tenns in, see FAM/ISM 69
(implied terms in)
model for PAWISM 69, I
L
Levels and setting out
clause on, 29
errors as to, 29
obligations as to, 29
Liquidated damages
actual loss to be calculated, 84
Appendix entry left blank, effect of, 83
clause on, 82
completion date not stated, where, 82
condition precedent to recovery of, 84
deduction by employer, 86
delay in completion, for, 82
general damages, and, 83
genuine pre-estimate of loss, 83
late completion, for, 82
penalty compared, 83
repayment of, 85
sectional completion and, 59.85
time extensions on, effect of, 82, 85
Lump-sum contract
meaning, 2
M
Materials and goods
clause on, 30
implied tenn as to, 30
inability 10 obtain, extension of time
for, 98
interim certificate for payment of,
146-147
*
opening up and testing,
costs of, 31
extension of time for, 31,98
loss and/or expense claim for, 31 ,
103
removal of defective, 31
variation, as, 41
"so far as procurable", 30-31
unfixed,
clause on, 51
ownership of, 51-52
retention of title clause, 51
Measurement and valuation
final,
commencement date of, 54
period for completing, 150
variations, of,
quantity surveyor, by, 43
rules for, 44
N
Nominated sub-contractor
access to premises of, 35
advantages in engaging, 125
artist and tradesman as, 139
clause on, 122
contractor's responsibility for, 126
domestic sub-contractor compared,
62^53
 Index 169

Nominated sub-contractor (cont'd) English law to, 3

written law to, 27
extension of time,
criticisms of, I
delay by, for, 95, 129
ineffective Tenomination of, for, entitlement to payments under, 2
to. 132 implied ternis In,
nomination of, certifier's obligations, as to, 5
contractor's obligations, as to, 4
objections to, 133 nomination of successor architect, as
PC and provisional sums, use o
129
to, 5
breach, 9
payment to,
deduction in, 131 model of, I
direct, 132
nature of contract based on, 2
final, 132-133 Payment
abandonment of work and, 2
period for, 131
clause on, 141
prtvity between employer and,
127-128 condition precedent to, issue of certifi-
lack of, 133 care, 144, 145
Tenomination of, 130 defect minor, where, 8
sub-contract, provisions to be in, due, when, 144
134-135
final settlement of, 150
warranties by, 127 insurance money, of, 75
Nominated supplier
interest on retention money, of, 149
Interim,
clause on, 136
contract, provisions to be in, 138 express provision for, 146
items included in, 147
nomination by architect of,
limits on powers as to, 137 materials and goods, for, 146-147
work executed by sub-contractor,
objection to, 137
for, 146
obligation as to, 137 nominated sub-contractor, to, see NOMi-
PC and provisional sums, use
137
NATED SUB. CONTRACTOR (payment
to)
payment to, 138
Tenomination of, 137 nominated supplier, to, 138
Notice PAWISM 69, under, 2
arbitration, of, 109, 160 quantum menut, based on, 3, 12
architect, to, "relevant parr", of, 59^O
contractor's address, of, 11,2 retention percentage, of, 149
delay, of, 90 royalties, of, 33
deterrnination, of, 117 Penalty
discrepancies, of, liquidated damages compared, 83
contract documents and statutory Performance

requirements, in, 27 personal, 61

contract drawings and contract vicarious, 61
bills, 17 Pertubuhan Akitek Malaysia
substantiate instr uctions, to, 20 ("pun"), I
contractor, to, appointtnent of arbitrator by, 160
Possession, see srrE
comply with architect's instruction,
to, 20 Practical completion
default, of, 109 certificate of,
detemiination, of, 77, 109 importance of, 54
habitities of contractor after issuance
challenging, 110
of, 54
P payment of retention percentage on,
149

PAWISM 69 clause on, 53

applicability of, completion date compared, 81
FAM/ISM 69 (cont'd) meaning, 54
170 Index

Practical completion (cont'd) Royalties and patent rights

obligation to insure until, clause on. 33
contractor, of, 54.73 contractor's responsibility for. 33
employer, of, 76
"relevant part", of, 59-60 S
Prime cost sums
clause on, 38 Schedule of defects, 55
estimated, provisional sums compared Sectional completion
with, 130 clause on, 57
meaning, 42, 129 completion of work in sections and,
use In nomination, 58
sub-contractor, of, 129 conditions for use of, 59
supplier, of, 137 criticisms of, 58
Provisional sums defects liability period,
clause on, 38 commencement of, 59
estimated prime cost sums compared, expiration of, 60
130 liquidated damages, effect on, 59.85
meaning, 42 "relevant part", of, 59
use In nomination, separate certificate for, 60
sub-contractor, of, 129 Sectional Completion Supplement, 58
supplier, of, 137 Site
antiquities found on, 158
possession of,
clause on, 78
Quantity surveyor degree of, 80
ascertainment of loss and/or expense, delay in giving, 79
delegation to, I 01 delennination of contract an
contract drawings, signing by, 8 111-112
contractor's rates, obligations as to, 25 employer to give, 78
death of, I O failure to give, 79
function and authotity, 43 Street, Drainage and Building Act 1974
time for completion of, 150 applicability of, 27
name and address in article 4, 10 Strikes
priced bills, importance 10,7 extension of time for, 93
valuation of variations by, 43 Sub. contractor, see NOMINATED SUB-
CONTRACTOR
R Sub. letting, see also ASSIGNMENT
assignment compared, 61
Recitals clause on, 61
contract bills, 7 consent by architect to,
uses of, 7 factors to be considered, 62
works description in, 7 need for, 62
Repudiation of contract without, I I I
architect's certificate, refusal to issue, domestic sub-contractor and nominated
117 sub-contractor compared, 62-63
completion of contract, preventing, 117 work, whole of, 62
non-payment, for, 145 Substituted contract, 3
refusal to pay as, 117-118
Retention money T
assignment of, 62
employer's entitlements to, 149 Tender
interest on, 149 nature of acceptance o , I I
purpose of, 147 Terms of contract
retention percentage, 147-148 condition, 4
date for release of, 54.60 express, 4
separate account for, 148-149 implied, see IMPLIED TERMS, PAM/ISM
trust in favour of contractor, 148 69 (implied tenns in)
 index 171

W
Terms of contract (cont'd)
innominate, 4
War
interpretation of, 48 compensation for damage by, 156
warranty, 4 extension of time because of, 93,157
war damage,
V clause on, 156
meaning, 156-157
Variations variations resulting from, 156
addition, omission or substitution of Warranty
works, by, 31,41 meaning, 4
Weather
clause on, 38
extension of time because of, 92-93
contractor's method of working, 40
Work
corrections of contract bills, 48
cost of, included in interim certificates acceleration of progress of, 92
44, 147 access to, 35
discrepancies in contract documents, completion of,
17 late, liquidated damages for, 82
- effect on contract, 40 "on or before" completion date,
80-81
extent and nature of, limits. of, 40-41
loss and/or expense arising from, 45' postponement of, 81
meaning, 40 "regularly and diligently", 80
measurement and valuation, failure as to, 111
defective, failure to remove, I I I
quantity surveyor, by, 43
rules for, 44 description, uses of, 7
measurement and valuation, time for
number of, 41
reinstatement work, completion of, 150
fire, resulting from, 75.77 sectional completion of, see SECnoNAL
COMPLETION
war damage, resulting from, 156
removal of work, materials and goods, suspension of,
by, 41 contractor, by, 110
wrtting, in, 40,41 employer, by, 119
Vouchers war damage to,
day-work, 44 compensation for, 156
materials and goods, as to, 30-31 "war damage", meaning, 156-157