part a - lecture 3 contractors and building contract

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CONTRACT MANAGEMENTBCM643

ZAINAB MOHMAD ZAINORDINPusat Pengajian Pembinaan,

Fakulti Senibina Perancangan & Ukur,UiTM Shah Alam

Acknowledgement: Dr. Zulhabri Ismail, PM Ngah Yahya Embong & Pn.

Ezlina Ahnuar

Lecture 3

CONTRACTORS AND THE BUILDING CONTRACTS

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Synopsis

The purpose of this lecture is to discuss and make aware of the responsibilities and obligations of the builders / contractors under standard forms [express] and common law [implied].

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Contractor’s Obligations

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Current scenarios in the construction site…

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Implied Warranty on Contractor’s Obligation

The courts have over time, implied in all building contracts that the builder or contractor will do his work in:1.Good and workmanlike manner2. That he will supply good and

proper materials and that,3. It will be reasonable fit for the

purpose required.

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Implied terms

A term which will be implied (e.g. from statute or custom) where it is necessary to carry out the presumed intention of the parties to a contract and is so obvious that the parties must have intended it to apply. Such a term will not override an express term.

(LB Curzon, p.179)

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Implied terms

A term which not written down in a contract or openly expressed at the time it is made but which the law implied.

The expression is used in several different senses…An implied term must not be in conflict with or be inconsistent with an express term. It must be based on the imputed or presumed intention of the parties…

(Powell-Smith et al.)

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Implied warranty

A lesser term of a contract (i.e. not a CONDITION) which is implied by law or by the behaviour of the parties.

(Penner, 2001, p.174)

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Implied

This term can only be properly used to mean ‘established by indirect or circumstantial evidence’ or, which comes to the same thing, ‘presumed in certain circumstances to exist, in the absence of evidence to the contrary’, especially with reference to inward intentions or motives as inferred from over acts.

(Penner, 2001, p.174)

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Terms implied..

Terms implied by fact• Implied by custom or habit.• Implied by trade or professional custom.• Implied to give sense and meaning to the

agreement.• Implied t o give business efficacy to a commercial

contract; The Moorcock.• Implied because of the prior conduct of the

contracting parties; Hillas v Arcos

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Terms implied..

Terms implied by law – by the court

Terms implied by law – by statute

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Pasuma Pharmacal Corporation v McAlister & Co. Ltd [1965] 1 MLJ 221.

The Federal Court in Pasuma explained the process by which the courts may imply terms into a contract:-

To give efficacy to the transaction. That is, terms may be implied from the presumed intention of the parties and upon reason so that there will not be a failure of consideration – The Moorcock.

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Pasuma Pharmacal Corporation v McAlister & Co. Ltd [1965] 1 MLJ 221.

Cont’dBy applying the “officious bystander” test or what is

commonly known as the ‘Oh, of course! Test. That is, if at the time the contract was negotiated, someone had said to the parties, ‘What will happen in such a case?, the parties would both have replied, “Of course, such and such will happen. We did not trouble to say that, it is too clear.” – Reigate v Union Manufacturing Co. Ltd. [1918] and Shirlaw v Southern Foundries [1939] 2 KB 206.

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Hancock v Brazier [1966] 1 WLR 1317; [1966] 2 All ER 901.

Facts

A contractor had used an infill which was commonly considered as suitable but unfortunately through no fault of his, reached with certain chemicals in the ground and caused heaves.

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Held

The CA held a purchaser entitled to damages in respect of defective hardcore before the date of the contract of purchase.

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Lord Denning summarized the law as follows:

“When a purchaser buys a house from a builder who contracts to build it, there is a three-fold implication: that the builder will do his work in a good and workmanlike manner; that he will supply good and proper materials; and that it will be reasonable fit for human habitation.”

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Young & Marten v McManus Childs [1969] 1 AC 454; [1968] 3WLR

630.Facts

A roofing sub-contractor complied fully to clients instruction on installation of “Somerset 13” tiles which were manufactured by sole maker to the roof.

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Young & Marten v McManus Childs [1969] 1 AC 454; [1968] 3WLR

630.Held

The sub-contractor was held liable when the tiles failed due to a latent and undiscovered defect for breach of the implied warranty.

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Young & Marten v McManus Childs [1969] 1 AC 454; [1968] 3WLR 630.

Legal principle embedded in Young & Marten?

“The contractor must carry out his work with proper skill and care or, as sometimes expressed, in a workmanlike manner. Goods and materials must normally be of good quality and reasonable fit for their purpose.”

(Uff, 2002)

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Merton L.B v Leach (1985) 32 BLR 51.

In Merton, there are some important terms which are usually to be implied into building and engineering contracts.

Such terms require that the building owner shall give possession of the site within reasonable time, and give instructions and information at reasonable times.

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Question to ponder…

If the contractor build the according to detailed instructions, does he provide implied warranty as to the fitness of the finish product?

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Lynch v Thorne [1956] 1 WLR 303.

Lord Evershed held that:

“If a skilled person promises to do a job, that is, to produce a particular thing…, and he makes no provision, as a matter of bargain, as to the precise structure…which he will create, then it may well be that the buyer of the structure or article relies on the judgment and skill of the other party to produce that which he says he will produce. That, however, is only way of formulating the existence in such circumstances of an implied warranty…”

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Lynch v Thorne [1956] 1 WLR 303.

Lord Evershed (cont’d)…

“On the other hand, it two parties elect to make a bargain which specifies in precise detail what one of them will do, then, in the absence of some other express provision, it would appear to me that the bargain is that which they have made; and so long as the party doing the work does that which he has contracted to do, that is the extent of his obligation.”

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Contractor’s Obligations Under Standard Forms of

Construction Contracts

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PAM 2006 Private Edition With Quantities

Clause 1.1

Completion of works in accordance with Contract Document

Clause 2.1

Comply with A.I.

Clause 3.5

To provide 6 copies of the works programme within 21 days of receipt of the L.A.

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PAM 2006Private Edition With Quantities

Clause 4Comply with statutory requirements

Clause 6.1Standard of Works, Materials, Workmanship and

Goods. [See also clause 6.3 (Inspection and Testing), clause 6.5 (Works, Materials, Workmanship and Goods Not in Accordance with Contract) and clause 6.7 (Failure to Comply with Architect’s Instruction)].

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Clause 8.1

To appoint Site Agent constantly on site.

Clause 14.3

Contractor will be responsible for loss or damage to materials or goods on site supplies by NSC and NS.

Clause 17.3

Should not sub-contracting

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Clause 18

Indemnify Employer against any expenses, liability, loss etc in respect of personal injury [occupier liability].

Clause 19

Contractor to insure against injury to persons and property.

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Clause 20.A

Contractor to join names with employer insure against loss and damage by fire, tempest. Lighting etc.

Clause 20.A.3 & 20.B.5

Restoration of damaged work / unfixed materials / goods upon settlement of any claim under insurance.

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Clause 20.C.6 (ii) & (iii)

Contractor to remove and dispose debris and restatement and make good.

Clause 21.1

To commence the work regularly and diligently.

Clause 22.2

To pay LAD amount as agreed.

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Clause 23.6

Constantly use his best endeavours to prevent delay.

Clause 27.5

Payment to NSC

Clause 27.9

Contractor fully responsible for all NSCs and NSs.

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Clause 30.1

Submit details and particulars to the Architect to consider and ascertain the amount to be stated in an Interim Certificate.

Clause 30.10

6 months after CPC, Contractor shall send all documents necessary for preparing the Final Account (accounts of NSC, NS)

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Clause 33.1

Stop work and not disturb the fossils, antiques etc. Notify the Architect upon discovery.


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Issues

What is meant by “reasonable satisfaction” [clause 1.1]?

No definition on what constitute as “reasonable satisfaction”.

Strong element of “personal judgment”.


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PWD 2010 FORM 203 A

Clause 5

Comply with S.O instructions.

Clause 6

Scope of contract.

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PWD 2010 FORM 203 A

Clause 8.2(b)Inform the S.O if any discrepancy.

Clause 10.0Obligation of the Contractor

Clause 13.1(a)Provide a Performance bond

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PWD 2010 FORM 203 A

Clause 21 Comply with statutory requirement

Clause 36.2Carry out the inspection and tests

Cont’d….

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GROUP DISCUSSION

CONTRACTORS AND CONSTRUCTION CONTRACTS

Discuss the roles and obligations of the contractors that expressly and impliedly stated in construction contracts

15 marks

GROUP DISCUSSION

ARCHITECTS AND CONSTRUCTION CONTRACTS

Dual liability of an architect can be seen in standard contract and common law. Based on your understanding, highlights cases that implicitly describe the architect obligations and give examples of the scenario that happen in construction projects.

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15 marks

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Thank you

part a - lecture 3 contractors and building contract

Documents

implied termsa term

implied warrantya lesser

implied t o

express term

impliedthis term

commercial contract

presumed intention

contractors obligations