Scenario:
1. Client appoints an Arch firm, Body corporate,
2. In PAM form, Arch is to be named as a "person" in article 3,
3. If the arch dies, what happens to the appointment of the firm in relation to the contract?
4. Client must re-appoint arch within 28 days but contractor has the right to object. There will be grounds for delay.
5. Would the client be forced to grant EOT & loss & expense if the there is continuous objection from the contractors?
My answer:
Firstly it is important to note that an architect is not a privy to a contract between the Employer and Contractor. The scope of empowerment an architect is strictly limited to the expressed provision of the contract.
Article 3 provides the insertion of the identity of the Architect which refers to a person. Although practice name is in the contract, the partner is personally looking after the job. As far as the contract is concerned, the Employer is under the common law duty to appoint another architect if the named architect ceases to be able to act for any reason (Croudace Ltd v London Borough of Lambeth(1986)).
Apart from the contract, the relation between the client and Architect also subject to the Memorandum of Agreement between the Client and Architect. If the Firm is named in the agreement, the Client may be obliged to name another partner as the Architect for the contract.
Now, if the Architect named in Article 3 dies, the employer has 28 days to nominate a successor. The right for the contractor to object is inserted because the new architect may be someone with whom the contractor has had unsatisfactory dealings in the past. The contractor has to put the reasons for objection in writing. If the employer thinks that the reasons are insufficient, the matter can be decided in arbitration, a situation to be avoided due to the delaying effect.
The rights for EOT are limited to the expressed provision in the contract. In the case of PAM2006 Form, if the contractor continuously objects the reappointment of architect and the reasons for objection are accepted by the employer or through an award of arbitration, EOT may be granted under clause 23.8(r).
Wednesday, June 23, 2010
2009 Paper 2: Question 2
The project is a city centre mixed development consisting of the following components:
Phase 1 – 3 level basement car parks
Phase 2 – Shopping mall in 4 storey common podium block
Phase 3 – 18 storey Serviced Apartment – Block A
Phase 4 - 18 storey Serviced Apartment – Block B
Phase 5 – 20 storey office Block c
The Developer has decided to develop each phase under a different contract. For Phase 1 and 2 the PAM Form of Contract 1998 was used.
a) Upon completion of Phase 1 works, the Phase 2 Contractor’s Land surveyor found several column positions out of alignment. The phase 2 contractor has submitted a VO for realignment of beams and column head adjustments. The Developer has refused to pay for the VO. He pointed out that as he had entrusted the entire construction to the consultants, the extra cost would be deducted from the Professional Fees.
Explain how you would resolve this problem. (5 marks)
My answer:
The architect shall write to the clients on the following salient points:
1. The issuance of CPC and even the Final certificate does not relieve the first contractor from their contractual obligation due to default in their works.
2. According to clause 5.1 the consultant’s is only responsible to provide accurately dimensioned drawings for the contractor to carry out the works.
3. The first contractor is responsible on the error on inaccurate setting out.
4. If the DLP period has not lapsed, Architect (according to clause 15.6) shall issue instruction to Phase 1 contractor to realign the columns and beams head within a reasonable time specified by the Architect.
5. If the Phase 1 Contractor failed to do so in the specified time, the developer may employ other person i.e. Phase 2 Contractor to carry out the works and the cost incurred shall be set off from the Phase 1 contractor’s account under clause 30.4
Phase 1 – 3 level basement car parks
Phase 2 – Shopping mall in 4 storey common podium block
Phase 3 – 18 storey Serviced Apartment – Block A
Phase 4 - 18 storey Serviced Apartment – Block B
Phase 5 – 20 storey office Block c
The Developer has decided to develop each phase under a different contract. For Phase 1 and 2 the PAM Form of Contract 1998 was used.
a) Upon completion of Phase 1 works, the Phase 2 Contractor’s Land surveyor found several column positions out of alignment. The phase 2 contractor has submitted a VO for realignment of beams and column head adjustments. The Developer has refused to pay for the VO. He pointed out that as he had entrusted the entire construction to the consultants, the extra cost would be deducted from the Professional Fees.
Explain how you would resolve this problem. (5 marks)
My answer:
The architect shall write to the clients on the following salient points:
1. The issuance of CPC and even the Final certificate does not relieve the first contractor from their contractual obligation due to default in their works.
2. According to clause 5.1 the consultant’s is only responsible to provide accurately dimensioned drawings for the contractor to carry out the works.
3. The first contractor is responsible on the error on inaccurate setting out.
4. If the DLP period has not lapsed, Architect (according to clause 15.6) shall issue instruction to Phase 1 contractor to realign the columns and beams head within a reasonable time specified by the Architect.
5. If the Phase 1 Contractor failed to do so in the specified time, the developer may employ other person i.e. Phase 2 Contractor to carry out the works and the cost incurred shall be set off from the Phase 1 contractor’s account under clause 30.4
Sunday, June 20, 2010
Application of U.K. common law
It is worth to note that English Law prior to 7 April 1956 is applicable in our courts (see : ss3 of the Civil Law Act 1956):
3. (1) Save so far as other provision has been made or may hereafter be made by any written law in force in Malaysia, the Court shall—
(a) in Peninsular Malaysia or any part thereof, apply the common law of England and the rules of equity as administered in England on the 7 April 1956;
Although modern English cases are not binding, in the specialized field where the contracts are worded identically, the English decisions are of the highest persuasive authority (see: Thames Design Sdn Bhd v Kuching Hotels Sdn Bhd [1993])
3. (1) Save so far as other provision has been made or may hereafter be made by any written law in force in Malaysia, the Court shall—
(a) in Peninsular Malaysia or any part thereof, apply the common law of England and the rules of equity as administered in England on the 7 April 1956;
Although modern English cases are not binding, in the specialized field where the contracts are worded identically, the English decisions are of the highest persuasive authority (see: Thames Design Sdn Bhd v Kuching Hotels Sdn Bhd [1993])
Amending Standard Contract Forms
A developer’s contract department had amended the EOT provisions in the Standard PAM 2006 form by omitting the exceptionally inclement weather provision. What is your advise as the project architect during the Tender stage?
It is easy not to notice that VO is the most important clause in the contract. In the absence of an expressed provision for variation, any instruction issued to modify or alter the original scope of work will entitle the Contractor to end the contract. Subsequently the contractor is no longer bounded by the contract rates and could make the subsequent claims based on ‘quantum meruit’. Therefore, clause 11 of the PAM 2006 Form in general, empowers the Architect to issue instruction ordering a variation without vitiating the contract.
I can’t help but to notice the trend in sidelining architects in the formation of tender/contract documents by some clients (apart from the contract drawings itself). In some projects, we were not even involved in the tender evaluation. Big clients have their in-house legal department to advice, but some of the things coming out of their ‘customised contract’ could rather be ironic. I think it’s prudent to just use the standard PAM forms. Since you’re paying an Architect to administer the contract, you might as well use a form he is familiar with.
Perhaps less liability without fees discount could be healthy to the architects, and perhaps it brings new meaning to Mies Van de Rohe’s “less is more”. However, when the client or other consultant choose to assume certain ‘traditional architect’s responsibility it is prudent to have the decisions documented. In today’s corporate world, we often see key personnel change due to merger and acquisitions or for various other reasons.
But if we may conclude, the industry should be made aware of the consequence of making amendments to standard forms of contracts that it may turn the administration of the contracts a real nightmare. Inconsistencies abound and the varying interpretations are a fertile source of disputes, and possibly the consequence to the two contracting parties is that millions of ringgit may be at stake.
Recent development in the English courts also suggest that the Employer is obliged to draw the attention of the contractor on any onerous conditions at the time the contract is entered into, otherwise they may be unenforceable. (Worksop Tarmacadam v Hannaby [1995])
Another point to note in dealing with amended forms is that, Architects should read thoroughly all the addendums made in the contract and be aware on how the changes affect their scope of empowerment. Architects should be mindful not to grant EOT or instruct variations beyond their contractual ambit, as such act could be regarded as ‘ultra vires’ and could expose the architect directly liable under tort.
It is easy not to notice that VO is the most important clause in the contract. In the absence of an expressed provision for variation, any instruction issued to modify or alter the original scope of work will entitle the Contractor to end the contract. Subsequently the contractor is no longer bounded by the contract rates and could make the subsequent claims based on ‘quantum meruit’. Therefore, clause 11 of the PAM 2006 Form in general, empowers the Architect to issue instruction ordering a variation without vitiating the contract.
I can’t help but to notice the trend in sidelining architects in the formation of tender/contract documents by some clients (apart from the contract drawings itself). In some projects, we were not even involved in the tender evaluation. Big clients have their in-house legal department to advice, but some of the things coming out of their ‘customised contract’ could rather be ironic. I think it’s prudent to just use the standard PAM forms. Since you’re paying an Architect to administer the contract, you might as well use a form he is familiar with.
Perhaps less liability without fees discount could be healthy to the architects, and perhaps it brings new meaning to Mies Van de Rohe’s “less is more”. However, when the client or other consultant choose to assume certain ‘traditional architect’s responsibility it is prudent to have the decisions documented. In today’s corporate world, we often see key personnel change due to merger and acquisitions or for various other reasons.
But if we may conclude, the industry should be made aware of the consequence of making amendments to standard forms of contracts that it may turn the administration of the contracts a real nightmare. Inconsistencies abound and the varying interpretations are a fertile source of disputes, and possibly the consequence to the two contracting parties is that millions of ringgit may be at stake.
Recent development in the English courts also suggest that the Employer is obliged to draw the attention of the contractor on any onerous conditions at the time the contract is entered into, otherwise they may be unenforceable. (Worksop Tarmacadam v Hannaby [1995])
Another point to note in dealing with amended forms is that, Architects should read thoroughly all the addendums made in the contract and be aware on how the changes affect their scope of empowerment. Architects should be mindful not to grant EOT or instruct variations beyond their contractual ambit, as such act could be regarded as ‘ultra vires’ and could expose the architect directly liable under tort.
Types of Specification
Specifications are used :
(1) to convey information concerning desired products
(2) as a basis for competitive bidding, and
(3) to measure compliance to contracts
1. Design Specification
Written requirement that describes the generic design characteristics and method of construction
Also known as method specification
Most commonly used in the past
Advantage
Greater degree of competition than propriety specification.
Straight forward and can be implemented with minimal Architects’s intervention.
Disadvantage
Tend to stifle contractor’s innovation
In some instances where 100 percent compliance were not possible, “substantial performance may be accepted.
Product Performance Liability
Architect/Specifier
Example
100mm thick clay brick with 20mm thick on both sides
2. Propriety Product Specification
Used when a generic description of the material cannot be formulated
Usually contain “or equivalent” clause to allow for some measure of competition
Advantage
Can achieve specific product performance and appearance
Disadvantage
Severely limits competition
Very little innovation by contractor
Product Performance Liability
Architect/Specifier/Manufacturer
Example
200mm thick ALC lightweight block with 6mm skim coating on both sided
3. Performance Specification
Written requirement that describes the functional performance criteria required for a particular equipment, material, or product
Focus on outcomes or results rather than process
Most often used when the contractor has specific expertise in doing the work.
For instance, specialty equipment manufacturers are often required to provide equipment that meets the client’s performance requirement for the equipment being purchased
Advantage
Allow contractors to bring their own expertise, creativity and resources to the tender process.
Allows the contractors to provide the product or service at less cost and shifts some of the risk to the contractors
Better competition
Disadvantage
Product Performance Liability
Contractor
Example
SIRIM & BOMBA approved 2 hour rated fire wall with STC rating123 to manufacturer’s detail and Architect’s approval
4. Mixed Specification
A hybrid of all of the above
(1) to convey information concerning desired products
(2) as a basis for competitive bidding, and
(3) to measure compliance to contracts
1. Design Specification
Written requirement that describes the generic design characteristics and method of construction
Also known as method specification
Most commonly used in the past
Advantage
Greater degree of competition than propriety specification.
Straight forward and can be implemented with minimal Architects’s intervention.
Disadvantage
Tend to stifle contractor’s innovation
In some instances where 100 percent compliance were not possible, “substantial performance may be accepted.
Product Performance Liability
Architect/Specifier
Example
100mm thick clay brick with 20mm thick on both sides
2. Propriety Product Specification
Used when a generic description of the material cannot be formulated
Usually contain “or equivalent” clause to allow for some measure of competition
Advantage
Can achieve specific product performance and appearance
Disadvantage
Severely limits competition
Very little innovation by contractor
Product Performance Liability
Architect/Specifier/Manufacturer
Example
200mm thick ALC lightweight block with 6mm skim coating on both sided
3. Performance Specification
Written requirement that describes the functional performance criteria required for a particular equipment, material, or product
Focus on outcomes or results rather than process
Most often used when the contractor has specific expertise in doing the work.
For instance, specialty equipment manufacturers are often required to provide equipment that meets the client’s performance requirement for the equipment being purchased
Advantage
Allow contractors to bring their own expertise, creativity and resources to the tender process.
Allows the contractors to provide the product or service at less cost and shifts some of the risk to the contractors
Better competition
Disadvantage
Product Performance Liability
Contractor
Example
SIRIM & BOMBA approved 2 hour rated fire wall with STC rating123 to manufacturer’s detail and Architect’s approval
4. Mixed Specification
A hybrid of all of the above
Delay
Each and every delay incurred should be well documented during the course of the project.
Types of delay
1. Critical or Non‐Critical
2. Excusable or Non‐Excusable
3. Compensable or Non‐Compensable
4. Concurrent or Non‐Concurrent
1. Non‐Critical Delays:
• Impact a portion of the work with available float time allowing the project to be completed on time
2. Critical Delays:
• Impact a portion of the work exceeding float time available and delaying the project
3. Excusable Delay
A delay beyond the control or fault of a contractor or owner (e.g. “Force Majeure” causes including weather, fire, flood & act of God)
4.Non‐Excusable Delay
The contractor’s fault
5. Non Compensable:
Contractor entitled to a time extension but not to delay damages
Delay due to:
1. Weather delay
2. Strikes
3. Acts of God
4. The contractor’s fault.
• Contractor is not entitled to a time extension and owner may assess liquidated
• damages or actual damages (if contract does include provision for liquidated damages)
5. Delay caused by events within the control of the contractor and could have potentially been avoided had the contractor exercised care
6. Compensable/ Excusable
Proof of Delay
• Contractor must proof that delays caused by the owner extend the project completion beyond the date attributable to its own delay
• Delay must be on the critical path
• Delay cannot be concurrent with Excusable/Noncompensable delay
Types of delay
1. Critical or Non‐Critical
2. Excusable or Non‐Excusable
3. Compensable or Non‐Compensable
4. Concurrent or Non‐Concurrent
1. Non‐Critical Delays:
• Impact a portion of the work with available float time allowing the project to be completed on time
2. Critical Delays:
• Impact a portion of the work exceeding float time available and delaying the project
3. Excusable Delay
A delay beyond the control or fault of a contractor or owner (e.g. “Force Majeure” causes including weather, fire, flood & act of God)
4.Non‐Excusable Delay
The contractor’s fault
5. Non Compensable:
Contractor entitled to a time extension but not to delay damages
Delay due to:
1. Weather delay
2. Strikes
3. Acts of God
4. The contractor’s fault.
• Contractor is not entitled to a time extension and owner may assess liquidated
• damages or actual damages (if contract does include provision for liquidated damages)
5. Delay caused by events within the control of the contractor and could have potentially been avoided had the contractor exercised care
6. Compensable/ Excusable
Proof of Delay
• Contractor must proof that delays caused by the owner extend the project completion beyond the date attributable to its own delay
• Delay must be on the critical path
• Delay cannot be concurrent with Excusable/Noncompensable delay
Rescue Job
You're on a 5 storey office job that have had 2 contractors with the first one terminated at 93%. The second contractor, who was the approved subcontractor to the first chap took over to completion, and it's well into the Defects Liability Period [DLP]. On one of your recent defects inspection you discover that a major... component - solar screens to the windows have not been installed. What do you do?
After going through a few rescue jobs in the past I’m of the opinion that terminating a main con in the 11th hour is a lose-lose situation. The 1st MC may go bust and Client loose time and money. But sometimes it is necessary to avoid a bigger lost.
One of the things that we did was to conduct a thorough audit to value the completed v outstanding works. We also included some disclaimers to cover any unforeseeable items due to access restrictions, etc. in formulating the scope of the rescue contract.
If BQ forms part of the contract, The QS must pick up all the items in the drawings and audit report to be priced in the BQ. Any items missed and/or not substantially referred in the BQ would grant the contractor a VO. The contractor has to check all the contract documents to come up with the contract the rates, not the quantity. The Employer (represented by the QS) is liable on the quantity.
PAM 2006 Article 5 expressly describes the QS’s professional liability in the contract. Would that be the reason why the PAM06 is not so popular among the QS? Among the possible negligence by the QS would be:
•Error in quantity
•Substantial under valuation of provisional sum
•Non compliance to the Standard Method of Measurement
In this case, for the solar screen to be considered part of the original contract sum, it must be substantially referred in BQ i.e .. inclusive of all other window components shown in the contract drawings. Otherwise, I’m of the opinion that the item is variation.
Instructions in general can be issued by the Architect right up to the issuance of Final Certificate where the Architect becomes ‘functus officio’ i.e instructions to rectify defects, etc. However, instructions that effect a variation to the contract should not be issued after CPC. If the solar screen is deemed as not part of the original contract sum, it may not be included in the contract after CPC unless there is an expressed provision that allows such variation (see: 150 Contractual Problems and Their Solutions by Roger Knowles). For instance, Clause 11.3 of PAM 2006 prescribes the time limit for the Architect to instruct a variation as: anytime before the issuance of CPC except for compliance to requirements by Appropriate Authority and Service Provider.
After going through a few rescue jobs in the past I’m of the opinion that terminating a main con in the 11th hour is a lose-lose situation. The 1st MC may go bust and Client loose time and money. But sometimes it is necessary to avoid a bigger lost.
One of the things that we did was to conduct a thorough audit to value the completed v outstanding works. We also included some disclaimers to cover any unforeseeable items due to access restrictions, etc. in formulating the scope of the rescue contract.
If BQ forms part of the contract, The QS must pick up all the items in the drawings and audit report to be priced in the BQ. Any items missed and/or not substantially referred in the BQ would grant the contractor a VO. The contractor has to check all the contract documents to come up with the contract the rates, not the quantity. The Employer (represented by the QS) is liable on the quantity.
PAM 2006 Article 5 expressly describes the QS’s professional liability in the contract. Would that be the reason why the PAM06 is not so popular among the QS? Among the possible negligence by the QS would be:
•Error in quantity
•Substantial under valuation of provisional sum
•Non compliance to the Standard Method of Measurement
In this case, for the solar screen to be considered part of the original contract sum, it must be substantially referred in BQ i.e .. inclusive of all other window components shown in the contract drawings. Otherwise, I’m of the opinion that the item is variation.
Instructions in general can be issued by the Architect right up to the issuance of Final Certificate where the Architect becomes ‘functus officio’ i.e instructions to rectify defects, etc. However, instructions that effect a variation to the contract should not be issued after CPC. If the solar screen is deemed as not part of the original contract sum, it may not be included in the contract after CPC unless there is an expressed provision that allows such variation (see: 150 Contractual Problems and Their Solutions by Roger Knowles). For instance, Clause 11.3 of PAM 2006 prescribes the time limit for the Architect to instruct a variation as: anytime before the issuance of CPC except for compliance to requirements by Appropriate Authority and Service Provider.
Sunday, June 6, 2010
Variations Clause
This is the most important clause in the contract.
In a contract, a contractor is promised a certain amount of money to perform a certain amount of work. In the absence of an expressed provision for variation in a contract, any instruction issued to modify or alter the original scope of work will entitle the Contractor to end the contract. Subsequently the contractor is no longer bounded by the contract rates and could make the subsequent claims based on ‘quantum meruit’.
Clause 11 of the PAM 2006 Form in general, empowers the Architect to issue instruction ordering a variation without vitiating the contract. PAM06 expressly provides that the instruction has to be in AI format. Clause 2 further stipulates the procedural requirements of the issuance of AI.
What is a valid variation?
In general, work which is incidental to the work already contracted for is within the scope of the Works and is thus not a variation. Other phrase used is “indispensable and/or necessary work”.
The principal elements of a valid variation are:
1. Must be in a form of instruction (AI)
2. Contractual Empowerment to the person issuing the instruction
3. The instruction must effect change to the works; and
4. The instruction is not intended to rectify negligence, omission, default and/or breach of contract by the Contractor
Clause 11.1 further stipulates the scope of variations allowed in the contract.
Architects should be mindful not to instruct variation beyond their contractual ambit, as such act could be regarded as ‘ultra vires’ and could expose the architect directly liable under tort. For instance, the architect does not have the right to issue instructions regarding safety of the works. If such instruction calls for a variation to the contractual provision, the contractor cannot look for the employer for compensation.
It should also be noted that any error in pricing or rate by the contractor is not a valid variation and thus may not be adjusted irrespective of the quantities involved after the execution of the contract.
Can An Architect Issue a Variation After CPC?
Instructions in general can be issued by the Architect right up to the issuance of Final Certificate where the Architect becomes ‘functus officio’. However, instructions that effect a variation to the contract should not be issued after CPC accept for compliance to requirements by Appropriate Authority and Service Provider as expressly provided in Clause 11.3 of PAM 2006
Valuation of Variation
The contractor is entitled to additional cost implicated by a valid variation. Clause 11.6 further stipulates the method of valuation of variation.
The contract rate is applicable for Variation items with ‘similar character’ and ‘similar conditions’ to the existing contract items. The word “similar” means “of a like nature” and does not mean have to be “identical”.
Similar character of variation work usually refers to the similar item of work already described and has a rate/price in the contract BQ. e.g. concrete columns/beams, brickwalls, etc. Variation work not of similar character e.g. installation of floor and ceiling tiles. Similar condition of variation work usually refer to the physical conditions, timing and extent of the variation work which is similar to that described and allowed in the contract BQ. Variation work not of similar condition, which may be affected by the three factors e.g. addition of a concrete beam after completion of all concrete works in the project.
The contractor is entitled to caim for additional costs on a fair and/or reasonable basis, commonly known as ‘quantum meruit’ if instructed to carry out additional works on an existing contract as a variation to the contract where:
1. the existing contract prices/rates do not cater for the said variation works;
2. the nature of the works is not with ‘similar character’ and ‘similar conditions’; or
3. the nature of the works is with ‘similar character’ and ‘similar conditions’but with significant change in quantity (new provision in PAM06 clause 11.6(a))
A QS/Architect may value a fair market rate or include a fair allowance on the contract rate/price to take into consideration the circumstances prevailing at the time of execution of the variation work.
There is no provision for submission of quotation or price agreement by the contractor prior to carrying out any variation works in PAM06. However, in good practice and to avoid unnecessary dispute or problem arising, it is prudent that the Contractor submit a quotation upon SO’s instruction or prior to carrying out the variation works.
Notice Requirement
Clause 11.7 (a) & (b) of PAM2006 expressly provide that a written notice of the contractor's intention to claim and their susequent submission of the supporting document within the stipulated time, is a condition precedent to contractor’s claim for additional expenses caused buy a Variation. If the contractor fail to comply with the formalities stipulated in the contract, he cannot insist either under the contract or other contractual promise to be paid a reasonable sum, even though the employer derived some benefit from the work varied: Taverner & Co. Ltd. V Glamorgan County Council.
In a contract, a contractor is promised a certain amount of money to perform a certain amount of work. In the absence of an expressed provision for variation in a contract, any instruction issued to modify or alter the original scope of work will entitle the Contractor to end the contract. Subsequently the contractor is no longer bounded by the contract rates and could make the subsequent claims based on ‘quantum meruit’.
Clause 11 of the PAM 2006 Form in general, empowers the Architect to issue instruction ordering a variation without vitiating the contract. PAM06 expressly provides that the instruction has to be in AI format. Clause 2 further stipulates the procedural requirements of the issuance of AI.
What is a valid variation?
In general, work which is incidental to the work already contracted for is within the scope of the Works and is thus not a variation. Other phrase used is “indispensable and/or necessary work”.
The principal elements of a valid variation are:
1. Must be in a form of instruction (AI)
2. Contractual Empowerment to the person issuing the instruction
3. The instruction must effect change to the works; and
4. The instruction is not intended to rectify negligence, omission, default and/or breach of contract by the Contractor
Clause 11.1 further stipulates the scope of variations allowed in the contract.
Architects should be mindful not to instruct variation beyond their contractual ambit, as such act could be regarded as ‘ultra vires’ and could expose the architect directly liable under tort. For instance, the architect does not have the right to issue instructions regarding safety of the works. If such instruction calls for a variation to the contractual provision, the contractor cannot look for the employer for compensation.
It should also be noted that any error in pricing or rate by the contractor is not a valid variation and thus may not be adjusted irrespective of the quantities involved after the execution of the contract.
Can An Architect Issue a Variation After CPC?
Instructions in general can be issued by the Architect right up to the issuance of Final Certificate where the Architect becomes ‘functus officio’. However, instructions that effect a variation to the contract should not be issued after CPC accept for compliance to requirements by Appropriate Authority and Service Provider as expressly provided in Clause 11.3 of PAM 2006
Valuation of Variation
The contractor is entitled to additional cost implicated by a valid variation. Clause 11.6 further stipulates the method of valuation of variation.
The contract rate is applicable for Variation items with ‘similar character’ and ‘similar conditions’ to the existing contract items. The word “similar” means “of a like nature” and does not mean have to be “identical”.
Similar character of variation work usually refers to the similar item of work already described and has a rate/price in the contract BQ. e.g. concrete columns/beams, brickwalls, etc. Variation work not of similar character e.g. installation of floor and ceiling tiles. Similar condition of variation work usually refer to the physical conditions, timing and extent of the variation work which is similar to that described and allowed in the contract BQ. Variation work not of similar condition, which may be affected by the three factors e.g. addition of a concrete beam after completion of all concrete works in the project.
The contractor is entitled to caim for additional costs on a fair and/or reasonable basis, commonly known as ‘quantum meruit’ if instructed to carry out additional works on an existing contract as a variation to the contract where:
1. the existing contract prices/rates do not cater for the said variation works;
2. the nature of the works is not with ‘similar character’ and ‘similar conditions’; or
3. the nature of the works is with ‘similar character’ and ‘similar conditions’but with significant change in quantity (new provision in PAM06 clause 11.6(a))
A QS/Architect may value a fair market rate or include a fair allowance on the contract rate/price to take into consideration the circumstances prevailing at the time of execution of the variation work.
There is no provision for submission of quotation or price agreement by the contractor prior to carrying out any variation works in PAM06. However, in good practice and to avoid unnecessary dispute or problem arising, it is prudent that the Contractor submit a quotation upon SO’s instruction or prior to carrying out the variation works.
Notice Requirement
Clause 11.7 (a) & (b) of PAM2006 expressly provide that a written notice of the contractor's intention to claim and their susequent submission of the supporting document within the stipulated time, is a condition precedent to contractor’s claim for additional expenses caused buy a Variation. If the contractor fail to comply with the formalities stipulated in the contract, he cannot insist either under the contract or other contractual promise to be paid a reasonable sum, even though the employer derived some benefit from the work varied: Taverner & Co. Ltd. V Glamorgan County Council.
Friday, June 4, 2010
What Constitute a Contract?
There have been several articles provided in PAM Part 3 Exam Seminar notes on this subject. An extensive definition in Malaysian context is also available in the Contract Act 1950 itself. The key elements can be sourced from Section 10 (1) of the Act as follows:
“ All agreements are contracts if they are made by the free consent of parties competent to contract, for a lawful consideration and with a lawful object, and are not hereby expressly declared to be void”
Derived from the above section, it can be construed that a legally binding contract must consist of SIX of the following elements:
1) Offer
2) Acceptance
3) Concent
4) Competency
5) Consideration
6) Legality
Offer and Acceptance
The word ‘agreement’ means that there must be an offer by one side and an acceptance of the offer by the person to whom the offer was made. Without both an offer and an acceptance, there can be no consensus ad idem or a meeting of the minds which is essential to form a contract.
Consent
Another key element to a contract is consent as described above as ‘..made by the free consent of parties..’. Section 19 further elaborate on the Voidability of agreements without free consent as follows:
“ When consent to an agreement is caused by coercion, fraud,
or misrepresentation, the agreement is a contract voidable at the
option of the party whose consent was so caused.”
Competency
‘..parties competent to contract..’ is further defined in Section 11 of the Act as follows:
“Every person is competent to contract who is of the age of majority according to the law to which he is subject, and who is of sound mind, and is not disqualified from contracting by any law to which he is subject.”
I.e a person under 15 years and a mentally insane person cannot enter a legal contract
Consideration
Consideration as described as ‘..for a lawful consideration..’ in the Act is another essential element of any valid contract. Consideration consists of either a benefit to the promisor or a detriment to the promisee. It is a present exchange bargained for in return for a promise. It may consist of some right, interest, profit, or benefit that accrues to one party, or alternatively, of some forbearance, loss or responsibility that is undertaken or incurred by the other party. It is not necessary for a contract to be supported by a monetary consideration.
Legality
The Act also require a contract to be of ‘a lawful object’, which means that the objective of the contract must be for a legal purpose. For example, a contract for illegal distribution of drugs is not a binding contract because the purpose for which it exists is not legal.
“ All agreements are contracts if they are made by the free consent of parties competent to contract, for a lawful consideration and with a lawful object, and are not hereby expressly declared to be void”
Derived from the above section, it can be construed that a legally binding contract must consist of SIX of the following elements:
1) Offer
2) Acceptance
3) Concent
4) Competency
5) Consideration
6) Legality
Offer and Acceptance
The word ‘agreement’ means that there must be an offer by one side and an acceptance of the offer by the person to whom the offer was made. Without both an offer and an acceptance, there can be no consensus ad idem or a meeting of the minds which is essential to form a contract.
Consent
Another key element to a contract is consent as described above as ‘..made by the free consent of parties..’. Section 19 further elaborate on the Voidability of agreements without free consent as follows:
“ When consent to an agreement is caused by coercion, fraud,
or misrepresentation, the agreement is a contract voidable at the
option of the party whose consent was so caused.”
Competency
‘..parties competent to contract..’ is further defined in Section 11 of the Act as follows:
“Every person is competent to contract who is of the age of majority according to the law to which he is subject, and who is of sound mind, and is not disqualified from contracting by any law to which he is subject.”
I.e a person under 15 years and a mentally insane person cannot enter a legal contract
Consideration
Consideration as described as ‘..for a lawful consideration..’ in the Act is another essential element of any valid contract. Consideration consists of either a benefit to the promisor or a detriment to the promisee. It is a present exchange bargained for in return for a promise. It may consist of some right, interest, profit, or benefit that accrues to one party, or alternatively, of some forbearance, loss or responsibility that is undertaken or incurred by the other party. It is not necessary for a contract to be supported by a monetary consideration.
Legality
The Act also require a contract to be of ‘a lawful object’, which means that the objective of the contract must be for a legal purpose. For example, a contract for illegal distribution of drugs is not a binding contract because the purpose for which it exists is not legal.
Tuesday, June 1, 2010
With or Without BQ?
Upon checking the PAM 2006 Contract Forms, I noticed the difference between the drafting of the Contract Forms with quantities (called Form A for this discussion) and without quantities (Form B) lies in 2 main clauses namely:
Clause 11 - Variation; and
Clause 12 - Quality and Quantity of works
Clause 11 - Variation
Form A empowers the Architect and/or the Quantity surveyor to evaluate claims. The QS is absent in Form B although in practice a QS may be commissioned to assist the architect in the contract administration.
Clause 12 - Quality and Quantity of works
Form A - Contract Bills form the basis for quantity of the works. The BQ carry the risk of error in quantities. Since the risk of error of quantity is born by the employer, any correction to the quantity would entitle the contractor for a VO (12.2)
Form B - The Contract Sum is derived from the contractor's own estimate of the quantity based on Drawings and Specifications. Here, the risk of error in quantity is borne by the contractor.
In contrary to popular belief, both contracts are Lump Sum ( see clause 12.2 of both forms) in a sense that the contractor undertake to complete the whole works for a determined amount of money payable by the employer.
The BQ may not provide an exhaustive description of the works but should be read as mutually explanatory with other contract documents, i.e. specification and drawings. Hence the contractor should thoroughly check all the relevant contract documents according to the priority set in clause 3.1 in coming up with the contract rates.
The BQ may not be required for smaller or less complex projects where drawings and specifications themselves provide sufficient information.
Clause 11 - Variation; and
Clause 12 - Quality and Quantity of works
Clause 11 - Variation
Form A empowers the Architect and/or the Quantity surveyor to evaluate claims. The QS is absent in Form B although in practice a QS may be commissioned to assist the architect in the contract administration.
Clause 12 - Quality and Quantity of works
Form A - Contract Bills form the basis for quantity of the works. The BQ carry the risk of error in quantities. Since the risk of error of quantity is born by the employer, any correction to the quantity would entitle the contractor for a VO (12.2)
Form B - The Contract Sum is derived from the contractor's own estimate of the quantity based on Drawings and Specifications. Here, the risk of error in quantity is borne by the contractor.
In contrary to popular belief, both contracts are Lump Sum ( see clause 12.2 of both forms) in a sense that the contractor undertake to complete the whole works for a determined amount of money payable by the employer.
The BQ may not provide an exhaustive description of the works but should be read as mutually explanatory with other contract documents, i.e. specification and drawings. Hence the contractor should thoroughly check all the relevant contract documents according to the priority set in clause 3.1 in coming up with the contract rates.
The BQ may not be required for smaller or less complex projects where drawings and specifications themselves provide sufficient information.
Intro
This blog is a compilation of my notes for my own consumption. I figured that since a blog is easily accessible anytime anywhere, why not fully utilise as my mobile reference. However, should anyone happen to read this postings, your comments are most welcomed.
The discourse are mostly related to the construction law and building contract. I'm not an expert in this area but currently studying the subject for my professional exam.
My main references include:
The discourse are mostly related to the construction law and building contract. I'm not an expert in this area but currently studying the subject for my professional exam.
My main references include:
- PAM Tutorial Notes
- Malaysian Standard Form of Building Contract (PAM 1998 Form) by Sundra Rajoo
- '150 Contractual Problems and Their Solutions' by Roger Knowles
- 'The Malaysian PWD Form of Construction Contract' by Lim Chong Fong
- Various articles on 'Engineering & Law' by Ir Harbans Singh
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