Notices Provisions in Standard Forms – Explained

Whether you are a Contractor or a Consultant you will have to deal with standard contract forms contracts unless you happen to work for one of the larger property developers in Malaysia which have developed their own in-house company or bespoke contract forms. Whether a standard form or a bespoke contract it is more than likely that somewhere they will contain notice provisions and although these provisions do not generally attract so much attention of the parties as perhaps provisions detailing payment, termination, extension of time and liquidated and ascertained damages these provision in many circumstances must be adhered to for parties to be in a position to enforce their contractual entitlements or the other parties obligations under the Contract.

At this juncture it should be understood that a notice provision in a Contract is not the same as where a Contract includes the term notify; a requirement that one party must inform the other of a thing or matter. A notice provision is where the contract includes the term shall give notice (or something similar), which usually requires a formal written notice to be issued by one party and delivered to the other.

For example, a Notice to Proceed is a formal notice issued under many forms of industry-standard contracts. The issue of a Notice to Proceed is the confirmation that the contractor or supplier of a service is to start work. To proceed on the basis of simply being notified, which could be a phone call or even a text message, without a formal notice in writing, would be extremely risky for the Contractor. For the Employer too, such a notice is equally important because, by issuing the formal Notice to Proceed, he knows that, regardless of what discussions or communications he may have had with the Contractor they will only start work, and thereby incur cost to his account, once the Employer has issued the Notice to Proceed, and not before……(more)

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Practical Completion – Explained (but not defined)

There have been numerous disputes which have centered on the issue of whether the construction Works have achieved Practical Completion or not. This is not at all surprising as most of the Standard Forms used in Malaysia of rely upon the issuance of a Certificate of Practical Completion to record when a project has indeed reached Practical Completion. The fact that the Certificate of Practical Completion is the document which also initiates such events as the release of the first moiety of retention, exclusion of liability for Liquidated and Ascertained Damages and changes in obligations in respect of insurance for the Works is by no means…(more)

Incorporation by Reference – Explained

First we shall address what is actually meant by the term ‘incorporation by reference’

It is a means by which the parties to a contract make reference to a document or publication be it a standard form of contract, technical specifications or similar publication without the need of having to retype the whole of that document in order for it to form part of the documentation which together form the contract between the parties. Incorporation by reference is not to be confused with an implied term because reference is made to a specific document or publication whereas implied terms are those which the courts introduce under common law or by reference to a statute where express terms are not so included within a contract but are required to give effect to the obvious intentions of the parties to the contract. (more)

Privity of Contract – Explained

The rule of privity of contract is the principle that a third-party cannot sue for damages on a contract to which he is not a party. This rule has been criticised particularly in cases where the contract is for the benefit of the third-party. At this time there has been no statute introduced and the rule persists in Malaysian Law to prevent a third-party enforcing contractual provisions made in their favour.

The existence of this rule is the reason behind the rise in the use of collateral warranties. Collateral warranties bypass the rule by creating separate independent contracts collateral to the consultancy or construction contract. It allows future owners of developments to sue consultants or contractors for defects in the design or construction under the collateral warranty. There would be no cause of action under the original consultancy or construction contract.

A further fundamental principle is that the assessment of damages for breach of contract is meant to be compensation for damage, loss or injury suffered through the breach. It therefore allows the party to the contract to sue for his loss but does not allow him to sue for the loss caused to a third-party. (more)

Access to Site and Site Possession – Explained

1) Access to Site

Depending on the precise wording of the Conditions of Contract the term or phrase Access to Site can have a number of meanings or interpretations. Normally Access to Site refers to the means and availability of the Contractors approach to the Site as defined in the Contract. It may also mean the ability to occupy the Site which is commonly referred to as Site Possession or Possession of the Site.

Firstly we will consider Access to the Site on which the Works are to be constructed. Access to the Site is necessary to allow the transportation and delivery of construction materials, plant, labour and equipment as well as to allow the installation and connection of utility services necessary for construction and indeed operation of the completed………(more)

2)   Site Possession

The term possession or use or occupation is contained within many standard forms of contract to describe the Contractors right to enter the Site, occupy and use the Site and carry out the specified Works. During the Contract Period, possession will usually provide the Contractor with such exclusive occupation and use the Site as required to construct the Works. At the end of the Contract Period, the Contractor may require partial occupation of the Site to carry out performance tests. In this case the Contractor use will usually override the Employers operation or use of the facility to conduct such tests. During the defects correction period, the Contractor will usually only require….. (more)

Commission Agreements and Illegal Payments

Foreign contractors and suppliers operating in Malaysia and indeed in many other countries may sometimes attempt to enter into and execute contracts with the use of agents, consultants and other intermediaries who assist them in tender processes as well as in negotiating and on odd occasions performing contracts. (more)

The Use of Conciliation as a means Alternative Dispute Resolution

The use of conciliation is at its infancy in Malaysia as with most countries in the South East Asia Region where the term conciliation simply implies a non-binding process where a neutral person attempts to facilitate and find an acceptable solution to a dispute between the parties. Although conciliation has been used in Malaysia for some time in the settlement of disputes in relation to family law and employment the concept of its use for the settlement of construction disputes is still considered foreign. The Industrial Relations Act 1967 and the Law Reform (Marriage and Divorce Act 1976 both refer to conciliation as recognised means to settle disputes.

Conciliation is being promoted by some quarters within Malaysia namely the Chartered Institute of Arbitrators, the Malaysian Institute of Arbitrators and the KLRCA who have published rules for conciliation. (more)