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There are several articles by Ir Harbans Singh published by BEM. Look for the Law & Engineering sections in each publication:

http://www.bem.org.my/v3/publications03.html

PENULTIMATE CERTIFICATE

PAM 1998 Form

Penultimate Cert is issued between CPC and Final Accounts. After the conclusion of Final Accounts (which period of finalization is stated as within 6 months after CPC) the contract sum would be duly adjusted. Subsequently, a Penultimate Certificate (which is an interim certificate) would be issued to pay for the entire amount due to the Contractor leaving only the retention sum based on 5% of original contract sum. (Note: the retention sum would not be adjusted according to the revised contract sum)

Hence, the amount stated in the Penultimate Certificate would be the difference between Original Contract Sum and Final Contract Sum less the retention sum. There would be no further payment certificate issued after the Penultimate Certificate until Final Certificate is issued after CMGD.

PAM 2006 Form

If we look closely at the timeline for Final Certification under PAM06, we will notice that the purpose of Penultimate Cert is significantly changed due to a longer period of final measurement. The Final Accounts could be concluded beyond the CMGD (See Appendix: if non stated, shall be 15 months after CPC)

The purpose of Penultimate Cert under PAM06 is now meant to release monies due to NSC before Final Cert to MC. If there is no NSC there will be no Penultimate Certificate

PWD Form 203A (Rev10/83)

There is no expressed provision for a Penultimate Certificate under this form.
Since there is no specific period for finalisation of final account, there are no issues similar to the ones in PAM98 form.

While Clause 48(a) require the contractor to submit all documents within 3 months after CPC to enable the SO to prepare the Final Account, the is no specific time requirement for the SO to finalise the Final Account accept during the issuance of Final Certificate which is only due 3 months after CMGD. Hence, after CPC is issued, the main contractor is expected to finance the loss and/or expense that arises from any variation until payment is made under Final Certificate

Furthermore, Clause 28(f) provides a direct payment mechanism for Gov to make payment directly to NSC if the need arise.

Client v Contractor Part 3

Let’s take a break from the story, and look at the legal implications behind the situation.

Whenever work is done in response to request by a party, even without a written contract, the party providing the service/work is entitled to a quantum meruit claim. The expression quantum meruit basically means ‘the amount he deserves’ or ‘what the job is worth’. It is a claim for a payment for the work executed where no price has
been agreed or quantified, and usually a claim being assessed in a ‘reasonable sum’, ‘reasonable remuneration’, ‘fair market rates’, ‘fair commercial rates’ or on similar terms.

Read more on quantum meruit at: http://www.mbam.org.my/mbam/images/@ENTRUSTY%20-%20QuantumMeruit%20(100-103).pdf

In Adam and Joe’s situation, Joe must substatiate his claim by proving the total costs incurred and payments made by him in carrying out the works.

Another example is where a plumber has been called in by a house owner for an emergency repair and no price was agreed in advance. Upon completion, the plumber cannot simply take advantage of the situation and drop a bomb on the house owner. He is only entitled to a reasonable sum for such service, nothing more and nothing less.

Should Adam and Joe decided to sign a proper agreement right from the outset; they would have had a proper CONTRACT SUM which was agreed by both parties. In general, a contract sum would overrule quantum meruit claims. A contract sum can be below or above the fair market price and both parties has to honour it!

to be continued...

Client v Contractor Part 2

Within a week, Joe came in with his workers and started on the renovation work. When the work was well in progress, Joe sat down with Adam to discuss payment. Joe asked for an RM10k progress payment to pay for materials and his workers. Satisfied with the progress, Adam wrote a check immediately!

2 weeks later, when the plumbing and wiring were almost completed, the works came to a complete stop. There had been no workers at site for 3 days. Adam went to see Joe to seek clarification. He found out that Joe had terminated his Indonesian sub-contractors and was facing some financial problem. He had spent RM25k so far and material prices were rising partly due to shortage of cement and sand in the market. He foresaw that it would cost more than RM55k to complete the whole renovation.

Adam started to wonder whether he had been shortchanged. He didn’t have a clear idea of what the final cost would be but he was very clear on his limited budget.

to be continued..

Client v Contractor Part 1

Adam just moved in to a new neighborhood. He met Joe, his new neighbor and found out that Joe is a Class F contractor. He also found out that they came from the same hometown and the bonding started instantly. One day over a cup of tea he mentioned to Joe his intention to renovate his kitchen and that he had a few quotations ranging from 25k to 50k. Joe offered his service and suggested that he will give better value for money! As he was trying to appear not being too calculative to his new friend, Adam accepted the offer, and no definite cost or time limit was mentioned. He was comfortable enough to trust that his good neighbor will do it within reasonable cost and reasonable time. At the back of his mind, Adam even believed that Joe will do the job for minimal profit!

to be continued..

Independent Certifier in PWD contract

The PWD contract was drafted with the intention to have an independent certifier intact. A typical PWD contract would mention the client as the Government of Malaysia. The officers empowered to execute the contract should be the person named in the Government Contract Act 1949 i.e. Works Minister, Director of Works etc.

The SO however, may or may not be another officer with an official designation in the relevant department who must act fairly and impartially in performing his duties.

In Perini Corporation v Commonwealth of Australia (1969) it was held that the Director of Works, who was the certifier under the contract, in making his decision was entitled to consider departmental policy but would be acting wrongfully if he were to consider himself as controlled by departmental policy.It was implied that the Commonwealth should not interfere with the Director of Works' duty as a certifier.

After a Certificate of Practical Completion (CPC) is issued, can an Architect issue an Interim Certificate?(LAM Paper 2 Q2a)

CPC is a significant milestone as well as a moot point in construction contracts. PAM 06 allows CPC to be issued with minor outstanding works and/or defects (see clause 15.1(a)) with the following conditions:

1. Employer can have full use of the works for their intended purposes
2. The outstanding works are minor in nature
3. Contractor has given to the Architect written undertaking to complete/make good such works.

With that in mind, an interim certificate could be issued after CPC at any time before the final certificate, upon completion of these outstanding works/defects.

Another reason for issuance of interim certificate after CPC would be to revise or correct any previous payment certificate (see clause 30.3)

To further clarify the matter clause 30.1 expressly states:

“ ..After issuance of CPC, interim certificates shall be issued as and when further amounts are ascertained by the Architect and QS as payable to the Contractor by the Employer”

TNB Substation Woes

Delay in obtaining utility services upon completion of physical works is not an uncommon scenario in our construction industry. It may be due to several factors such as ambiguous scope of contract, change in authority requirements during construction or just plain bureaucracy.

In the absence of expressed provision in the contract for the Main Contractor to secure power supply, their obligation is limited to the completion of the TNB building provided that the Testing & Commissioning can be achieved using other means i.e. gen- set, etc.

If the Testing & Commissioning can only be properly achieved using a stable power supply via an energized TNB substation, the Main Contractor is obliged to have it completed within 'reasonable' time, i.e. 6 months or any period before completion as normally expected of the service provider. In such case, delay by the service provider beyond the 'reasonable' energizing period can be regarded as an act of prevention by the service provider and would make the MC eligible for EOT under clause 23.8q (PAM06).

Another prudent approach is to allow sectional completion for the TNB substation to ensure the substation is completed ahead of time, allowing reasonable time for the TNB to energise before the project completion.

This approach could also be applied to other services such as water supply and telecom to separate the contractor’s contractual obligation from the service provider’s time consuming procedures

Omission and Loss of Profit

Q: Where work is omitted and given to another contractor, is the employer liable to pay loss of profit?

A: Entitlement for loss of profit may depend on the wordings of the contract form. PAM98 cl 11.6 allow for valuation of direct loss and/or expense due to variation, however the word ‘loss’ is absent in PAM06 cl11.7.

However, cl 11.6(b) PAM06 provides that fair adjustment of rates to take into account when there is a significant change in quantity. It may be argued that fair valuation should include loss of profit in respect of work omitted.

From my observation, there is no clause in the standard form that prohibits the employer from omitting works to be carried out by others, although several case laws suggest that the employer may not omit work prescribed under Provisional Sum to be executed by 3rd party see Amec Building V Cadmus (1997). In Australian case Carr v JA Berriman (1995) it was held that works omitted would entitle the contractor to claim loss and expense

Quantum Meruit Claim

Q: When do 'quantum meruit' claims arise and how should they be evaluated?

A: Quantum Meruit basically means ‘the amount he deserves’. Other similar terms being used includes ‘reasonable sum’, ‘fair market rates’, etc.
When you engage a contractor to do work without a contract or without a contract sum, he is entitled for a quantum meruit claim.

A quantum meruit claim may occur in a building contract due to the following:
•Changes were imposed without a variation clause
•Variation with significant change in quantity
•Variation involved works with items not similar character and/or condition to items in contract

Q: How are 'fair' rates defined?

A: PAM06 defines fair market rates to be determined by QS. In my opinion, it should be based on reasonable remuneration, not just cost. In fact PAM cl 11.6(d)ii allows for Cost + 15% profit.

How far can an architect/engineer accept minor deviation at site?

Several case laws had indicated that employer may recover the cost of rectification if the work is defective. But if rectification is not a reasonable solution compare to the minimal benefit, rectification cost would not be awarded.
But it is important to note that the deviations must be aesthetically and technically acceptable. In other words, the employer can still benefit from the works without compromising structural and safety factors.

One of the controversial English cases was Ruxley -v- Forsyth which had shed some lights to such circumstances:

“The 1995 House of Lords decision in the case of Ruxley -v- Forsyth was widely reported since it added to the general understanding of how damages should be assessed for a contractor's failure to meet specified standards in a construction contract.

Forsyth had specified that a swimming pool being constructed for him by Ruxley should have a maximum depth of water of 7'6". Unfortunately the completed pool only had a maximum depth of 6'9" and the depth below the diving board was only 6'. Forsyth sued for the cost of a new pool.

The trial judge concluded that the pool constructed was perfectly safe to dive into and that there was no evidence that the shortfall in depth had decreased its value. The only practical method of achieving a pool of the required depth would be to demolish the existing pool and reconstruct a new one at a cost of some £21,000. There was no evidence that Forsyth actually intended to build a new pool at such a cost.

The judge held that that cost would be wholly disproportionate to the disadvantage of retaining the pool as it had been built. Accordingly he concluded that, despite breach of contract on the part of Ruxley in building a pool which did not meet the required specification, the damages to be awarded was simply a figure to reflect a loss of amenity. This was assessed in the amount of £2,500.

Forsyth appealed the matter to the Court of Appeal and was successful. The Court of Appeal held that Forsyth had suffered a loss as he had a swimming pool less suited to diving than the one he had contracted for. The question to answer was what money would place Forsyth in the same situation as he would have been, had the contract been performed. The answer was the cost of replacement of the pool, otherwise a builder of swimming pools would never need to perform its contract. The Court of Appeal awarded Forsyth damages in the amount of £21,000, being the cost of a new pool.

No doubt Forsyth thought that he could now pocket the £21,000 and continue to swim happily in his 6'9" deep pool. However, the matter did not stop there, and the next port of call was to the House of Lords where the decision was once again reversed, reinstating the earlier decision of the trial judge. Their Lordships stated that to hold in a case of this kind that the measure of the building owner's loss was the cost of reinstatement, however unreasonable it would be to incur that cost, would seem to fly in the face of commonsense. Where the cost of remedying the defect was disproportionate to the end to be attained, the damages were to be measured by the value of the facility built in accordance with the contract, less its value as it stood. Thus Forsyth never saw his £21,000 but instead, no doubt, was faced with a considerably larger legal bill. “

The above case was indeed a controversial one as it went through several appeals and reversal in decisions. Perhaps it is an attempt to meet in between design based and performance based specification in providing the solution. I believe that no man-made law is perfect but perhaps this seems to be a fair solution for such predicament.

Building contract forms has developed over the years to tackle predicaments and eventualities guided by principles of laws and court decisions. The Set-Off Clause 30.4 is now introduced in PAM 06 which among others enable the client/architect to accept works with acceptable performance/aesthetic although not exactly in accordance with the contract.

A new provision in PAM06 i.e. clause 6.5 (e) was introduced to allow such diviation to be accepted subject to employer's consent and the set-off clause.

Under PAM98 contract form, set–off was not expressly an option to remedy works that are not in accordance to contract. In such case, one of the options is to adjust the contact sum as variation.

I certainly hope that the above British court decision is not misconstrued by contractors to take design specifications lightly. The issue of the case was to determine the measure of damages for breach of contract where the cost of reinstatement is disproportionate to the loss suffered. The application in reality shall not be applied vexatiously to compromise the aesthetic value, safety and performance of the works.

Architect’s Liability on Supervision

The Architect's duty with regard to supervision has been a subject of a number of court cases. One of the closest to our context is a Singapore case: Sim and Associates v Alfred Tan (1997) where the architect was sued for, among others, certifying defective works.

The court held that an architect is only required to give reasonable supervision. That is the general rule in the absence of specific requirements in the conditions of appointment. The fact that the work is certified which turns out to be defective does not by itself mean that the architect has been negligent.

Failure to proof the consultant's negligence would render the contractor responsible for work not in accordance with the contract.

Design Liability

Q: Where a Contractor / NSC's drawings are " APPROVED " , " CHECKED " , " INSPECTED " etc, by the Architect or Engineer and subsequently an error is discovered, who will bears the cost? Contractor, NSC , Architect/Engineer or Employer?

A: In a performance specification (items to be designed by contractor/manufacturer), the architect must be clear in what he is doing, which is checking compliance with the performance requirements, not to undertake design. This must be reflected in the wording of the 'approval' or the 'checking'.

Clause 1.2 of PAM06 expressly provides that in such case contractor is fully responsible for the design irrespective of approval by Architect

Without proper performance spec. or contract provision, an architect may not delegate design to contractor. In Moresk v Thomas (1966), the Architect was held liable

Q: In the case where the Employer bears the cost, can he recover the sum involved from the Architect or Engineer?

A: Employer may recover cost from Architect in the following conditions:

1. When damage was due to Architect's design error, not contractor's workmanship or non-compliance to spec.
2. Employer must prove damage i.e. rectification cost, not necessarily the entire 'additional cost'
3. If both Architect & Contractor are liable, Employer may recover cost from Architect if contractor become insolvent

When the Client refuse to pay for an approved VO..

Q: If the client refuse to pay for the V.Os, is it breach of contract by the client? Would it lead to determination or just suspension of work by contractor?

A: As I mentioned in previous posting, variation is the most important clause in the contract. It enables changes to be made to the scope of work, etc without vitiating the contract. As long as the VO was made within the contractual provision, the new scope is deemed to be part of the contract scope. Any cost and time implication (subject to EOT provisions) would alter the contract sum and completion date respectively.

Clause 24.4 (PAM06) provides that the loss/expense due to the VO shall be added to the Contract Sum and shall appear in the next Interim Certificate after the date of ascertainment. If the employer fails to honour the interim certificate within the Period of Honouring Certificate, the contractor may suspend the execution of work until such time payment is made, subject to the procedures stipulated in clause 30.7

Please note the right for suspension by contractor is a NEW provision under PAM06. In the absence of such provision, there are no general rights for contractor to suspend the execution of works. If you are administering a contract using PAM98 or JKR83, such suspension or even slowing down the execution of works by the contractor could amount to a repudiatory breach by the contractor, see PAM98 clause 25.1 (i). On the other hand, the contractor should resort to determine the contract (not to suspend work) as provided by PAM98 clause 26.1 (i).

JKR83 form has got another set-back; there is no provision for determination by the contractor within the contract! However, the unpaid contractor may commence an action against the Government for recovery of payment with interest; see s74 illustration (n), Contract Act 1950.

Letter of Release

Letter of release usually comes in the picture when an Architect's service is prematurely terminated and the client intends to proceed with another Architect.

PAM guidelines on Letter of Release via General Circular No. 2/2007 must be read in the background of the Conditions of Engagement of a Professional Architects, Rule 19:

“In the event that the Memorandum of Agreement between the Professional Architect and the client is TERMINATED for a reason not due to the fault of either party, the Professional Architect shall, subject to the rights of either party in respect of antecedent breaches of the Memorandum of Agreement between the two parties, charge the balance of fees for architectural consultancy services rendered up to the stage of termination together with all reimbursable charges, and after the full settlement of all fees and charges due from the client, the Professional Architect shall issue A LETTER OF RELEASE to the client and the client shall be entitled to appoint another Professional Architect to continue with the project”

The CF and CCC precondition came about to accommodate Purchasers who wish to carry out a renovation works by engaging his own architect while the Developer's Architect had not fully completed his duty.

I’m of the opinion that LOR is not relevant under the following conditions:

1.Obtaining CF was never part of the original agreement ( not a full service)
2.The Architect had fully discharged their duty (final cert issued)
3.All fees due to the architect are duly paid

I’ve come across some LOR case laws but mostly involved instances where Professional Architect withheld LOR when there were disputes relating to claim of professional fees and I think the subject may deviate from our original discussion.

In TRHamzah and Yeang Sdn Bhd v. Lazar Sdn. Bhd. (1985) 2 MLJ 45, the architect terminated its services as architects on the ground of failure of payment of fees. The court held, among others, that the Architect cannot withhold LOR if:

1.The architect’s services were not terminated by the client
2.The project was not abandoned
3.The architect refused to agree to have the fees referred for settlement.

The key point is on item 3; by refusing to refer to dispute resolution, a waiver on the LOR cannot be obtained. It was held that in the circumstances of this case, the court could not allow the architect to withhold the Letter of Release as to do so would mean “that the architect can hold the client to ransom’ (see Blair v. Osborne and Tomkins [1971]).

When in doubt, Architects may always refer to LAM for clarification. Under certain conditions, as I mentioned, LAM may waive the LOR.

However, it is also important to note that these waivers are not immune in court and may be challenged. In Akitek Tenggara Sdn. Bhd. v. Mid Valley City Sdn. Bhd. (1999) 2 MLJ 625, the court held against LAM’s waiver due the following reason:

a) The termination of the agreement was unlawful
b) The Architect’s services were terminated not because the project was aborted but because the client wanted to use its own architect.
c) Cancellation of the contract by the Client was purely on the basis that it wished to utilize its own architect

The above are just my observations and may subject to criticism. Case laws have to be construed in the whole context and circumstances of the case.

Why LAD should not appear in Interim Certificate?

The payment certificate is prepared by the Architect as provided in Cl.30.
An architect is not a party to a contract but just an agent to the employer.
The scope of empowerment to issue the payment certificate is limited to Cl 30.2 which stipulates the amount that expressly described the amount appear/due in the certificate as follows:

Total value of work properly completed + material on site

Less: Amount retained for Retention Sum and amount previously certified.

Other items like LAD, set-off, etc could be valid contractual rights to the employer but beyond the architect’s scope of empowerment under cl 30.2.
Therefore, the employer would have to make the deduction themselves from the monies due or become due.



Apart from Cl 30.2 there are other clause that enpower the architect to include other items into a payment certificate:

Clauses expressly mentioning variation rights or items to be added to contract sum:

4.3 - Statutory Obligation
4.4 - Fees , levies & charges
11.6 - Variation rules
6.3 - Testing
7.2 - Royalties
24.4 - Loss & expence to be included in Cert
27.5 - payment to NSC
28.5 - Expenses due to Nominated Supplier's material

Other Related Questions:

Q: Which VO is included in Payment Certificate & which is not? Approved? Issued? Done?

A: The VO must be included in contract sum in the next certificate of payment after the date of ascertainment as provided by cl 11.9. However only works properly executed would appear in the payment certificate


Q: Is value of work done by others to rectify MC's non conformances allowed to be deducted?

A: Such deduction is the employer’s contractual rights but not included in the Architect’s empowerment under clause 30.2. So, it should not be included in the payment certificate


Q: What is the ratio to value relevant parts in partial cpc in releasing 1st moiety - how is it derived?

A: The value shall be proportionate to the original contract sum


Q: Do Architect certify full material on site or 75%?


A:Subject to Cl 30.2 and the % mentioned in the appendix. If none, then 100%. Note: JKR contract specify 75%

Principles

Maneuvering through the complex circumstances in construction contracts requires the application of legal principles to technical facts. The LAM professional exam should be tuned to these thinking skills. In reality, contract forms changes over time and amended to suit client’s requirements, but the principles should remain the same.

Perhaps, Contractors should also be put through a curriculum similar to our Part 3 exam as part of their qualification. But that would be too idealistic. To make things worse, apart from ignorance, we are also facing contractors who rely more on ‘connections’ rather than technical competency.

However, I still believe that in any conflict, principles should prevail.. and I share the following paradigm-shifting experience as told by Frank Koch in Proceedings the magazine of the Naval Institute for us to cogitate:

Two battleships assigned to the training squadron had been at sea on maneuvers in heavy weather for several days. I was serving on the lead battleship and was on watch in the bridge as night fell. The visibility was poor with patchy fog, so the captain remained on the bridge keeping an eye on all activities.

Shortly after dark, the lookout on the wing of the bridge reported, "Light, bearing on the starboard bow."

"Is it steady or moving astern?" the captain called out.

Lookout replied, "Steady captain," which meant we were on a dangerous collision course with that ship.

The captain then called to the signalman, "Signal that ship: We are on a collision course, advise you to change course 20 degrees."

Back came a signal, "Advisable for you to change course 20 degrees."

The captain said, "Send: I'm captain, change course 20 degrees."

"I'm a seaman second class," came the reply. "You had better change course 20 degrees."

By that time the captain was furious. He spat out, "Send: I'm a battleship. Change course 20 degrees."

Back came the flashing light, "I'm a lighthouse."

We changed course.

Principles are like lighthouses

Reality could be foggy at times, and therefore it’s important to understand the principles of law behind the contract provisions.

Time, the essence of Contract?

When I order some 1000 pieces of satay for a wedding, I expect the caterer to deliver on the exact date of the occasion. If the caterer delivers the satay one day late, the items are of no value to me. Here, time is of the essence of the contract.

In a construction contract, though it has often been said, and routinely reproduced as a boilerplate clause (see PWD203 cl 41.3 “Notwithstanding the provision of Clauses 42 and 45, time shall be the essence of this Contract”), it is strictly not accurate to state merely that “time shall be of the essence of the contract”: it would be more accurate and reflective of the intention of the parties to state that time would be of the essence with respect to which provision or provisions of the contract.

The possible legal consequences that can flow from the Contractor’s failure to complete the Works within the contractual time can be inferred from the provisions of section 56 Contracts Act 1950. The material part of section 56 Contracts Act 1950 is reproduced below:

“56(1) When a party to a contract promises to do a certain thing at or before a specified time, …, and fails to do any such thing at or before the specified time, the contract, or so much of it as has not been performed, becomes voidable at the option of the promisee, if the intention of the parties was that time should be of the essence of the contract.

56(2) If it was not the intention of the parties that time should be of the essence of the contract, the contract does not become voidable by the failure to do the thing at or before the specified time; but the promisee is entitled to compensation from the promisor for any loss occasioned to him by the failure.

56(3) If, in case of a contract voidable on account of the promisor’s failure to perform his promise at the time agreed, the promisee accepts performance of the promise at any time other
than that agreed, the promisee cannot claim compensation for any loss occasioned by the non-performance of the promise at the time agreed, unless, at the time of the acceptance, he gives notice to the promisor of his intention to do so.”

The insertion of a clause declaring time to be of the essence in a construction contract, unlike its insertion in other contract forms, will not normally, in and of itself, allow the innocent party to rescind or terminate the contract for any breach of a time condition. In determining the party's intentions, the court will look to all the particular terms and circumstances and may well import little meaning to the "time is of the essence" clause.

It can be said that in construction contracts, with the presence of extension of time and liquidated damages clauses, time is, more often than not, NOT of the essence with respect to completion date. That is to say, for the legal consequences flowing from a delay to the completion date or extended completion date in most construction contracts, the applicable provision in Contracts Act 1950 would be section 56(2).

Case Law

In Tan Ah Kian v. Haji Hasnan [1962] MLJ 400., Gill CJ identifies the following three situations when time would be of the essence:

(a) the parties expressly state in the contract that it shall be so;
(b) where it was not originally stated to be of the essence but it was subsequently made so by one party giving reasonable notice to the other who has failed to perform the contract with sufficient promptitude; or
(c) where from the nature of the contract or of its subject matter time must be taken to be of the essence.

ENTIRE CONTRACT, SUBSTANTIAL PERFORMANCE

The older reported cases such as Appleby v Myers (1867)LR CP651 and Whitaker v Dunn (1887) 3 TLR 602 require complete performance by a promisor as a condition precedent to his right of recovery under an entire contract.

However the rigours of the common law has since been modified by later judicial pronouncements. It is now established by the doctrine of substantial performance that a promisor who has substantially performed his side of the contract may sue on the contract for the agreed sum, though he remains liable in damages for his partial failure to fulfill his contractual obligations.

At common law, substantial performance is an alternative principle to entire contract. This principle is relevant when a contractor's performance is in some way deficient, through no willful act by the contractor, yet is so nearly equivalent that it would be unreasonable for the owner to deny the agreed upon payment. If a contractor successfully demonstrates substantial performance, the owner remains obligated to fulfill payment, less any damages suffered as a result of the deficiencies in workmanship by the contractor.

Case Law:

Zainun Ali, JCA observed in Nirwana Construction Sdn Bhd v JKR NS(2008) that in the absence of express provision to exclude Substantial Performance, a contract cannot be regarded as Entire Contract

Gunn Chit Tuan, J. observed in KP Kunchi Raman v Goh Brothers Sdn Bhd (1978) 1 MLJ 89 in considering whether there had been substantial performance, it was relevant to take into account both the nature of the defect and the proportion between the cost of rectifying them and the contract price.

Obligation

Architect’s Contractual Obligation

1. Empowerment as Employer’s agent
2. Empowerment as Independent certifier

Employer’s Contractual Obligation

1. Make site available
2. Effect payment
3. Appoint Architect

Contractor’s Contractual Obligation

1. To carry out and complete works
2. To comply with specifications and instrructions
3. To preceed regularly and deligently