FIDIC Red Book 1999 – The Force Majeure Clause

The definition of force majeure provided in the FIDIC Red Book 1999 Edition form in Clause 19 is widely drawn. Sub-Clause 19.1 defines a force majeure event as one:

A) which is beyond a Party’s control,

B) which such Party could not reasonably have provided against before entering into the Contract,

C) which, having arisen, such Party could not reasonably have avoided or overcome, and

D) which is not substantially attributable to the other Party…….. (more)

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)

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)

Procurement in Construction

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.

Dangers Associated Supplementary Agreements to Construction Contracts

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

Four New Articles Added

Contractors Rights to Payment Under a Letter of Intent

 This Article looks at some of the common issues which arise from the use of ‘Letters of Intent’ in the construction industry prior to the execution of a formal contract for the works. Read More

FIDIC Red Book 1999 Edition – Design Liability

The FIDIC Red Book 1999 Edition is drafted primarily for the intention of use on projects where the design is carried out for the Employer by designers employed directly by the Employer. Thus the general principle would be that as the Employer through the Engineer is responsible for the provision of the design the risks associated with such design would by the Employers. The Fact that the designers has carried out the design is irrelevant as the designer has been commissioned directly by the Employer. Read More

Force Majeure in Standard Forms

All standard contract used in Malaysia contain a force majeure clause and it is very important that those entering into construction agreement fully understand the reasons for its inclusion and how it should be administered.  Read More

Partnering – An Overview

The term partnering refers to both a procurement route and also a tender process. Partnering attempts to develop a trusting relationship between members of the whole project team including the Employer, design team, Contractor and Sub-contractors who will become partners. The aims of partnering are to promote better design and construction; lower risks; reduce waste; and avoid disputes. Read More