Certificated Type of Certificates PAM 2006 Payment 1) Contract Act 1950
Certificated Type of Certificates PAM 2006 Payment 1) Contract Act 1950
Certificated Type of Certificates PAM 2006 Payment 1) Contract Act 1950
Type of Certificates
PWD 2010
1) Clause 28.3
2) Clauses 31.3 & 31.4
3) Clause 31.0
4) Clause 39.3
5) Clause 40.1
6) Clause 48.1
7) Clause 56.1
8) Clause 42.1 (a)
9) N/A
PAM 2006
1) Clause 30.1
2) Clauses 30.14 & 30.15
3) N/A
4) Clause 15.2
5) Clause 22.1
6) Clause 15.6
7) N/A
8) N/A
9) Clause 16.1 (a)
PAYMENT
1) Contract Act 1950
Section 53
Order of performance of reciprocal
promises
Where the order in which reciprocal
promises are to be performed is expressly
fixed by the contract, they shall be
performed in that order; and, where the
order is not expressly fixed by the contract,
they shall be performed in that order
which the nature of the transaction
requires.
ILLUSTRATIONS
(a) A and B contract that A shall build a
house for B at a fixed price. As promise to
build the house must be performed before
Bs promise to pay for it.
(b) A and B contract that A shall make over
his stock-in-trade to B at a fixed price, and
B promises to give security for the payment
of the money. As promise need not be
performed until the security is given, for
the nature of the transaction requires that
A should have security before he delivers up
his stock.
Section 56
Effect of failure to perform at fixed
time, in contract in which time is
essential
56. (1)
When a party to a contract promises to
do a certain thing at or before a
specified time, or certain things at or
before specified times, and fails to do
any such thing at or before the specified
time, the contract, or so much of it as
has not been performed, becomes
voidable at the option of the promisee, if
the intention of the parties was that
time should be of the essence of the
contract.
56. (2) Effect of failure when time is not
essential
If it was not the intention of the parties
that time should be of the essence of the
contract, the contract does not become
voidable
by the failure to do the thing at or
before the specified time; but the
promisee is entitled to compensation
from the promisor for any loss
occasioned to him by the failure.
Section 72
71. Where a person
lawfully does anything for
another person, or
delivers anything to him,
not intending to do so
gratuitously, and such
other person enjoys the
benefit thereof, the latter is
bound to make
compensation to the
former in respect of, or to
restore, the thing so done
or delivered.
ILLUSTRATIONS
(a) A, a tradesman, leaves
goods at Bs house by
mistake. B treats the goods
as his own. He is bound to
pay A for them.
(b) A saves Bs property
from fire. A is not entitled
to compensation from B, if
the circumstances show
that he intended to act
gratuitously.
2)CIPAA 2012
INTERIM PAYMENT
The word interim means temporary,
provisional or short term.
For that, it can be said that Interim Payments
are provisional or short-term payments made
progressively to a contractor at weekly, bi-
weekly or monthly intervals based on periodical
estimated value of work that the contractor has
properly carried out.
These clearly stated that the Contractor is
entitled to be paid for the work properly done
and materials and goods delivered to site
PWD 2010
Clause 28
PAM 2006
Clause 30
CIDB 2000
Clause 42
Interim Certificate
In the case of Dunlop & Ranken Ltd v Hendall
Steel Structures Ltd [1957] 3 All ER 344, Lord
Goddard CJ held that:
A contractor who has all the expense of the
materials and labour wants money from time to
time, and it is perfectly clear that, until the
Architect has given a certificate, the Contractor
has no right to receive any sum of money from his
employer.until the contractor can produce to
the building owner a certificate from the
Architect, the Contractor cannot get anything.
FINAL PAYMENT
PWD 2010
Clause 31
PAM 2006
Clause 30
CIDB 2000
Clause 42
FIDIC
Introduction
In the layman's language,
payment simply means the
money that a party pays for
the services done or goods
supplied by another.
In legal/contract language, it
is the consideration that the
promisee gives in exchange
for the promisors promise
Entire Contract
Payment is the consideration that an employer pays
for the contractors promise to carry out the
construction works.
The order of work and payment is illustrated in
Illustration (a) of section 53 Contract Act 1950.
Construction contracts come within the category of
entire contract.
Under the entire contract principle, the promisors
(contractor) performance is condition precedent for
the promisees (employer) obligation to pay.
CASE
In Sumpter v. Hedges [1898] 1 QB 673, the plaintiff
agreed to erect two houses and stables for the
defendant for a lump sum. The plaintiff then
abandoned. Thereafter he claimed for payment of the
partly completed work.
It was held that in the absence of express entitlement
under the contract, he was not entitled for any further
payment for the unfinished work despite the fact that
the employer retained the benefit
Similarly, in the case of Hoenig v. Isaac [1953] 2 All
ER 176, it was held that in the absence of any express
or implied provisions for progress payment during the
progress of the work, the contractor was not entitled
to claim for his work unless he has substantially
finished the work.
.
Procedure for Payment
1. Performance
2. Application (Condition
Precedent
3. Valuation
4. First Payment Minimum Value
5. Certificate
6. Payment
7. Subsequent Minimum Value
8. Direct Payment
Determination & Suspension of Work
a)Express Provisions
Clause 26 PAM 2006
b)Contract Act 1950
Clause 55 PWD 2010
c)Common Law
Breach of condition
Petition for Liquidation
Companies Act 1965
Section 217
Section 218
EXTENSION OF TIME
The roles of contract:
Binds the parties in a legal relationship
Sets out rights, duties and liabilities of the
contracting parties
Objectives of construction contract, on the employers
perspective are, certainty of cost, time and quality.
Contractors main duty is to carry out and complete the
construction works within the time period specified in the
contract.
The importance of time element in construction contracts
are reflected in the many timelines related clauses in the
standard forms.
CONTRACT ACT 1950
SECTION 56
The provision relating to extension of time must be discussed
in relation to liquidated and ascertained damages provisions.
Discussing the former is incomplete without associating it
with the latter.
The main purpose of the extension of time clause is
essentially to preserve the time as essence of the contract
feature of the contract so that the employers entitlement to
the LAD is safeguarded.
In construction contracts, it is a question of law whether
time for completion is of the essence of the contract.
Clause 81.0 of PWD 2010 provides that Time whenever
mentioned shall be the essence of the Agreement.
Timelines Clauses
Duration of the construction works
Date of commencement (giving possession of site)
Date/dates of completion or completion of sections
Compliance with contract administrators instructions
Contract administrators duty to supply information and
drawings
Notices
Certificate of Non-Completion
Failure to comply with timelines has the corresponding
legal consequences.
Legal Basis
The legal basis of the extension of time clause is to preserve the
nature of the contract: time as of the essence of the contract.
Maintaining this main feature of construction contract is highly
important in order to preserve the employers entitlement to
claim liquidated and ascertained damages.
When time overruns and the employer allows the contractor to
continue without asserting that time is of the essence, then:
the time for completion becomes at large,
the contractors duty is to complete the work
within reasonable time
the liquidated & ascertained damages clause
becomes inoperative; and
the employer is only entitled to claim
unliquidated damages.
PWD 2010 Clause 43
Cl. 43.1 - Procedure
Cl. 43.1(a) (j) Relevant
events
Proviso delays cause by NSC
etc
Proviso mitigation
Provisio instructions -
remedy contractors default
PAM 2006 - 23
Cl. 23.1 Procedure
Cl. 23.2- delays caused by NSC,
etc.
Cl. 23.3 Insufficient
information
Cl 23.4 Certificate of EOT
Cl. 23.5 Other considerations
Cl. 23.6 mitigation
Cl. 23.7 Notice to NSC
Cl 23.8 (a) (x) Relevant
events
Cl. 23.9 EOT after Certificate
of EOT
Cl. 23.10 Architects power to
review
Analysis of Provision
Time to Apply
Condition precedent
Procedure
Certifying person
Relevant events
Certificate of extension of time
Mitigation
Time to Apply
PWD 2010 Clause 43.1
Upon it becoming reasonably apparent that
the progress of the works is delayed....
PAM 2006 Clause 23.1
If the contractor is of the opinion that the
completion of the works is or will be
delayed ...
Condition Precedent
PWD 2010 Clause 43.1
No condition precedent prescribed
PAM 2006 Clause 23.1(b)
Contractors notice to Architect:
The giving of such written notice shall be a
condition precedent to an entitlement to extension
of time.
LIQUIDATED DAMAGES
Introduction
However, a contract may contain provisions that set out remedies
for breach of contract.
In construction main contracts for example, contractors may be
entitled to claim from employers direct loss and expenses in the
event the employers causes delays to the progress of the works
(unliquidated damages).
However, if the contractors caused the delays, the employers may
deduct from the contractors interim payments damages
(liquidated damages).
This is a common law principle.
The principle is coded in section 75 of Contract Act 1950.
Remedies for Breach
Damages
Unliquidated Damages
Liquidated Damages
Equitable Remedies
Specific Performance
Injunction
Section 75
When a contract is broken, if a sum is named in the
contract as the amount to be paid in case of such a
breach, or if the contract contains any other
stipulation by way of penalty, the party complaining
of such a breach is entitled, weather or not actual
damage or loss is proved to have been caused
thereby, to receive from the party who has broken the
contract reasonable compensation not exceeding the
amount so named or, as the case may be, the penalty
stipulated for.
Amount of money specified as penalty for breach:
If the amount of money specified is less than
the actual loss, then the innocent is only
entitled receive from the party in breach the
total amount specified.
However, if the amount specified is more than
the actual loss, the innocent party is only
entitled to receive from the party in breach the
actual loss that he is able to prove.
However, if he is not able to prove his actual
loss, he may only get a reasonable amount
not exceeding the amount so named.
CASE
In Maniam v State of Perak [1957] MLJ 75, the object
of the section in question suggested by Pollock and
Mulla, the joint authors of the IndianContract and
Specific Relief Acts, was repeated by Thomson J (as he
then was) with approval as set out above, but
unfortunately the section in question was found by his
Lordship to be irrelevant to the facts of that case, and
consequently there was no expounding on the words
in question.
CASE
Balfour Beatty Building Ltd v
Chestermount Properties (1993) 62 Build
LR 1
affirms the rule on acts of
prevention setting time at large.
The following passage appears on
p 9 of the report:
In the absence of an express
provision, the consequences of the
occurrence of an act of
preventionwas that the entire
extension of time, completion date
and liquidated and ascertained
damages code was displaced by a
general contractual duty to
complete the works within what in
all the circumstances was a
reasonable time from the date of
the act of prevention failing
which the contractors would be
liable for unliquidated damages for
breach of contract in failing to
complete within a reasonable
time.
Peak Construction v McKinney Foundation (1970) BLR 111
Two Principles
1. If an employer is in any way responsible for the
contractors failure to achieve the completion date,
he is not entitled to liquidated damages.
2. Similar principle also applies if the contract
administrator fails to grant extension of time when
he should have done so (because the contractor
should be entitled to the
Peak Construction was the main contractor, Liverpool
Corporation was the employer and McKinney
Foundation was the nominated piling subcontractor
The piling NSC did not do a good work; the piles were
defective; stop work order issued.
Due dilatoriness of Liverpool Corporations, the stop
work lasted 58 weeks although the remedial work took
only 6 weeks.
The contract administrator issued no extension of time
and the employer claimed liquidated damages against
the main contractor.
The MC brought action against the piling NSC to
recover the LAD paid to the employer.
The court held that the liquidated damages clause
should be strictly construed contra proferentem.
Thus the employer was not entitled to liquidated damages for
delays which they were substantially responsible.
DIRECT LOSS & EXPENSE
Introduction
In general, the term 'claims' is
taken as referring to
applications for financial
compensation arising out of
delays and disturbances to
progress, contract over-runs or
prolongation, and other such
events having financial
implications.
A general principle of contract is
that when a party breaches a
term, the other party may claim
damages for breach of contract.
Under the law of contract, the
damages that an innocent party
may claim against the party in
breach is either unliquidated
damages or liquidated damages.
Contractors breach of the of
the contractual date for
completion (delay) is an
employers risk.
Construction contracts generally contain
three essential clauses that manage the
risk:
(1) liquidated damages;
(2) extension of time; and
(3) direct loss and/or expense
Those three clauses basically provide
that:
1. If the delay is purely due to the
contractors own faults, he is not
entitled to extension of time; and
the employer may deduct
liquidated damages for the
breach;
2. If the delay is due to any neutral
events, the contractor should be
entitled to extension of time and
he should not be made liable for
any loss that the employer might
suffer thereby.
3. If the delay is caused by the
employers acts of prevention,
this is considered as the
employers breach, the contractor
should be granted extension of
time and also any direct loss and
expense that he might incur
thereby (but not
indirect/consequential loss).
Contract Act 1950 Section 74
When a Contract has been broken, the
party who suffers by the breach is
entitled to receive, from the party who
has broken the Contract, compensation
for any loss or damage caused to him
thereby, which naturally arose in the
usual course of things from the breach
(first limb), OR which the parties know,
when they made the contract, to be
likely to result from the breach of it
(second limb).
PWD 2010
Clause 44 Claims for loss
and expense
Clause 43.1(c)
Suspension of work
under clause 50
Clause 43.1(d) Dispute
with neighbouring land
owners
Clause 43.1(e) S.O.s
instructions issued
under clause 5
Clause 43.1(f)
Appointment of NSC/NS
Clause 43.1(i) Delay by
Governments artists,
tradesmen
PAM 2006
Clause 24 Loss and/or expense
caused by matters affecting the
regular progress of the works
CIDB 200
Clause 1.1 Definition of
Loss and Expense
Clause 31 Claims for loss
& expense
Clause 32 Procedure for
claims
PROCESS & PROCEDURE
Stages 1
First Notice(Intention to claim)
Condition precedent.
Written notice from contractor to CA
Intention to claim
Supporting documents and
calculations
Within specified
Conditions Precedence
All the Malaysian standard forms of
contract provide, in various versions,
for the serving of notices as condition
precedent to make claim for direct
loss and expenses.
Clause 44.3 of PWD 2007 expressly
provides that if the contractor fails to
serve the employer two notices under
clauses 44.1 and 44.2, the
government is discharged form all
liability in connection with the claim.
Clause 24.1(a) of PAM 2006, referring
to the first notice, provides that the
giving of such written notice shall a
condition precedent to any
entitlement to loss and/or expense
that the contractor may have under
the contract and/or under common
law.
Conditions Precedence (cont)
Clause 32(1)(b) of CIDB 2000, referring to
the first notice as well, similarly provides
that the giving of such a notice shall be a
condition precedent to any entitlement that
the contractor may have under the
contract.
The courts have not been asked to give
effect to this kind of term. It is still not
clear if failing to give such notice will:
o disentitle the contractor completely
from recovering his losses both
under the contract as well as under
the law; or
o the contractor can still recover
damages under the law of contract.
Stage Two (Actual Claim Assessment)
PWD 2007 (Clause 44.2)
PAM 2006 (Clause 24.1(b)
CIDB 2000 (Clause 32.3)
Stage Three PAYMENT (Interim Certificate/Final
Account)
PWD 2007 (Clause 44.2) add into
Contract Sum
PAM 2006 (Clause 24.4) Interim
Certificate
CIDB 200 (Clause 32.5) Interim Certificate
CLAUSE
PWD 2010 Clause 43.1
PAM 2010 Clause 24.3
CIDB 2000 Clause 31.1
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