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)
MALCONLAW would like to advise readers that the Articles Section contains eight articles describing various procurement options available to Employers and developers in respect of their construction projects. In addition to giving an overview of the procurement strategy the articles discuss the advantages and disadvantages of the various routes including the benefits which may be achieved and their suitability in respect of the projects criteria.
- Alliancing in Construction
- Cost Reimbursable or Prime Cost – An Overview
- Guaranteed Maximum Price Contracts – An Overview
- Introducing Management Contracting
- Partnering – An Overview
- Procurement through Design and Build
- Procurement using Specification and Drawings
- Procurement with Bills of Quantities and Approximate Bills of Quantities
Contract Documents: If you’re responsible for the drafting and negotiation of the contract documents your input now will help avoid potential claims and failing which may give you the advantage in and future dispute resolution. Try to ensure that:Contracts are drafted properly and comply with the applicable country law.Record terms expressly, accurately and unambiguouslyState the governing law of the contract and jurisdiction. When doing so consider the most favourable jurisdiction for resolving the dispute this is especially relevant ii International contracts.Specify the mechanism for resolving any disputes including the identification of the most favourable method of dispute resolution be it; mediation, expert determination, arbitration or litigation through the courts…………
Dangers Associated Supplementary Agreements to Construction Contracts
In the event that during the progress of the Works, the Employer decides that additional work is required which is so substantial or of such a nature that he considers that it is not appropriate to simply issue an Architect’s instruction he may wish to address this with a supplementary agreement.
It maybe that the Contractor too is willing to agree to this proposal as the terms and conditions appear favourable having no need to tender the additional or varied works. Both parties however should be beware of the potential pitfalls…… more
We review the book Management of Risk in Construction Projects which is co-authored by Nigel Smith, Tony Merna and Paul Jobling. The authors cover:
The human dimension
Tools and techniques available to the risk analyst
The problems of procurement and finance
The practical application of risk analysis, including the principles of risk modelling and simulation, together with case studies.
The book is a featured book which means you are free to submit queries in respect of the books content and we will attempt to answer your question.