i
NATURE OF DELAY IN NOMINATED SUBCONTRACTING
MD. ASRUL NASID BIN MASROM
A dissertation submitted in fulfillment
for the award of the degree of
Master of Science in Construction Contract Management
Faculty of Built Environment
Universiti Teknologi Malaysia
JUNE, 2007
iii
DEDICATION
Thanksgiving to Allah s.w.t, as with the consent awarded, I am able to finish this
dissertation within the given time.
To my beloved mother, Asmah Binti Majid, “you are my strength when I was weak”,
my siblings, my beloved friends…
and not forgetting to my late grandmother…Tok Yah (mak)
my late grandfather…Tok Mat (abah)
my late father..
may Allah bless you…Amin.
iv
ACKNOWLEGDEMENT
First and foremost, I extend my highest gratitude to my supervisor of this
dissertation, Dr.Nur Emma Mustaffa who has provided guidance, advice, support and
thought in writing this dissertation.
Highest credit also goes to the coordinator of ‘Dissertation’, Assoc. Prof. Dr.
Rosli b. Abdul Rashid, and other lecturers for the course of Master of Science
(Construction Contract Management), for encouragement, guidance and critics.
I am also indebted to Sultan Iskandar Foundation (Yayasan Sultan Iskandar)
for sponsoring my study. Not forgetting to my beloved mother, my siblings and my
colleague for giving full support. Lastly , I would like to thank to my classmate and
also others in giving me support and cooperation to complete this dissertation and
also providing me essential information needed to fulfill my study requirements.
Thank you.
v
ABSTRACT
Construction delay is a results of occurrence beyond the control of either the
contractor or the employer. Delay can be categorized as excusable, non-excusable,
compensable and concurrent. There are many causes that can contribute delay in
construction. However, delay in nominated subcontracting are very seldom
acknowledged and the ways to improve also seldom discussed. As a result, to
identify the causes of delay on account of nominated subcontractor’s work are often
difficult. Thus, the objective of this study is to identify circumstances which are
caused delay in nominated subcontractor’s work and their implication to the main
contractor. In Malaysia, most of the standard form of contract such as PWD203A,
PAM 19988 and CIDB 2000 have provided grounds which gives entitlement for an
extension of time to the main contractor in the event of delay on the part of the
nominated subcontractor. The methodology that has been applied in this study is a
detail analysis of ten (10) cases which have been selected through Malayan Law
Journal. The results proved that there are several circumstances which caused delay
in nominated subcontractor’s work. Every causes have their own implication to the
main contractor in terms of entitlement of extension of time as well as the liability of
damages. This study concludes that, irregular payment is the prominent cause which
contributed to delay in nominated subcontracting.
vi
ABSTRAK
Kelewatan di dalam pembinaan adalah disebabkan oleh kerana ia berlaku di
luar kawalan samada daripada kontraktor ataupun majikan. Kelewatan boleh
dikategorikan sebagai kelewatan dengan alasan, kelewatan tanpa alasan, kelewatan
boleh dibayar gantirugi dan kelewatan serentak. Terdapat pelbagai punca yang
menyumbang kelewatan di dalam pembinaan. Namun begitu, kelewatan di dalam
kerja subkontraktor dinamakan yang perlahan adalah kurang diberi perhatian dan
jarang dibincangkan. Akibatnya, kelewatan di dalam kerja subkontraktor dinamakan
ini sukar untuk dikenalpasti puncanya. Oleh yang demikian, objektif utama kajian ini
adalah untuk mengenalpasti keadaan-keadaan yang menyebabkan kelewatan di
dalam kerja-kerja subkontraktor dinamakan serta implikasinya ke atas kontraktor
utama. Di Malaysia, kebanyakan borang kontrak seperti PWD 203A, PAM 1998 dan
CIDB 2000 ada menyediakan alasan-alasan yang boleh digunapakai untuk
melayakkan kontraktor utama mendapatkan masa tambahan akibat kelewatan dari
pihak subkontraktor dinamakan. Kaedah yang digunakan untuk mencapai objektif
kajian, adalah dengan menganalisa 10 kes yang telah diperolehi melalui Jurnal
Undang-undang Malaya (Malayan Law Journal). Keputusan kajian ini membuktikan
terdapat beberapa keadaan yang menyebabkan kelewatan di dalam kerja-kerja
subkontrak dinamakan. Setiap punca mempunyai implikasinya yang tersendiri ke
atas kontraktor utama terutamanya di dalam menentukan kelayakan ke atas tambahan
tempoh masa pembinaan begitu juga dengan tanggungan ke atas gantirugi. Kajian ini
menyifatkan pembayaran yang tidak mengikut jadual adalah punca utama yang
menyumbang kelewatan di dalam kerja-kerja subkontraktor dinamakan.
vii
TABLE OF CONTENTS
CHAPTER
TITLE
1
PAGE
Title
i
Declaration
ii
Dedication
iii
Acknowledgement
iv
Abstract
v
Abstrak
vi
Table of Contents
vii
List of Cases
xi
List of Table
xv
List of Figures
xvi
List of Abbreviations
xvii
INTRODUCTION
1.1
Background Study
1
1.2
Problem Statement
3
1.3
Objectives of the Study
6
1.4
Scope of the Study
7
1.5
Significance of the Study
7
1.6
Research Methodology
8
1.6.1 Stage 1: Identifying The Research Issue
8
1.6.2
Stage 2: Literature Review
9
1.6.3
Stage 3: Data Collection
9
viii
1.6.4
Stage 4: Research Analysis
1.6.5 Stage 5: Conclusion and Recommendation
2
10
10
DELAY IN CONSTRUCTION PROJECT
2.1
Introduction
12
2.2
Time is of The Essence
13
2.3
Contract Commencement and Completion Date(s)
15
2.3.1
20
Substantial Completion
2.4
Definition of Project Delay
21
2.5
The Nature of Delay Claims
24
2.6
Causes of Delay
25
2.6.1 Owner-Caused Delay
26
2.6.2 Designer-Caused Delay
27
2.6.3
28
Contractor-Caused Delay
2.6.4 Subcontractor Delay
2.6.5
Delay Not Caused by Parties to the Design
and Construction Stage
2.7
29
30
Type of Delay
33
2.7.1
Excusable Delays
34
2.7.2
Non-Excusable Delays
35
2.7.3
Compensable Delays
36
2.7.4
Concurrent Delays
37
2.8
Extension of Time (EOT)
39
2.9
Liquidated Ascertained Damages (LAD)
42
2.10
Summary
43
3
SUBCONTRACT DELAYS
3.1
Introduction
44
3.2
Nature of subcontracting
45
3.2.1
Assignment
46
3.2.2
Domestic Subcontract
47
3.2.3
Nominated Subcontract
48
ix
3.3
Relationship of the Parties in Construction
49
3.3.1 Main Contractor
51
3.3.2
Nominated Subcontractor
52
3.3.3
Domestic Subcontractor
53
3.4
Relationship between Employer and Subcontractor
3.5
Relationship between the Main Contractor and
Subcontractor
3.6
the Nominated Subcontractor
57
3.6.1
Delay and Extension of Time
58
3.6.2
Relevant Events in Standard Form of
65
3.6.4
66
Damages for Non Completion
Nature of Delay in Nominated Subcontracting
67
Circumstances Contributes to Delay in Nominated
Subcontractor’s Works
71
3.8.1 Late Instructions
71
3.8.2
Delay in Delivery of Materials and Goods
by The Employer
73
3.8.3
Late Payment
74
3.8.4
Changes Out of Scope of Work
76
3.8.5
Delay in Giving Possession of Site
77
3.8.6
Suspension of Works
78
3.8.7
Main Contractor Fails to Provide and Erect
Facilities
79
3.8.8
Interference by The Main Contractor
80
3.8.9
Negligence by The Nominated
Subcontractor
3.9
59
3.6.3 Breach of Contract
Work
3.8
56
Provision under Subcontractor Form in relation to
Contract
3.7
53
80
3.8.10 Delay to Rectify Damages
81
3.8.11 Default by The Main Contractor
83
Summary
84
x
4
COMMON CIRCUMSTANCES CAUSING DELAY IN
NOMINATED SUBCONTRACTING
4.1
Introduction
85
4.2
Analysis of Cases
86
4.2.1
Number of Cases Within Time Frame
86
4.2.2
Type of Nominated Subcontractor
According to Specialisation
4.2.3 Causes of Delay
4.3
5
88
90
Circumstances Causing Delay in Nominated
Subcontracting
91
4.3.1
Circumstances No.1
92
4.3.2
Circumstances No.2
97
4.3.3
Circumstances No.3
100
4.3.4
Circumstances No.4
104
4.3.5
Circumstances No.5
108
4.3.6
Circumstances No.6
111
CONCLUSION AND RECOMMENDATIONS
5.1
Introduction
115
5.2
Summary of Research Findings
115
5.3
Problems Occurred When Conducting This
Study
120
5.4
Further Studies
120
5.3
Conclusion
121
REFERENCES
122
xi
LIST OF CASES
CASE
PAGE
Alliance (Malaya) Engineering Co. Sd. Bhd. v. San Development
Sdn. Bhd. (1974) 2 MLJ 94
75,93
Antara Elektrik Sdn.Bhd. v. Bell & Order Bhd (2002) 3 MLJ 321
75,96
Behzadi v. Shaftsbury Hotels Ltd (1992) Ch 1
Carr v. JA Berriman Pty Ltd (1953) 89 CLR 327
15
97,102
Chandler Brothers Ltd v. Boswell (1936) 3AII ER 179
Clydebank Engineering & Shipbuilding Co. v. Castaneda
and Others (1905) AC 6
56
Croudace Ltd. v London Borough of Lambeth (1986) 33 BLR 25
74
43
CSK Electrical Co. Bhd. V. Regional Construction Sdn. Bhd.
(1987) 2 MLJ 76
75,112
CSK Electrical Co. Bhd. V. Regional Construction Sdn. Bhd.
(1987) 2 MLJ 763
79
Davies & Co.Shipfitters Ltd. v. William Old Ltd(1969) 67 LGR 395
48
DEC Electric, Inc. v. Raphael Construction Corp
(1989) 538 So. 2d 963, 964
75
Dodd v. Churton (1897) 1 Qb 562
110
Dunlop Pneumatic Tyre Co. Lt v. New Garage Motor Co. Ltd.
(1915) AC 79
42
Engineering Construction (PTE) Ltd v. Ohbayashi – Guni Ltd.
(1986) 1 MLJ 21
75,96,98
xii
Engineering Construction (PTE) Ltd v. Ohbayashi –Gumi Ltd
(1986) 1 MLJ 218
83
Equitable Debenture Assets Corporation Ltd v. Morgan
Branch Roberts and Ors. (1984) 2 CLD 10-01
81
Freeman & Son v. Hensler (1900), 64 JP 200
100,103
Freeman v. Hensler (1900) 64 JP 260
18
Geary, Walker & Co Ltd v. W Lawrence & Sons Ltd (1906)
57
Gilbert Ash (Nothern) Ltd v Modern Engineering (Bristol)
Ltd (1973) 3 AII ER 195
57
GLC v. Cleveland Bridge and Engineering Co Ltd (1984) 34 BLR 50
18
Glenlion Construction Ltd v. Guiness Trust (1987) 39 BLR 89
73
Glenlion Construction Ltd. V. The Guiness Trust (1987) 39 BLR 89
28
H. Fairweather & Co. Ltd. v. London Borough of Wandsworth
(1987) 39 BLR 106
29
Hampton v. Glamogan County Council (1917) A.C 17
54
Harbutt’s Plasticine Co. Ltd. v. Wayne Tank & Pump C. Ltd. (1970)
66
Helstan Securities Ltd. v. Hertfordshire County Council
(1978) 3 AII ER 262, Messrs Renhold
46
Henry Boot Construction (UK) Ltd v. Malmaison Hotel
(Manchester) Ltd (1999) 70 CLR 32
39,40
Hoenig v Isaacs (1952) 2 All ER 176
19
Holme v.Guppy (1838) 2 M & w 387
110
Hong Kong Fir Shipping Co. Ltd v. Kawsaki Kisen Kaisha Ltd (1962)
66
J.M. Hill v London Borough of Camden (1980) 18 BLR 31
78
Jurong Engineering Ltd v. Paccon Building Technology Pte. Ltd
(1999) 3 SLR 667 (CA)
56
Kitsons Sheet Metal Ltd v. Matthew Hall Mechanical and
Electrical Engineers Ltd (1989) 47 BLR 82
18
Lebaupin v. Crispin (1920) 2 KB 714
34,63
xiii
Levy v. Assicurazioni Generali (1940) 2 AII ER 437
Lightweight Concrete Sdn.Bhd. v. Nirwana Indah Sdn.Bhd.
(1999) 5 MLJ 351
London Borough of Hounslow v. Twickenham Garden
Developments Ltd. (1970) 7 BLR 81
Maryon v. Carter (1830) 4 C & P 295
Miller v. London County Council (1934), 151 LT 425
64
73,105
102
63
14,26,43
Mitsui Construction Co. v. The Attorney General of Hong Kong
(1986) CLJ 134
77
Multiplex Constructions Pty Ltd v. Abragus ty Ltd (1992)
36
Neodox Ltd v Swinton and Pendlebury Borough Council
(1958) 5 BLR 34
37,72
Nokes v. Doncaster Amalgamated Collieries Ltd (1940)
A.A 1014 (H.L)
46
North West Metropolitan Regional Hospital Board v. TA Bickerton
& Sons Ltd. (1970) 1 AII ER 1039
52
Peak Construction (Liverpool) Ltd. v. Mcknney Foundations Ltd. (1970)
15,27,40
Penang Development Corporation v. Teoh Eng Huat (1992) 1 MLJ 749
63
Percy Bilton Ltd V. Greater London Council (1982), 20 BLR 1
Pigott Construction Co. Ltd. v. W.J. Gowe Ltd (1961) 27 DLR (2d) 258
27,29
113
Pritchett,etc.,Co. Ltd. v. Currie (1916) 2 Ch 515 C.A
54
Roberts v Bury Commissioners (1870) LR 5 CP 310
111
Robinson v Harmon (1848) 1 Exch 850 at 855
107
Ryoden (M) Sdn.Bhd. v. Syarilkat Pembinaan Yeoh Tiong
Lay Sdn.Bhd.(1992) 1 MLJ 33
Shanklin Pier Ltd. v. Detel Products (1951) 2 K.B 854.
Shen Yuan Pai v. Dato’ Wee Hood Teck & Ors (1976) 1 MLJ 16
Smith and Montgomery v. Johnson Bros Co.Ltd. (1954) 1 DLR 392
54,94
55
72,108
47
xiv
Surrey Health Borough Council v. Lovell Construction
(1990) 48 BLR 108
64
Teoh Kee Keong v. Tambun Mining Co. Ltd. (1968) 1 MLJ 39
107
Tham Cheow Toh v. Associated Metal Smelters Ltd. (1972) 1 MLJ 171
107
Thamesa Designs Sdn.Bhd v. Kuching Hotels Sdn.Bhd. & 3 Ors.
(1993) 2 AMR 2083
The Queen in Right of Canada v Walter Cabott Construction
Ltd (1975) 21 BLR 42
40,78,101
102
Wallis v. Robinson (1862) 130 RR 841
54
Watson v Auburn Iron Works (1974) 318 NE 2d 508
96
Wells v. Army & Navy Co-operative Society (1902)86 LT 764
Westminster City Council v. Jarvis & Sons Ltd (1970) 7 BLR 64
110
1,19,68,70
Woh Hup (Pte) Ltd & Anor v. Turner (East Asia) Pte Ltd.
(1987) 1 MLJ 443
99
Young & Marteen Ltd v. . Mcmanus Childs Ltd (1969) 1 AC 454
82
xv
LIST OF TABLES
TABLE NO.
Table 3.1
TITLE
Comparison of Grounds for Granting Extension
of Time in Different Standard Forms of Contract
Table 4.1
62
Number of Cases Dealing With The Period of
Time
Table 4.2
PAGE
87
Number of Cases Dealing With Types of
Nominated Subcontractor
89
Table 4.3
Causes of Delay
90
Table 5.1
Analysis For Circumstances Which Causes Delay In
Nominated Subcontractor’s Work and Their
Implication to The Main Contractor
Table 5.2
116
Analysis For Circumstances Which Causes Delay In
Nominated Subcontractor’s Work and Their
Implication to The Main Contractor
117
xvi
LIST OF FIGURES
FIGURE NO.
TITLE
Figure 1.1
Research Methodology
Figure 2.1
The Relationship Between Cost and Construction
PAGE
11
Duration
24
Figure 2.2
Causes of Delay
32
Figure 3.1
Contractual Relationships of the Parties
50
Figure 3.2
Relationship Arising From a Subcontract
55
Figure 3.3
Delay on the Part of Nominated Subcontractor
69
Figure 3.4
Delay Caused by Nominated Subcontractor
67
Figure 4.1
Number of Cases Dealing With The Period
of Time
Figure 4.2
Figure 4.3
88
Number of Cases Dealing With Type of
Nominated Subcontractor
89
Causes of Delay
91
xvii
LIST OF ABBREVIATIONS
CIDB
Construction Industry Development Board
PWD
Public Work Department
JCT
Joint Contract Tribunal
PAM
Persatuan Arkitek Malaysia
RIBA
Royal Institute of British Architects
SO
Superintending Officer
EOT
Extension of Time
LAD
Liquidated Ascertained Damages
1
CHAPTER 1
INTRODUCTION
1.1
Background Study
Construction industry is a series of different specialist in contributing to the work
at different times, different skills, work for different organization and sometimes different
geographical locations.1 However, the parties including clients, designers, contractors and
suppliers share the same goals of minimizing costs and duration to deliver the projects.2
Furthermore, every construction project has a defined goal or objective, specifics
tasks, defined time including beginning and end, defined deliverables and resources being
consumed. To complete any projects successfully, many tasks need to be accomplished
by the project team for instance, the owner must define the requirements, the designer
needs to translate the requirements into contract document and the construction
1
Murdoch, J. and Hughes,W. (2000).Construction Contracts-Law and Management,3rd ed., Spon Press,
London.
2
H.A. Rahman (2006). Mitigation of Delaying During Commissioning of Construction Project Using
Knowledge Management- Contractor’s Perception, Quantity Surveying National Convention. 137-150
2
professionals need to organize and manage the physical construction in accordance with
the contract document.3
Besides, project schedules are useful and essential to the successful coordination
of the project. Eggleston4 stipulates that, most construction contracts specify performance
time in achieving completion of the whole of the works. On top of that, time may be
fixed either by reference to specified dates or by reference to a construction period and it
is essential that precise completion date can be established.
Sundra Rajoo5 is of the view, a contractor’s obligation is to carry out and
complete the works accordance to the contract. Furthermore, the contractor’s legal
obligation is to complete the project by the date for completion or within the date for
completion.6
Wright7 however, asserts that finishing a project on schedule is a difficult task to
accomplish in the uncertain, complex, multiparty and dynamic environment of
construction. Most of projects are eventually completed more or less to specification but
seldom on time and within budget. Thus, many of these problematic situations are either
beyond control and often lead to delay.8
1.2
3
4
Problem Statement
Levy, S.M. (1994). Project Management in Construction, 2nd ed., Mgraw-Hill Inc. USA.
Eggleston,B. (1997). Liquidated Damages and Extension of Time. 2nd ed. Oxford: Blackwell Science Ltd.
Rajoo, S. (1999).The Malaysian Standard Form of Building Contract (The PAM 1998 Form), Malayan
Law Journal, Malaysia.
6
M.S.M.Danuri (2006). Delay Claims and Damages, Proceedings of the 2006 One Day Seminar on
Mitigation of Delay in Construction Projects. November 23, University of Malaya
7
Wright,J.N. (1997). Time and Budget: The Twin Imperatives of a Project Sponsor. International Journal
of Project Management. 15(3): 181-186
8
H.A.Rahman (2001). Critical Factors for Mitigation of Delay in Construction, Conference paper of
National Conference of Construction Industry Development. Johor Bahru
5
3
Many construction projects suffer from delay. Failure to finish either within the
original planned time and budget or both, ultimately results in a delay. In addition to that,
construction projects involve more variables and uncertainties than in the product line
also increases the probability of delay.9
Therefore, disputes involving delayed of construction project are widespread in
the construction industry.10 Datuk Seri Mohd Effendi Norwawi has noted that delays in
government projects have become crucial problems which need to be solved
immediately.11 Furthermore, National House Buyer Associated12 highlight that the
complaints statistics regarding late delivery and liquidated ascertained damages (LAD) in
year 2002 is 13%, and 14% in year 2005. Besides, abandoned projects had increased
from 19% in 2002 to 23% in 2005.
Recently, the “blame game” over the long-delayed of Sultanah Bahiyah Hospital
in Alor Setar continues between the parties involved. This project failed to be completed
on time in December 2003 and due to that the cost incurred to RM565 million for the
four-year delay. Nevertheless, there is nobody who wants to take the blame over this
problem. In fact, the parties still unable to identify the causes constitute to the four-year
delay of the hospital.13
How delay can occur in construction project? There are many ways that a
construction project can be delayed. In short, all parties to the design and construction
9
H.A.Rahman (2001). Experiences in Handling Project Delays In Construction, National Construction
Industry Development Conference.1-15
10
Smith, Curie & Hancock (2001). Common Sense Construction Law- A Practical Guide for the
Construction Profesional, John Wiley & Sons, Canada
11
F.N.Karim , Incompetent Contractors, Delays, Cost Overruns, Failed Projects: Lesson Learnt. News
Straits Times, February 5, 2007.
12
Complaints Statistics, News Sunday Times, February 11, 2007
13
R.Abdullah . Delay of Sultanah Bahiyah Hospital Project, News Straits Times, March 8, 2007
4
process can delay the project. Delay may be the result of their direct action or of their
failure to act especially if they have duty to act in the circumstances.14
Nevertheless, unexpected events may happen during the life of the construction
project and can affect construction time necessary for completion of the work. For
instance, force majeure, negligence, discrepancies and so forth, may occur on the
construction project to increase the time of performance of the overall project or affect
any given activity and most common causes differ under different project. 15
Based on Sundra Rajoo’s views16, it shows that delaying circumstances can be of
three types namely delay caused by Contractor, delay caused by the natural events and
delay caused by Employer or his agent. Besides, delay caused by nominated subcontractor or supplier also disturb of the progress of the works.17
In addition to that, it has been highlighted in several studies on causes of delay
and one of them shows that delays in subcontractor’s work has been ranked at no. 25 out
of 73 causes.18 According to a study on contractor’s responses of the significance of
factors causing delays in building projects, it has been asserted that delay in
subcontractor’s work has been ranked at no. 11 out of 20.19 Further to this, study on delay
factor in relation to subcontractors also proven that it falls at ranking no. 9 out of 28.
20
Another study proves that, by basing on the overall ranking of the 44 factors, delay in
14
Bramble,B.B, Callhan, M.T.( 1992). Construction Delay Claims, 2nd ed., John Wiley & Sons, New York.
Fong, L.C. (2004). The Malaysian PWD Form of Construction Contract, Sweet & Maxwell, Malaysia
16
Rajoo, S. (1999).The Malaysian Standard Form of Building Contract (The PAM 1998 Form), Malayan
Law Journal, Malaysia.
17
Carnell,N.J (2005). Causation and Delay in Construction, Blackwell Publishing Ltd., UK
18
Hadi,S.A & Al-Hejji, S.(2006), Causes of Delay in Large Construction Projects, International Journal of
Project Management, 24, 349-357.
19
Kumaraswamy,M.M & Chan, D.W.M.(1998).Contributors to Construction Delay, Construction
Management and Economics, The University of Hong Kong,16, 17-29.
20
Odeh, A.M & Battaineh,H.T.(2002). Causes of Construction Delay: Traditional Contracts, International
Journal of Project Management, 20, 67-73.
15
5
subcontractor’s works is among the top 4.21 With reference to that, it reveals that delay
caused by subcontractors can be considered as a significance cause that contributes to
delay in projects. Therefore, these studies show that delay caused by nominated
subcontractor is a significance cause of delay in construction world.
Basically, under PWD 203A Clause 43(k), PAM 98 Clause 23.7(vii) and CIDB
Clause 24.1(p) has asserted that the contractor is allowed extension of time on account of
delays on the part of the nominated sub-contractor or nominated suppliers. Due to that,
the main contractor is entitled to an extension of time when delayed by a nominated subsubcontractor and there is no liability on the part of the employer for liquidated damages.
However, a particularly controversial area of risk allocation in respect of
nominated sub-contractors and suppliers is that of delay. The reason why this is
controversial is that, where such an extension of time is granted to main contractor, the
employer is deprived of the right to claim liquidated damages which the main contractor
would otherwise passed on to the delaying sub-contractor.22
Besides that, in the case of Westminster City Council v. Jarvis & Sons Ltd (1970)
7 BLR 64 , cites that the main contractor claimed extension of time by rely on phrase
‘delay on the part of nominated sub-contractor’ and has taken all reasonable steps to
avoid and reduce. Finally, the court held that no extension should be granted.23 Thus, it
shows to identify causes of delays are often difficult and the burden on the party seeking
to prove delay is a heavy one.24 Hence, what is the nature of the delay in nominated
subcontractor’s work? What are the main causes that contribute to this delay? What are
21
Aibinu,A.A, & Odeyinka,H.A.(2006). Construction Delays and their Causative Factors in Nigeria,
Journal of Construction Engineering and Management, 132, 667-677.
22
Murdoch,J. , Hughes, W. (2000). Construction Contracts- Law and Management, Spon Press, London.
23
Ibid, 21
24
Carnell,N.J (2005). Causation and Delay in Construction, Blackwell Publishing Ltd., UK
6
common circumstances causing delay in nominated subcontracting and their implication
to the main contractor?
In the view of the above, it is necessary for the parties in this construction
industry, mainly employer, architect, main contractor and nominated subcontractor to
have better knowledge of the causes of delay in nominated subcontractor’s work before
considering it’s the implication to the main contractor.
1.3
Objective of the Study
With reference to the above problem statement, the following is the objective of
this study:
1.
To identify circumstances which are caused to delay in nominated
subcontractor’s work and their implication to the main contractor.
1.4
Scope of the Study
7
The following the scope of study:
1.
The approach adopted in this study is case law based. The case will be
referred is only having connection to this study which is delay in nominated
subcontractor’s work. Although, the issue of delay is closely related to extension
of time and liquidated damages, these areas are not elaborated in detail.
2.
The standard forms of contract used in Malaysia, PAM 98, PWD203A and
CIDB 2000 will be compared and discussed. The court cases referred in this study
include Malaysia, Singapore, Australia, and English cases. There is no limit to the
cases chosen in terms of time frame, as long as it has not been overruled by higher
court and establishes a good law.
1.5
Significance of the Study
Basically, this study is expected to answer some of the uncertain issues that arise
in construction contracts such as issues that related delay in construction project. In
accordance to that, issues will be analyzed based on the interpretation and judgment by
the courts. Normally, the reason why these issues arise in the event of delay is due the
parties who are unclear and unaware of the causes of delay. Thus, by identifying the
ground or causes of delay in construction project, this study will be able to create
awareness to the parties consist of employer, consultant, contractor, sub-contractor and
supplier about their obligation in carrying out the works within the time, budget and
quality as in the contract.
8
In addition to that, it can be as a basic guidance for those who are involved in
construction industry for instance, developers, architects, engineers, quantity surveyors,
and etc. in relation to the issue of delay. Finally, hopefully it assists in avoiding
unnecessary disputes while assuring project success and better relationship among the
contractual parties.
1.6
Research Methodology
In order to achieve the objectives of this study, a systematic process of conducting
this study had been organized. Basically, this study process comprised of five major
stages, which involved identifying the study issue, literature review, data collection, data
analysis, conclusion and suggestions.
1.6.1 Stage 1 : Identifying The Research Issue
The study issue arises from intensive reading of books, journals and articles
which can be attained from the UTM library, Building Construction Information Centre
(BCIC) and Resource Centre of Alam Bina (RC).Based on the study issue, the objective
of the study has been identified. In addition to that, this research is executed to review the
relevant court decisions, with the intention of identifying and determining the common
causes constitutes delay claim in construction project.
9
1.6.2 Stage 2 : Literature Review
Collection of various documentation and literature regarding the study field is of
most important in achieving the research objectives. Besides, secondary data is collected
from reading materials in printing form like books, journals, research paper, magazines,
reports, proceedings, seminar paper as well as information from internet. It is important
to identify trends and developments over time in construction industry, as well as the
general state of knowledge concerning the subject area of delay such as background,
definition, type, procedures, relevant events and etc.
1.6.3 Stage 3 : Data Collection
In this stage, after identifying all the background and relevant issues through
literature review, legal cases based on written opinions of courts, which are related to the
study issue, will be collected from different sources such as All England Law Reports,
Malayan Law Journals, Singapore Law Report and etc. via UTM library electronic
database, namely Lexis-Nexis Legal Database.
1.6.4 Stage 4: Research Analysis
10
Once the previous related court cases under Malayan Law Journal are collected, it
will be conducted by reviewing and clarifying all the facts of the cases. The focus will be
on two parts, issues in delay caused by nominated subcontractors and the other is the
implications of the delay towards the parties involved in the contract especially the main
contractor. The circumstances which constitute delay in nominated subcontractor’s work
will be determined from the relevant cases. After issues presented by each cases,
thorough discussion and comparison will be done in order to achieve objectives of this
study
1.6.4 Stage 5 : Conclusion And Recommendation
In this stage, reviews on the whole process of the study will be made with the
intention to identify whether the study objective has been achieved. After presenting the
study findings, recommendations and limitations of the study, topics for further research
emerge.
11
•
RESEARCH ISSUE
The issue is what the circumstances are caused to delay in nominated
subcontractor’s work and implication to the main contractor.
ƒ
RESEARCH OBJECTIVE
To identify circumstances which are caused to delay in nominated
subcontractor’s work and implication to the main contractor.
ƒ
ƒ
ƒ
LITERATURE REVIEW
Time for performance and delay, occurrence of construction delay, types of
delay, and delay in phases of construction, consequences of delay, provision
of standard forms of contract, delay in other country, extension of time,
liquidated ascertained damages, sub-contracting.
RESEARCH METHOD
Data collection:
Legal cases in relation to the causes of delay in construction
Access to UTM library electronic database(Lexis-Nexis Legal
Database)
Collect cases from All England Law Report, Malayan Law
Journal, Singapore Law Report, Current Law Journal and etc.
Data analysis: Detail study on legal cases
DISCUSSIONS
CONCLUSION & RECOMMENDATIONS
Figure 1.1: Research Methodology
12
CHAPTER 2
DELAY IN CONSTRUCTION PROJECT
2.1
Introduction
Some delays are the result of occurrences beyond the control of either the
contractor or the owner. In addition to that, many delays however, result from one party
or the other’s failure to fulfill its contractual obligations. Any entity involved in the
construction process must understand its rights and responsibilities in each type of delay
situation.
To have such an understanding, employers, contractors, subcontractors, and
material suppliers must be able to recognize and distinguish among the various types of
delay. Thus, this chapter will explain on completion, definition and characteristics of
delay, relevant events set out under standard form of contract i.e. PWD 203, PAM 98,
and CIDB and briefly JCT 98.
13
2.2
Time is of The Essence
In construction contract, time may be stated either by reference to specified date
or by reference to a construction period. Thus, this part will consider the basic principles
of time in relation to construction contracts. Normally, when parties enter into a contract
it is normal that they specify the time in which performance of that contract must be
carried out.25
An interesting stipulation encountered frequently in building contracts is one
which purports to state that time is of the essence of the contract. The stipulations are
usually inserted in the preliminaries section of the bills of quantities or in some portion of
the contract specification. In many cases, it amounts to nothing more than just a well
intended exhortation to the contractor to apply himself diligently to complete the works
on time.26
However, Martin27 has highlighted that time of the essence is one of the most
misused contractual terms, particularly in construction contract. In the normal situation,
where a time for completion is expressly stated in the contract, thus the employer is
entitled to damages if the contractor does not complete on time. Besides that, time is of
the essence where failure to meet the particular date is a fundamental breach of contract
entitling the other party to treat the contract as repudiated and claims damages. On the
other hand, in a case of Miller v. London County Council28 cites that the parties lost the
benefit of the clause due to the fact that stated time is not definite clearly in the contract,
25
Martin,R.L.(2004), Introduction Time Within Contracts, Bullet-Proof EOTs Conference.July 27. Kuala
Lumpur. 1-21.
26
Fong,C.K. (2004) Law an Practice of Construction Contracts, 3rd Edition, Thomson Sweet & Maxwell
Asia, Singapore
27
Martin,R.L.(2004), Introduction Time Within Contracts, Bullet-Proof EOTs Conference.July 27. Kuala
Lumpur. 1-21.
28
Miller v. London County Council (1934), 151 LT 425
14
thus there was no date from which the liquidated damages could run and damages could
be recovered.
In relation to that, there is a situation under common law where time is shown to
be the essence of a contract; the court will hold that a delay in its performance constitutes
a breach which goes to the root of the contract, regardless of the magnitude of the breach
or the scale of its actual consequences. The innocent party, in the circumstances, is
entitled to terminate the contract and bring an action for damages against the defaulting
party.29
Under what circumstances can time be held of the essence of a contract? In
United Scientific Holding Ltd v Burnley Council, the House of Lords, citing with
approval a statement on the position in Halsbury’s Laws of England (4th Ed), ruled that
time should not be held to be of the essence unless the following conditions present:30
1. The parties must have expressly stipulated in the contract that conditions as to
time should be strictly complied with.
2. The nature of the subject-matter of the contract and the surrounding
circumstances demonstrate that time should be considered to be of the essence.
3. The party who has been subjected to unreasonable delay gives notice to the party
in default making time of the essence.
It must be a term so fundamental that its breach would render the contract
valueless, or nearly so, to the other party. It is noteworthy that where a term is not
originally of the essence it may be made of the essence by one party giving the other a
29
See United Scientific Holdings Ltd v. Burnley Council (1978)
Fong,C.K. (2004) Law an Practice of Construction Contracts, 3rd Edition, Thomson Sweet & Maxwell
Asia, Singapore
30
15
written notice to that effect.
31
In that case, failure to comply with the notice would be
evidence of a repudiatory breach rather than a repudiatory breach itself. This may be of
limited use in cases where a contractor consistently fails to meet time targets for reasons
which do not entitle him to an extension of time under the contract provisions. However,
in the case of most standard form building contracts, the provisions for determination (e.g
for failure to proceed regularly and diligently) adequately cover the situation.
There is authority that time will not normally be of the essence in building
contracts unless expressly stated to be so. This is because the contract makes express
provision for the situation the employer is wholly or partly responsible for the
contractor’s failure to complete on time where the employer cannot recover liquidated
damages unless the contract provides otherwise.32
In a nutshell, most contract documents provide that ‘time is of the essence’. This
clause makes time a material requirement of the contractor’s performance obligation and
ensures that the owner can recover delay damages for missed milestone or completion
dates. In the absence of such a clause, or an expression by the contract as a whole that
time is material element of performance , delay damages may not recoverable.
2.3
Contract Commencement and Completion Date (s)
Time is an extremely important issue in construction. Together with cost and
quality, it is a primary objective of project management and a major criterion by which
31
32
See Behzadi v. Shaftsbury Hotels Ltd (1992) Ch 1
See Peak Construction (Liverpool) Ltd. v. Mcknney Foundations Ltd. (1970)
16
the success of a project is judged. It has clearly stated in every form of contract including
PWD 203A, PAM 98, CIDB 2000 and JCT 98 which sets out:
PWD 203 (Clause 38 (b))
Unless the Contract Document shall otherwise provide, possession of the Site as
complete as may reasonably be possible but not so as to constitute a tenancy,
shall
be given on or before the Date for Possession stated in the Letter of
Acceptance of Tender to the Contractor who shall thereupon and forthwith
commence the Works and regularly and diligently proceed with and complete
the Works on or before the Date for Completion as stated in the appendix.
PAM 98 (Clause 21.1)
On the Date of Commencement stated in the Appendix, possession of the site
shall be given to the Contractor who shall thereupon begin the Works, and
regularly and diligently proceed with the same and complete the same on or
before the Date for Completion stated in the Appendix subject to any extension of
time in accordance with Clause 23.0 and/or sub-clause 32.
CIDB 2000 (Clause 17.2 (a)
Unless the Contract otherwise provides, the Contractor shall be entitled on or
before the Date of Commencement access to and possession of the Site or such
part of the Site to enable the Contractor to commence the Works. The
Contractor’s access to possession of the Site or such part of the Site shall not be
exclusive but shall be subject to the Employer’s rights under Clause 18 in respect
of other contractors.
17
JCT 98 (Clause 23.1)
On the Date of Possession of site shall be given to the contractor who shall
thereupon begin the Works, regularly and diligently proceed with the same and
shall complete the same on or before the Completion Date.
These clauses are identifies the three basic time-related issues as commencement,
progress and completion. In fact there are also two other issues where the contractor’s
continuing obligations after completion, and the extension of time which may be
available to the contractor when the work is delayed by certain specified clause.
In addition to that, the factor to be analyzed in assessing a delay claim is the
contract commencement, progress and completion dates. Based on the study carried out
by Scott33, it shows that construction contracts usually specify performance periods either
by setting forth commencement and completion dates or by establishing that the work
shall be completed within a specified number of days after the notice to proceed or
commencement of work.
Under the commencement factor, the issues at the beginning of the contract
involve giving possession of the site to the contractor, the timing of this possession and
potential delays to the possession. Normally, possession should take place not more than
two months after the successful contractor has been awarded the contract. Too speedy a
start may cause extra work and delay, rather than hastening the construction period. This
needs to be balanced against the needs of the client to avoid undue delay which may
cause extra costs.34
33
Scott,S. (1997), Delay Claims In U.K Contracts, Journal of Construction Engineering and Management.
238-242.
34
Murdoch, J., Hughes,W. (2000), Construction Contracts-Law and Management, 3rd Edition, Spon Press,
London
18
Where a contract specifies the date for the commencement of work, the employer
may be deemed to have warranted the readiness of the work site as the specified date.
The employer has to give possession of site to the contractor to permit him to carry out
his obligations.35 Clause 21.1 of the PAM 98 stipulates expressly what would otherwise
be implied as was in the case of Freeman v Hensler36 where if the work site is not a
sufficient state of readiness to permit the contractor to begin work on that date, the
employer may be liable for delay damages. In an attempt to avoid liability for such
delays, employers often include a statement that the specified commencement date is
only a projection or an estimate.
While, in the situation where a construction contract fixes a date for completion,
but makes no provisions to the rate at which the works are to progress, it appears that the
courts will not imply any such term. This is because, in the absence of any indication to
the contrary, the contractor has absolute discretion as to how the progress is planned and
performed, provided only that it is completed on time. 37
Furthermore, while many contracts require the contractor to submit a programme
for the execution of the works, this in itself does not mean that there is contractual
obligation to keep to that programme.38 Indeed, it should be appeared that, if there were
such an obligation, it would apply to both parties. Thus, employer would have to ensure
that the contractor was provided with all necessary information at such a time as to
enable compliance with programme.
In construction contracts, completion is a vague concept. The fact that building
projects can be handed over in a less than perfect state is to the advantage of both parties.
35
Rajoo,S. (1999). The Malaysian Standard Form of Building Contract (The PAM 1998 Form), Malayan
Law Journal, Malaysia.
36
Freeman v. Hensler (1900) 64 JP 260
37
See GLC v. Cleveland Bridge and Engineering Co Ltd (1984) 34 BLR 50
38
See Kitsons Sheet Metal Ltd v. Matthew Hall Mechanical and Electrical Engineers Ltd (1989) 47 BLR 82
19
This is clear when the legal meaning of completion is considered. A contractor cannot
truly be said to have totally performed the contract if a single item of work is missing or
defective. However, from a practical point of view, to delay the handover of something as
complex as a large building for a trivial breach would causing enormous inconvenience.
As a result, most building contracts require the contractor to bring the works to a state
described by such expressions as practical completion or substantial completion.
There is a question of whether or not a building is complete in this sense is
normally a decision for the contract administrator, based on an inspection of the works
and the exercise of reason. Practical completion can be defined as completion for all
practical purposes that are to say for the purpose of allowing the employers to take
possession of the works and use them as intended. 39
In addition to that, many contracts also include interim milestone dates,
specifying the dates upon which certain portions of the work are to be completed. The
inability to meet interim milestone dates may provide the basis for an acceleration
directive claims. To avoid misunderstandings and disputes, all parties should take great
care to clearly define contract commencement dates and the interim completion to meet
any such dates should also be clearly defined.
2.3.1 Substantial Completion
39
Westminster CC v Jarvis & Sons Ltd (1970) 7 BLR 64
20
Most of contract documents define “substantial completion” of the work as “the
stage in the progress of the work when the work or a designed portion thereof is
sufficiently complete so the owner can occupy or utilize the work for its intended use.
Robinson40 has emphasized that the phrase ‘substantial completion’ has been
adopted to describe the state of completion that the law would imply as the minimum
prerequisite for entitlement to payment under an entire contract in the absence of an
express requirement for entire completion. In addition to that, the word ‘substantial’
imports a somewhat indeterminate requirement for a level of achievement falling short of
completion.
In practice, acceptance of the contractor’s performance will reflect the
practicalities of the employer’s needs at the point in time. In the case of Hoenig v
Isaacs41, it shows that the plaintiff was employed by the defendant to decorate and
furnish a flat for the sum of £750, the term of payment being ‘net cash, as the work
proceeds and balance on completion.’ The defendant paid £350 on the ground that some
of the design and workmanship was defective. The judge held that there had a substantial
performance of the contract and the defendant was liable for £750, less the cost of
remedying the defects which was assessed at £56.
Generally, an owner may not assess, and a contractor is not liable for, delay or
liquidated damages after substantial completion. Thus, even when a contractor does not
fully completed the work specified by its contract, or has performed work in a defective
manner, the owner may prevented from collecting actual delay damages or liquidated
damages if the contractor has advanced work sufficiently to have achieved substantial
completion.
40
Robinson,N.M. (1996). Construction Law in Singapore and Malaysia, 2nd Ed. Butterworth Asia,
Singapore.
41
Hoenig v Isaacs (1952) 2 All ER 176
21
2.4
Definition of Project Delay
Today’s projects are technically complex and scheduled driven. Multidisciplinary nature of modern construction projects require management and execution by
highly skilled and task organized project team. For a successful completion of any
project, both the timing and cost have to be carefully planned, monitored and controlled.
Project must also meet the technical performance specifications and mission to be
performed.
Nevertheless, Ndekugri42 asserts that these objectives may be impeded by
situations where contractor fails to complete the works according to due date. Basically,
the term ‘delay’ is defined as the extension of time beyond planned completion dates
traceable to the contractors.43
Besides that, Turner44 has viewed delay as being treated only if it leads to failure
to achieve the completion date and not in its effects on the programmed before
completion. On the entirety principle, delay is assumed to be the responsibility of the
contractor, so leading to him having to pay liquidated damages, even if delay is not
necessarily his fault, unless contract specifically provides otherwise.
42
I.Ndekugri (1994). Delays, Extension of Time and Liquidated Damages under JCT80, Construction
Papers, Reading University. 35,1-14.
43
Kaming,P.F.,Olomolaiye,P.O, Holt,G.D. & Harris,F.C.(1996). Factors Influencing Construction Time
and Cost Overruns on High-Rise Projects in Indonesia. University of Wolverhampton,U.K.15, 83-94.
44
Turner,D.F.(1989). Building Contract Disputes-Their avoidance and Resolution, Longman Group UK
Limited.
22
Meanwhile, in business, a project is defined as delayed when its progress has not
matched the planned progress. On the other hand, delay also can be defined as a slowing
down of a work without stopping it entirely.45 Besides, in the layperson’s sense of the
word ‘delay’ simply means a postponement in the completion of a task. But, in the legal
sense of the word ‘delay’ can actually involve several distinct that present different legal
claims and defenses.46
All significant stages of the project must take place no later than their specified
dates, to result in total completion on or before the planned finish date. In general, delay
in progress of works has a significant effect to the project performance, it does not only
increase the time required to perform the contract work but may also increase the cost for
many of the parties involved. To recover damages for extended performance or obtain a
time extension, the delay must affect the overall project completion.
The client, consultants, contractors and the suppliers that are all interrelated to
form the life cyclic of construction may cause delays. Many things may occur on the
construction project to increase the time of performance of the overall project or affect
any given activity and most common causes differ under different site conditions. Very
long delays can be caused by pre-verification, legal or planning difficulties, shortage of
information, lack of funds or other resources, and a host of other reasons. However, a
common risk to projects is failure to start work on time and hardly be expected to finish
on time.47
Every construction contract considered time as the essence of the project.
Typically, a time period is specified as the contract duration. The contractor is obliged
under the contract to achieve substantial completion within the specified period.
45
Bartholomew,S.H.(1998). Construction Contracting/Business And Legal Principles, New Jersey.
Cox,A. & Thompson,I. (1998). Contracting for Business Success, Thomas Telford Publishing, U.K
47
Turner,D.F. (1989). Building Contracts Disputes-Their Avoidance and Resolution, Longman Group UK
Limited.
46
23
Unfortunately, proves that unexpected events can happen during the life of the
construction project and can affect the construction time necessary for the completion of
the work. When the contractors fail to complete the project within the contract period,
delay becomes the reality of the project. 48
If the panned timescale is exceeded, the original cost estimation and budget are
almost certain to be exceeded too. According to Yahya49, a project costs money during
every day of it existence from beginning of the program right through until the project
end, both in direct cost and indirect cost. Direct cost included material, machinery,
workforce and supervision costs. The “variable” or “direct” project costs of material and
workforce man-hours are time-related in several ways. Cost inflation is one factor, so that
a job started and finished later than planned can be expected to cost more because of
intervening materials price rises and increases in wages, salaries and other costs. While,
the “fixed” or “overhead” cost of management, administration, accommodation, services
and general facilities are directly time-related. If the project runs late, then these costs
will have to be come for a longer period than planned and must exceed their budget.
The success of a project depends on getting things done on time and within
budget. The time/cost relationship is illustrated in Figure 2.1. According to Figure 2.1, an
optimum point can be achieved with reasonable construction duration, well-planned
resources and maximum usage of resource.
Cost
Crash cost
48
Kumaraswamy,M.M & Chan,D.W.M. (1996). Contributors to Construction Delays, Construction
Management and Economics.The University of Hongkong, 16,17-29.
49
Yahya, I.A. (2006). Delay in Construction Projects, Proceedings of the 2006 One Day Seminar on
Mitigation of Delay in Construction Projects. November 23, University of Malaya
Minimum cost
Optimum Duration
24
Figure 2.1: The relationship between cost and construction duration
Source: Adopted from Yahya,I.A (2006)
2.5
The Nature of Delay Claims
The legal rights and obligations of the parties associated with performance delays
arise from either an express contract obligation to perform by given date or within a
specified time frame, or the implied obligation in every contract that each party will
specified time frame, or the implied obligation in every contract that each party will not
delay, hinder or interfere with the performance of the party.50 A party that hinders or
prevents performance by the other party, or that renders performance impossible, may not
benefit from its wrong. This rule of law prevents a party from taking advantage of its own
contract breaches. The same rule also provides a basis for the recovery of costs generated
by delays that are the fault or responsibility of one of the contracting parties.
Basically, the contractor’s obligation to complete the works by the completion
date is, like all such obligations, backed up by legal sanctions. Under certain type of
50
Smith, Curie & Hancock (2001), Common Sense Construction Law- A Practical Guide for the
Construction Profesional, John Wiley & Sons, Canada
25
contract, time is expressly or impliedly ‘of the essence’.51 Where this is so, any lateness
in performance entitles the other party to determine the contract. However, construction
contracts very rarely fall into this category. Consequently, the employer’s remedy for late
completion will be award of damages for breach of contract.52
Most of the studies has been carried out and indicate that common causes of
delays include inclement whether, labor disputes, ultimately equipment delivery,
defective specifications, changes of the work and differing site conditions. These kinds of
delays often increase both time required to perform the work and the cost of the work
where it will be elaborated in detail later.
2.6
Causes of Delay
There are many ways that a construction project can be delayed. Although it is
extremely difficult to generalize on what can cause delay, in most cases delay results
from a failure to plan and to assess possible occurrences and consequences.53
This section will explain the causes of delay by looking at the responsibility of the
major parties to the design and construction process for instance the owner, designer,
contractor, subcontractors, and suppliers. In assessing responsibility of the various parties
for delay, one must first start with a factual analysis of who did or failed to do what. This
51
Chappel,D.,Smith,V.P,Sims,J.(2005), Building Contract Claims, 4th Edition, Blackwell Publishing Ltd.,
UK.
52
I.Ndekugri (1994). Delays, Extension of Time and Liquidated Damages under JCT80, Construction
Papers, Reading University.35, 1-14
53
Carnell,N.J (2005). Causation and Delay in Construction, Blackwell Publishing Ltd., UK
26
requires a further examination of the contractual responsibilities and duties implied by
law. Generally, the causes can be classified as follows:54
2.6.1 Owner- Caused Delay
Owner-caused delay can be detailed further into four main categories55; delay
resulting from failure to fulfill contractual responsibilities, delay caused by changes made
in the work required under the construction contract, delay caused by interfering with
responsibilities of the contractor and failure to coordinate the activities of any separate
contractors. Although specific duties will depend upon the individual contract, the
owner’s contractual responsibilities can be generalized to responsibility to provide the
project site, approvals, finances and design as well as contract administrations.
The court in Miller v London Country Council (1934) 151 LT 425 supports that
there is power to extend the time for delays caused by the building owner, and such
delays have taken place, but the power to extend the time has not been exercised, either at
all or within the time expressly or impliedly limited by the contracts, it follows (unless
the builder has agreed to complete to time notwithstanding such delay) that the building
owner has lost the benefit of the clause.
54
Abdul Rahman,H. (2001), Critical Factors for Mitigation of Delay in Construction, National Conference
of Construction Industry Development 2001.
55
Nee,C.S. (2005). Extension of Time: The Issue of Delay Notification, Faculty of Built
Environment,UTM.Msc.Thesis.
27
Another situation, in the case of Percy Bilton Ltd v.Greater London Council
56
where judge held that an employer is not entitled to liquidated damages if by his acts or
omissions he has prevented the contractor from completing the works by the completion
date. The employer also cannot recover liquidated damages where he is wholly or partly
responsible for the contractor’s failure to complete on time.57
2.6.2 Designer-Caused Delay
According to Rahman et.al’s58 study, delay caused by designers generally results
from four common deficiencies; defects in design, slow correction of design problems,
tardy review of shop drawings and delays in tests and inspections. Besides that, their
finding also clearly explained the problems faced by the contractor with regards to the
quality of civil and structural design of The Chemistry and Biochemistry Building,
Faculty of Science, University Malaya. The effects of poor quality of design are listed as
major and minor problems.
Because of integral role the designer has in the development of the project design,
preparation of contract documents and contract administration, deficiencies in its
performance may have significant impact upon the progress of construction works. The
impact of the designer’s errors is first felt by the contractor who may or may not have
direct recourse against the designer depending upon the jurisdiction.
56
Percy Bilton Ltd V. Greater London Council (1982), 20 BLR 1
Peak Construction (Liverpool) Ltd v. Mckinney Foundations Ltd (1970), 1 BLR 111
58
H.A.Rahman, I.A. Abbas & M.A. Berawi (2001), Experiences in Handling Project Delays in
Construction, Conference paper of National Conference of Construction Industry Development, Johor
Bahru.1-15.
57
28
The relevant event is in two parts.59 In the first part, if the architect does not
provide the information as set out in the schedule, the contractor has a ground for
extension of time provided that other criteria are met. Meanwhile, the second part of the
relevant event refers to the failure of the architect to comply with the situation whereby
information release schedule has not been provided for or in the situation when the
information required is not listed on the schedule.
But if the contractor’s rate of progress is such that he will not finish by the due
date, the architect may have regard to this act. Moreover, the architect entitled to slow
down the rate of provision of information to the contractor in order to match the
contractor’s progress.60
2.6.3 Contractor-Caused Delay
Delay attributable to the contractor most often stem from five major causes;61
failure to evaluate the site or design, contractor management problems, inadequate
resources such as cash, material, or labor, poor workmanship and subcontractor failures.
The specifics contractor problems are often unknown to the owner and designer until
major slippage in the schedule is recognized. Even then, the exact reasons for the project
delay are often unknown. The contractor may allege a variety of causes which are
excusable and compensable.
59
Chappel,D.,Smith,V.P,Sims,J.(2005), Building Contract Claims, 4th Edition, Blackwell Publishing Ltd.,
UK.
60
Glenlion Construction Ltd. V. The Guiness Trust (1987) 39 BLR 89.
61
Kumaraswamy,M.M & Chan,D.W.M. (1996). Contributors to Construction Delays, Construction
Management and Economics.The University of Hongkong, 16,17-29.
29
In relation to that, under PWD203A Clause 43(j) will grant an extension of time
to the contractor if the securing of the materials is beyond his control, but the shortage
must have been one that could not have reasonably been foreseen at the date of the
closing of the tender. It should be noted that this clause is not applicable for shortage of
labour even though essential for the execution of the works.62
2.6.4 Subcontractor Delay
In general, the contractor is responsible to the owner for the none-excusable
delays incurred by its subcontractors.63 However, if the delay is caused by a second tier
subcontractor, and the general contractor and first tier subcontractor make diligent efforts
to expedite the work of the second tier contractor, the general contractor may be excused
for the delay. Since the second tier subcontractor’s action may be beyond the control of
the contractor and not due to contractor fault negligence, the contractor may be neither
assessed liquidated damages nor compensated for such delay.
Most of the contracts have been set out the provision that related to subcontractor
delay for instance PWD203A Clause 43(k), PAM98 Clause 23.7(vii), CIDB Clause
24.1(p) and JCT 98 Clause 25.4.7. However, this provisions has a limited meanings
where ‘delay on the part of the Nominated Sub-contractors’ is only means delay by the
nominated sub-contractor during execution of the sub-contract works. 64
62
Fong,L.C. (2004). The Malaysian PWD Form of Construction Contract, Sweet & Maxwell, Malaysia.
Chappel,D.,Smith,V.P,Sims,J.(2005), Building Contract Claims, 4th Edition, Blackwell Publishing Ltd.,
UK.
64
Percy Bilton Ltd. V. Greater London Council (1982) 20 BLR 1.
63
30
In this case, the contractor has an obligation to avoid or reduce delay by
nominated subcontractors. In fact, the contractor also has responsibility for nominated
subcontractor’s production of installation drawings where it has been derived from a case
of H. Fairweather & Co. Ltd. v. London Borough of Wandsworth (1987) 39 BLR 106.
2.6.5 Delay Not Caused by Parties to the Design and Construction Process
Most of the delays which are not caused by the owner, designer, contractor,
subcontractors, suppliers or other parties to the design and construction process are
excusable or non-compensable delays.65
In addition to that, these delays are beyond the control of any of the parties and
contract where some are dealt with specifically in the contract documents are adverse
weather, labor disputes, unavoidable calamities, acts of God and unusual delays in
transportation. Based on Fong’s views66, it concludes that a catch-all the contract may
designate “any cause beyond the contractor’s control” or “any cause beyond the
contractor’s control and without the fault or negligence of the contractor.”
The purpose of such clauses is to protect the contractor from the risk of the
unexpected. Foreseeability of the event is an important consideration. Therefore, just
because the contractor encounters one of the enumerated causes of delay, it may not be
entitled to a time extension if the event was unforeseeability.
65
A.M.Odeh & H.T. Battaineh.(2002) Causes of Construction Delay:Traditional Contracts, International
Journal of Project Management.20, 67-73
66
Fong,C.K.(2004). Law and Practice of Construction Contracts, 3rd ed.,Sweet & Maxwell
Asia,Singapore.
31
Causes of Delay
32
Owner-Caused Delay
Contractor-Caused Delay
-Failure to evaluate
-Contractor management
problems
-Inadequate Resources
-Construction defects
-The project site
-Approvals
-Owner’s financial
obligations
-Owner Contract
Administration
Responsibilities
-Changes in the works
-Owner interference
-Failure to coordinate
separate prime contractors
Designer-Caused Delay
Delay – Not Caused by
Parties
-Weather
-Acts of God
-Strikes and labor disputes
Subcontractor
-Design defects
-Slow correction
-Tardy Shop drawing
review
-Delay due to tests and
inspection
Figure 2.2: Causes of Delay
Source: Modified from H.A.Rahman (2006)
2.7
Type of Delay
33
Many studies have been carried out and proved that construction delays generally
adversely affect construction progress. Most disputes arise out of delays that are at least
partially the fault of the owner. As has already been shown, Kaming67 elaborated that
such delays can be due to suspension of work, slow owner responses to the contractor’s
questions, slow processing of shop drawings and other submittals, failure to provide
timely access to the construction site, differing site conditions, variation orders, and other
actions of the owner.
Most contracts provide additional contract time when owner-caused delays occur.
If the contract does not contain a no-damage for delay provision, the contractor will also
have a good chance to receive monetary compensation for owner-caused delays.
In addition to that, construction projects are delayed by numerous causes. Besides,
delay is considered a major cause of construction claim. Claims could be due to four
types of delay namely: 68
1. excusable delays
2. non-excusable delays
3. compensable delays
4. concurrent delays
2.7.1 Excusable Delays
67
Kaming,P.F.,Olomolaiye,P.O, Holt,G.D. & Harris,F.C.(1996). Factors Influencing Construction Time
and Cost Overruns on High-Rise Projects in Indonesia. University of Wolverhampton,U.K.15, 83-94.
68
Smith, Curie & Hancock (2001), Common Sense Construction Law- A Practical Guide for the
Construction Profesional, John Wiley & Sons, Canada
34
The occurrence of a construction delay raises the issue of who should bear both
the responsibility for, and the cost of that delay. In deciding this question, courts and
arbitration panels look both to the causes of the delay and to the express ad implied
obligations imposed by the parties.
Generally, the parties’ contract dictates whether a delay is excusable.69 Typical
examples of excusable delays to a contractor’s work are differing site conditions, design
problems, changes to the work, inclement weather, strikes and acts of God. As this list
implies, when unanticipated outside forces delay completion of the contractor’s work, the
delay is generally considered excusable.
Excusable delays are those not attributable to the contractor’s actions or in
actions, and typically include unforeseen events. Basically these events are beyond the
contractor’s control and are without fault or negligence on his/her part.
One of the events is force majeure which is usually considered to cover a host of
highly unusual and superhuman event.70 In the classic case of LeBaupin v. Crispin71, the
court accepted that the term is used with reference to all circumstances independent of the
will of man, and which it is not in his power to control.
Most contracts specifically enumerate the types of excusable delays for which a
time extension is due. These terms vary from contract to contract. Because contracts
differently allocate the risk of both non-performance an unanticipated occurrences
beyond control of the parties, the precise term of the contract are critical.
69
S.Alkass, M.Mazerolle & F.Harris(1995). Construction Delay Analysis Techniques, Shool of
Construction,Engineering and Technology,University of Wolverhampton,UK.14,375-394
70
Fong,C.K.(2004). Law and Practice of Construction Contracts, 3rd ed.,Sweet & Maxwell Asia,Singapore
71
Lebaupin v. Crispin (1920) 2 KB 714
35
Some contracts exhaustively list each type of excusable delay and seek to limit
the granting of extensions to the listed delays. Other contracts may contain somewhat less
extensive list, but may conclude the enumeration excusable delays with catchall phrase
such as “causes beyond the control, and without the fault or negligence of the contractor.”
Each party to a construction contract must have a clear understanding of the intended
scope and operation of such a clause when requesting time extensions or analyzing time
extension requests.72
2.7.2 Non-Excusable Delays
In contrast of excusable delay, a non-excusable delay provides no bases for
recovery of either the time or the monetary impact of the delay.73 Moreover, the legal
consequences of non-excusable delay are borne by the perpetrator of the delay. Put
another way, the party that causes a non-excusable delay likely creates an excusable, and
under certain circumstances a compensable, delay to the other party’s work.
Consequently, this type of delay presents no entitlement to a time extension or
delay damages for the contractor if the delay can be proved to have affected the whole
project. The owner however could be entitled to liquidated damages. For instance, a nonexcusable delay would be when a contractor fails to provide sufficient manpower to
complete the job on time.
72
Abdul Rahman,H. (2001), Critical Factors for Mitigation of Delay in Construction, National Conference
of Construction Industry Development 2001.
73
S.Alkass, M.Mazerolle & F.Harris(1995). Construction Delay Analysis Techniques, Shool of
Construction,Engineering and Technology,University of Wolverhampton,UK.14, 375-394
36
In addition to that, non-excusable delay is for which the party assumes the risk of
delayed performance and its consequences. Common non-excusable delays for a
contractor include failure to perform work within the allotted time frame. In the
Australian decision of Multiplex Construction Pty Ltd. V. Abragus Pty. Ltd74
demonstrates that the employer is likely to suffer in the event that the works are delayed.
Thus the remedy for breach by the contractor of his obligation to complete works on time
lies generally in damages.
2.7.3 Compensable Delays
Basically, compensable delay is when the contractor will be entitled to additional
compensation for the cost of delay and as well as additional time for contract
performance and it may be granted extension of time and money if there is any change in
scope of work, late supply of owner materials or information, impeded site access,
differing site conditions and failure to provide timely and review shop drawings.75
Furthermore, this type of delay is delays for which the innocent party is entitled to
both a time extension and additional compensation for the resulting costs.76 In other
word, the contractor is entitled both due to insufficient time of the employer to provide all
necessary instruction and details. For instance, where the owner or employer causes a
delay, if the contract does not include a provision exonerating the owner from liability for
74
Multiplex Constructions Pty Ltd v. Abragus ty Ltd (1992)
Kaming,P.F.,Olomolaiye,P.O, Holt,G.D. & Harris,F.C.(1996). Factors Influencing Construction Time
and Cost Overruns on High-Rise Projects in Indonesia. University of Wolverhampton,U.K.15, 83-94.
76
Neodox Ltd v Swinton and Pendlebury Borough Council (1958) 5 BLR 34
75
37
such delays, the contractor is entitled to both compensatory damages and a time
extension.
Building contracts do not usually require the contractor to utilize all of the
performance time allotted by the contract. Recognizing this, courts held owners liable for
delaying contractors where, even though the project was finished within the contractually
allotted time, the contractor was prevented from achieving an early finish. Thus, timely
completion does not necessarily preclude the recovery of delay damages where a
reasonable as–planned schedule would otherwise have yielded early completion.
2.7.4 Concurrent Delays
Concurrent delay is in addition to excusable delay and non-excusable delay, as an
analytical framework for identifying and evaluating construction delays. Concurrent
delays are delays that occur, at least to some degree, during the same period of time.77 In
construction, the term concurrent delay is a term of art that refers to the situation when an
excusable compensable delay and non-excusable delay occur at the same time or during
overlapping time periods.
According to Alkass78, concurrent delays refer to delay situations when two or
more delays (regardless of the type) occur at the same time or overlap to some degree.
Besides, this concurrent delay is used to denote a period of project overrun which is
caused by two or more effective causes of delay which are of approximately equal
77
Fong,C.K.(2004). Law and Practice of Construction Contracts, 3rd ed.,Sweet & Maxwell Asia,Singapore
S.Alkass, M.Mazerolle & F.Harris(1995). Construction Delay Analysis Techniques, Shool of
Construction,Engineering and Technology,University of Wolverhampton,UK. 375-394
78
38
causative potency.79 In a nutshell, this type of delays can be described as expression
which explains a situation where here are more than one causes of delay operating at a
particular point of time.
There is a case that deal with the question of dominance is Galoo Ltd and Others
v. Bright Grahame Murray where it was held that the ‘but for’ test of causation was not
sufficient and it was clear that if there was a breach of contract by a defendant entitling
him to claim for damages, it must first be held to be an effective or dominant cause of his
loss. In considering whether a breach duty imposed upon a defendant whether in contract
or in tort, the court had to arrive at decision on the basis of the application of common
sense.
However, if there two concurrent causes of delay, one of which is a relevant
event, and the other is not, then the contractor is entitle to an extension of time for the
period of delay caused by the relevant event notwithstanding the concurrent effect of the
other event.80 Thus, to take a simple example, if no work possible on site for a week not
only because of exceptionally inclement weather (a relevant event), but also because the
contractor has shortage of labour (not a relevant event), and if to work during the week is
likely to delay the works beyond the completion date by one week, then if he considers it
fair and reasonable to do so, the architect is required to grant an extension of time of one
week. He cannot refuse to do so on the grounds that the delay would have occurred in any
event by reason of the shortage of labour.
Concurrent delay creates complex legal issues regarding assessing responsibility
for overall project delay.81 The analysis of concurrent delays may be further complicated
if:
79
80
81
J.Marin (2002). Concurrent Delay, A Paper of the Society of Construction Law, London.
Fong,C.K.(2004). Law and Practice of Construction Contracts, 3rd ed.,Sweet & Maxwell Asia,Singapore
Henry Boot Construction (UK) Ltd v. Malmaison Hotel (Manchester) Ltd (1999) 70 CLR 32
39
1. The delay periods are different lengths
2. The delay periods are not totally concurrent
3. The delay periods are periods have different impact on the number and types of
work activities they affect and the severity of the impact upon the affected work
activities is different for each of the delays.
2.8 Extension of Time (EOT)
Most of the building contracts contain express provisions under which the period
allowed for the contractor to undertake and complete the works can be extended. These
provisions cater for delays that are neither the fault nor the responsibility of the
contractor.
Based on Martin’s82 views, traditional extension of time clauses contain a list of
delaying events for which the contract administrator is empowered to grant extensions of
time and the forms of currently used in Malaysia are no exception to this.
Furthermore, Ndekugri83 added that an examination of the list makes two facts
very clear. Firstly, the matters include not only those which are attributable to the
employer but also events outside his control. Secondly, the list is by no means exhaustive
of possible events for which the employer might be responsible.
82
Martin,R.L.(2004), Introduction Time Within Contracts, Bullet-Proof EOTs Conference.1-21.
I.Ndekugri (1994). Delays, Extension of Time and Liquidated Damages under JCT80, Construction
Papers, Reading University. 35,1-14.
83
40
Every contract has asserted under particular provisions, for instance PWD 203A
under clause 43, PAM 69 and PAM 98 under clause 23 and CIDB under clause 24.
According to PWD 203A conditions of contract include lists of relevant events. Under
Clause 43 PWD 203A provides for the Superintending Officer to grant an extension of
time on specified grounds and extension of time is grantable on those grounds and no
other.
The operation of clause 43 modifies the liability of the Contractor to complete the
Works by the Date for Completion specified in the Appendix and to pay Liquidated and
Ascertain Damages to the Government upon the failure of the contractor to meet the
deadline. Nevertheless, this clause contained limited grounds for extending time and did
not cover many common delaying events, for instance failure to give possession of site
on the due date. It has been demonstrated in a case of Peak Construction (Liverpool) Ltd.
v. Mckinney Foundation Ltd. (1970) 1 BLR 11 and also in Thamesa Designs Sdn.Bhd v.
Kuching Hotels Sdn.Bhd. & 3 Ors. (1993) 2 AMR 2083.
On the other hand, PAM 98 has similar list of the relevant events to PWD 203A.
Clause 23.0, asserts that an employer could impose an absolute obligation on the
contractor to complete the Works by a certain date and regardless any delay
circumstances. Thus, the contractor may be imposed liquidated damages for failure to
meet the completion date. 84
CIDB conditions of contract make it a pre-requisite to the contractor’s right to an
extension of time that he has carried out the Works or any section of the Works with due
diligence and has taken all reasonable steps to avoid or reduce such delays.85 In addition
84
85
Henry Boot Construction Ltd v. Central Lancashire New Town Develoment Corporation (1980)1 BLR 1
Clause 24.1 of CIDB Standard Form of Contract for Building Works 2000 Edition
41
to that, Martin86 highlights the relevant events which are common to PWD 203A and
PAM 98 forms, the CIDB conditions include other relevant events such as:
i)
an instruction from the Superintending Officer to resolve a discrepancy in or
between any of the contract documents(Clause 24.1(f))
ii)
compliance with Statutory Requirements for which he employer is responsible or
which results in a variation (Clause 24.1 (g))
iii)
testing or opening up the works not provided for under the contract (Clause
24.1(h))
iv)
an instruction to suspend any work (Clause 24.1(k))
v)
an instruction in relation to a Prime Cost or P.C or Provisional Sum giving rise t a
variation.
Hence, every each standard forms of contract are aimed at allocating the risk of
non-completion between parties. It reduces the contractor’s risk in relation to delays by
entitling him to an extension of time for practical completion on account of delay based
on various circumstances.87
Extension of time clauses, therefore have various purpose such as to retain a
defined time for completion, to preserve the employer’s right to liquidated damages
against acts of prevention and to give contractor relief from his strict duty to complete on
time in respect of delays caused by designated neutral events.88 On the other hand, these
clauses provide for the machinery for notification of delay by the contractor and the grant
of extension of time by the architect on specified grounds. An extension of time is
grantable only on those grounds under these clauses.
86
Martin,R.L.(2004), Introduction Time Within Contracts, Bullet-Proof Eots Conference. 1-12.
Rajoo, S. (1999).The Malaysian Standard Form of Building Contract (The PAM 1998 Form), Malayan
Law Journal, Malaysia.
88
Eggleston,B. (1997). Liquidated Damages and Extension of Time. 2nd ed. Oxford: Blackwell Science Ltd.
87
42
2.9
Liquidated Ascertained Damages (LAD)
As has been mentioned earlier in previous chapter, liquidated ascertained
damages will be briefly discussed in this study. In general, liquidated ascertained
damages means a fixed and agreed sum as opposed to unliquidated damages which is a
sum neither fixed nor agreed, but must be proved in court, arbitration or adjudication. In
detail, liquidated ascertained damages are compensatory in nature and should be a
genuine attempt to predict which is not related to probable damages but rather stipulated
in terrorem.89
In other words, liquidated ascertained damages also can be explained as a
monetary amount fixed and agreed by the parties in advance, as the damages payable in
the event of a specified breach of contract. In building contracts commonly, liquidated
damages are payable only for the contractor’s failure to complete on time. A provision
for liquidated ascertained damages is enforceable if the amount fixed is a genuine preestimate of the loss likely to be caused by the breach. In contrast, a ‘penalty’ clause is
invalid. If the agreed sum is extravagant in relation to the greatest possible lost, it will be
held to be penalty. Liquidated ascertained damages are recoverable without proof of loss.
There are numbers of classic cases demonstrated in relation to this discussion such as
Dunlop Pneumatic Tyre Co. Lt v. New Garage Motor Co. Ltd. (1915) AC 79, Clydebank
Engineering & Shipbuilding Co. v. Castaneda and Others (1905) AC 6 and Miller v.
London County Council (1934), 151 LT 425.
89
Chappel,D.,Smith,V.P. & Sim.J.(2005). Building Contract Claims, Blackwell Publishing Ltd. UK.
43
2.10
Summary
In construction, time is extremely important. It can be divided into three basic
time-related namely commencement, progress and completion. According to that, a
proper planning is very important in order to execute the construction works until
completion within time and budget provided. Thus, the contractor’s obligation is to
complete the works by the completion date given. Under certain types of contract, time is
expressly or impliedly ‘of the essence’. Where this is so, any lateness in performance
entitled the other party to terminate the contract. However, contracts very rarely fall into
this category. Consequently the employer’s remedy for late completion will be an award
of damages for breach of contract. On the other hand, the contractor may be granted
extension of time if the cause falls in the relevant events provided under forms of
contract.There are many causes of delay in construction. Basically, delays often increase
both time required to perform the work and the cost of the work. Besides, delay is
considered a major cause of construction claim. Claims could be due to four types of
delay such as excusable delays, non-excusable delays, compensable delays, and
concurrent delays.
CHAPTER 3
44
SUBCONTRACT DELAYS
3.1
Introduction
The construction process requires an extensive diversity of skills and materials
not all of which may be sourced from the resources of a single construction firm. Thus,
most contractors depend on a sub-contractors and suppliers to undertake specialist works
or other builder works.90 To understand the problems in relation with sub-contract delays,
therefore it is important to have better knowledge of the nature of sub-contracting,
responsibilities associated with nominated sub-contractor, the main contractor and the
employer.
For that reason, this chapter will explain the definition of main contractor,
nominated subcontractor and domestic subcontractor. In addition to that, discussion will
be focused on the provisions that have been sets out in the contract (PWD 203A, PWD
203N, PAM 1998, PAM Subcontract Form, CIDB 2000 and CIDB.B (NSC)/2002) which
are related to nominated sub-contractor, main contractor and employer. Besides that,
breach of contract where default by nominated sub-contractor and delay in nominated
sub-contractor’s works also will be discussed in this chapter.
90
M.John & Hughes.W. (2000). Construction Contracts-Law and Management, 3rd ed.,Spon Press.London.
45
3.2
Nature of Subcontracting
In normal practice, main contractors are to an ever-increasing extent, reducing
their dependence on directly employed labour. A main contractor too may have or be in
the process of creating a contract with an employer to carry out certain works. According
to Atkinson91 , it has been shown that a main contractor may consider that part of the
works is best carried out by another contractor. Subcontractors play vital role when they
are hired to perform specific tasks on a project.92 Moreover, subcontractors are specialist
agents in the execution of a specific job, supplying manpower, besides materials,
equipment, tools or designs.93
Nevertheless, Murdoch94 says that subcontracting as a phenomenon is not unique
to the construction industry as other business seems to be following in the same way. In
construction, there are several ways in which persons may come to be employed on the
works or on the site, or possibly on both, despite the contractor’s right of possession and
his obligation to carry out and complete the works. Thus, the processes of distinguishing
of the right and obligation through subcontracting will be discussed as follows:
3.2.1 Assignment
91
Atkinson,D.(1999). Subcontracting, Atkinson Law, London.
D.Arditi,M.Asce & R.Chotibhongs (2005). Issues in Subcontracting Practice, Journal of Construction
Engineering and Management, 131, 866-876.
93
Shimizu,J.Y & Cardoso,F.F (2002). Subcontracting and Cooperation Network in Building Construction:
A Literiture Review, Proceedings IGLC,10 August.
94
M.John & Hughes.W. (2000). Construction Contracts-Law and Management, 3rd ed.,Spon Press.London.
92
46
According to Turner95, assignment can be identified when the contractor passes
over his performance of the whole of the works and rewards for so doing to another,
while not being relieved of his contractual liability over performance. Keating96 added
that in considering assignments it is essential to distinguish between the benefit and the
burden of a contract.
In the normal building contract, the burden on the contractor is the duty to
complete the works, and his benefit is the right to receive the contract money when it
falls due. The burden on the employer is the duty to pay such money, and the benefit is
the right to have the works completed.97
However, in general, it has been shown that the burden of a contract cannot be
assigned without the consent of other party. Building contracts commonly, contain
clauses restraining assignment and sub-letting.98 Therefore, a contractor cannot assign
his liability to complete the work somewhere else. 99 However, the contractor would be
entitled to assign his rights but if the contract forbids assignment, such an assignment is
ineffective to transfer rights to assignee against the employer as cited in the case of
Helstan Securities Ltd. v. Hertfordshire County Council (1978) 3 AII ER 262, Messrs
Renhold contracted with the council for road works on ICE,4th edition. Condition 3
provided: “The contractor shall not assign the contract or any part thereof or any benefit
or interest therein or thereunder without the written consent of the employer.” Renhold
purported to assign their rights to payment under the contract to the plaintiffs. The Judge
held that the assignment was ineffective.
3.2.2 Domestic Subcontract
95
Turner, D.F.(1994). Building Contract- A Practical Guide, 5th ed.,Longman Scientific & Technical, UK.
Keating,D. (1978). Building Contracts, 4th ed. London Sweet & Maxwell.
97
Ibid.
98
Smith,V.P & Furmston,M. (1984). A Building Contract Casebook, Granada Publishing
99
Nokes v. Doncaster Amalgamated Collieries Ltd (1940) A.A 1014 (H.L)
96
47
On the other hand, Fong100 asserts that a contractor passes over a part only of the
works and rewards as in abovementioned, while remaining directly related to the
employer and continuing with the consultants. This is called domestic subcontracting or
sub letting.
A domestic subcontractor is one in whose selection and appointment the employer
normally plays no part, other than simply giving consent where this is required under the
terms of the main contract.101 However, a major practical problem in relation to subcontracts is the way in which the main and sub-contract fit together. Provisions of the
main contract cannot be read into subcontract unless they have been expressly
incorporated. 102
It has clearly stated in the case of Smith and Montgomery v. Johnson Bros Co.Ltd.
(1954) 1 DLR 392, the defendants were the main contractors to construct a tunnel sewer
for the City of Hamilton through the Hamilton mountain. The plaintiffs, who were
miners, undertook a subcontract for tunneling according to the dimensions and
specifications as set forth in the contract between the City of Hamilton and the defendant.
Unfortunately, the judge held that these words were not apt to incorporate the terms and
conditions of the main contract into the sub-contract.
3.2.3 Nominated Subcontract
100
Fong,C.K.(2004). Law and Practice in Construction Contract, 3rd ed., Sweet & Maxwell Asia.
M.John & Hughes.W. (2000). Construction Contracts-Law and Management, 3rd ed.,Spon
Press.London.
102
Smith,V.P & Furmston,M. (1984). A Building Contract Casebook, Granada Publishing
101
48
There is another situation in subcontracting whereby the contractor has no option
about whether to subcontract and little option about to whom to subcontract, as the
architect’s nomination will usually have to be accepted. Normally, the nomination is
indicated by a prime cost sum in the tender document and is made post contractually.
This situation is named as nominated subcontracting.103
In this approach, it allows the employer or his professional team full involvement
in the early selection of the individual company, using the subcontractor’s expertise for
design and coordination.104 Besides, nomination is the practice by which an employer,
through the contract administrator, selects a person who then enters into sub-contracts
with the main contractor.105
In addition to that, the contractual position between contractor and nominated
subcontractor must be found in the subcontract. In A. Davies & Co.Shipfitters Ltd. v.
William Old Ltd
106
cites that the defendant was the main contractor for the erection of a
new store on JCT 63 terms, which provided for certain work to be subcontracted to a
subcontractor which was nominated by the architect. The architect obtained a tender for
this work from the plaintiff and instructed the defendant to accept it. The defendants sent
an order to the plaintiff on their standard printed form, which contained on its reverse
printed conditions which included a ‘pay when paid’ clause. The plaintiffs wrote
thanking the defendant for the order and carried out the work. The employer became
insolvent before having paid for all the work. The Judge held that the contract between
plaintiff and defendant was on the basis of the defendant’s printed conditions, which the
plaintiff had accepted. The defendant was only liable to pay for the work in so far he had
himself been paid by the employer.
103
Fong,C.K. (2004). Law and Practice in Construction Contract, 3rd ed., Sweet & Maxwell Asia.
Robinson, M.N. et.al(1996). Construction Law in Singapore and Malaysia, 2nd ed., Butterworth Asia.
105
M.John & Hughes.W. (2000). Construction Contracts-Law and Management, 3rd ed.,Spon
Press.London.
106
(1969) 67 LGR 395
104
49
3.3
Relationship of The Parties In Construction
Traditionally, the construction process is undertaken by two groups which
consists of consultants and contractors where both working on behalf of their client. In
addition to that, there are also subcontractor and suppliers who assist the contractor in
various ways and tasks.107 The contractual relationship between main parties is illustrated
in Figure 3.1.
Based on that, each of the parties is increasingly sub-divided into specialist
interests such that any building project will bring together a large number of different
specialists. With reference to that, this part will briefly discuss on responsibilities of each
parties namely main contractor, nominated subcontractor and domestic subcontractor.
107
Kwakyee,A.A (1997). Construction Project Administration in Practice, The Chartered Institute of
Building.
50
Nominated
Supplier
Architect
Employer
Contractor
Nominated
Subcontractor
Key:
Contractual
Procedural
Agreement/warranty,
optional with suppliers
Figure 3.1:
Contractual relationships of the parties
Source
Adopted from S.Colin
:
3.3.1 Main Contractor
Supplier
Domestic
Subcontractor
51
The production aspects of projects are undertaken by building contractors who are
essentially commercial companies that enter into a contract to construct development
projects.108 According to JKR 203A, contractor has been defined as the person or
persons, partnership, firm or company whose tender for the Works has been accepted and
who has or have signed this Contract and includes the Contractor’s personal
representatives, successors and such other persons or body of persons to whom the
Contractor has assigned or sub-let pursuant to Clause 27 of these Conditions. 109
Based on Fong’s110 views, the contractor may be sole proprietor or partnership or
body corporate typically registered under the Companies Act 1963. It includes persons
vicariously performing the contract for the contractor. While, PAM 98 defined that the
contractor as the other principal party to the main contract and may have any status and
thus could be a natural or legal person whether incorporated or not as a company,
partnership, or joint venture. 111
In short, a main contractor is the parties who are enter the contract with the
employer to execute works and to organize his considerable resources. Besides, the main
contractor is also responsible to carry out his works and diligently proceed with the same
and shall complete the same on or before the completion date as stated in the contract.
3.3.2 Nominated Subcontractor
108
Kwakye,A.A(1997). Construction Project Administration-In Practice, Addison Wesley Longman.
Fong,L.C.(2004).The Malaysian PWD Form of Construction Contract, Sweet & Maxwell Asia.
110
Ibid.
111
Rajoo.S(1999). The Malaysian Standard Form of Building Contract (The PAM 1998 Form), 2nd ed.,
Malayan Law Journal Sdn.Bhd.
109
52
The system of nominated subcontracting in the construction industry is common
and widespread and it is seems to have a number of advantages for the employer.
112
For
that reason, it enables the employer to select a subcontractor to the contractor to carry out
certain work, particularly specialist works such as M & E works. Besides, the employer
may obtain the most competitive price for the execution of the work.
Furthermore, in PWD 203A form of contract provides the definition for
nominated subcontractor as “all specialists, merchants, tradesmen and others executing
any work or services, or supplying any materials or goods for which Prime Cost Sums (or
P.C Sums) are included in the Bills of Quantities or for which the SO has given written
instructions in regard to the expenditure of Provisional Sums.”113
Thus, the contractor is entitled to choose his own subcontractors, Clause 27.0 of
the PAM 1998 Form allows the architect to nominate subcontractors whom the contractor
must employ to carry out specific works. In the case of North West Metropolitan
Regional Hospital Board v. TA Bickerton & Sons Ltd. (1970) 1 AII ER 1039 has cited that
the employer remains bound to renominate in the situation where the nominated
subcontractor did not carry out his work as specified in the contract. According to
Rajoo114, nominated subcontractor under PAM 1998 Form is a person selected by the
architect to do defined work as a subcontractor on the site of the main contractor.
3.3.3 Domestic Subcontractor
112
Rawling,B.E. (2001).Nominated or Named, HKIS Newsletter 10(5)b June 2001.
Fong,L.C.(2004).The Malaysian PWD Form of Construction Contract, Sweet & Maxwell Asia.
114
Rajoo.S(1999). The Malaysian Standard Form of Building Contract (The PAM 1998 Form), 2nd ed.,
Malayan Law Journal Sdn.Bhd.
113
53
The
key
contractual
difference
between
‘nominated’
and
‘domestic’
subcontractors is that with domestic subcontractor the main contractor has the freedom of
choice over which subcontractor to employ and the terms on which they are employed.115
And nominated subcontractors as it has been explained earlier is a person selected by the
employer. In addition to that, the root principle of any domestic sub-contract is that a
main contractor selects and appoints the subcontractor to perform work for which he, the
contractor has tendered as part of the main contract.116
Most of the standard form of contract does not provide any provision that related
to the domestic subcontracting. Thus, domestic subcontracts are the result either of
individual negotiation or commonly, of imposition by one side or the other. 117
Discussion on domestic subcontractor for the purpose of this study is limited
because the focus is more on nominated subcontractor.
3.4
Relationships between employer and subcontractor
Under the traditional common law position is that a subcontract executed between
a main contractor and subcontractor cannot give rise to any privity of contract between
the subcontractor and employer. This is because subcontracting operates as a subletting
of the physical construction of the works only and does not constitute an assignment of
rights and liabilities under the main contract. The main contractor continues to be
115
Cheeseman,G.(2004). And the Nomination are…., Construction Management,RCIS.
Turner,F.D.(1990). Building Contract Disputes-Their Avoidance and Resolution, Longman Scientific
and Technical,UK.
117
M.John & Hughes.W. (2000). Construction Contracts-Law and Management, 3rd ed.,Spon Press
116
54
responsible to the employer for the whole of the works and to be liable for any defective
work delay or any other default committed by his sub-contractors.118
In addition to that, the main contractor is acting as an agent for the employer
when he negotiates and awards the nominated subcontracts. However, a situation where
the circumstances were indeed exceptional was encountered in the classic case of Wallis
v. Robinson (1862) 130 RR 841 which cited that an architect negotiated with a
subcontractor, in the presence of the employer to execute work in a certain manner which
suggested that the subcontractor would be paid extra for this work.
The court held that, a separate contract was created between the employer and the
subcontractor, so that the subcontractor was entitled to recover the additional payment
directly from the employer. The decision in this case, turned on its facts where it seems
that the employer and the subcontractor had intended to enter into a separate contract.
A subcontractor who has entered into a contract with the main contractor to which
the employer is not a party has no cause of action against the employer for the price of
work done or goods supplied under his contract,
119
unless he sues under valid
assignment. Whether he has any lien on goods supplied, the property in which has passed
to the main contractor.120 Likewise the employer has no claim in contract against a
subcontractor unless he can rely on a collateral warranty.
In relation to that, if a
subcontractor or supplier warrants the quality of his work or goods, in consideration of
the employer causing the contractor to enter a contract with the subcontractor or supplier,
the employer can sue the subcontractor or supplier for loss caused by breach of that
118
Ryoden (M) Sdn.Bhd. v. Syarilkat Pembinaan Yeoh Tiong Lay Sdn.Bhd.(1992) 1 MLJ 33.
Hampton v. Glamogan County Council (1917) A.C 17
120
Pritchett,etc.,Co. Ltd. v. Currie (1916) 2 Ch 515 C.A
119
55
warranty.121 The relationship arising in a subcontract is illustrated in the Figure 3.2
below.
Employer
Main Contract
Main
Contractor
Collateral Warranty
Sub Contract
Subcontractor
Figure 3.2: Relationships arising from a Subcontract
Sources: Adopted from Fong.C.K.(2004)
3.5
121
Relationship between the main contractor and subcontractor
Shanklin Pier Ltd. v. Detel Products (1951) 2 K.B 854.
56
In this part, consideration will be based on the effect of terms in the main contract
in order to have effective explanation of relationship between both parties. Normally,
problems arise where the terms which the main contractors are required to observe under
main contract turn out to be inconsistent with his obligations to the subcontractor under
the subcontract.122
Furthermore, in the classic case of Chandler Brothers Ltd v. Boswell (1936) 3AII
ER 179 asserts that an engineer was empowered under the terms of the main contract to
order the main contractor to remove a subcontractor. The main contractor did not provide
for this contingency in terms of the subcontractor. As a result, he was placed in an
untenable position where he would commit a breach of the subcontract if he carried out
the engineer’s instruction o remove the particular subcontractor and if he did not, he
would commit a breach of the terms of the main contract. In the event, the main
contractor chose to comply with the order of the engineer to remove the subcontract for
delay. However, in so doing, the main contractors were held to have committed a breach
of the subcontract.
Besides, a subcontract may be drafted to expressly incorporate certain terms of
the main contract into the subcontract in order to forestall these inconsistencies. Where
the terms of incorporation are clear, the effect of incorporation may be readily
determined.123
Nevertheless, terms of incorporation may not always clear. There is a question
whether a materials term of the main contract has been effectively incorporated in a
subcontract. Thus, in a classic case of Geary, Walker & Co Ltd v. W Lawrence & Sons
122
123
Russell,J.(2006). Protecting The Subcontractor’s Entitlements, Electrical Times, April 2006 edition.
Jurong Engineering Ltd v. Paccon Building Technology Pte. Ltd (1999) 3 SLR 667 (CA)
57
Ltd (1906) cites that “the term of payment for the work….shall be exactly the same as
those set forth in clause 30 of the (main)….contract.” In relation to that, problems with
incorporation are exacerbated where the structure of the main contract is of a different
contractual character from that of the subcontract. 124
In a nutshell, in the absence of any express incorporation clause, there is some
dicta to the effect that recourse may be made to the terms of the main contract to resolve
ambiguities in the subcontract in favor of a meaning which would enable the main
contractor to comply with the main contract as demonstrated in the case of Gilbert Ash
(Nothern) Ltd v Modern Engineering (Bristol) Ltd (1973) 3 AII ER 195.
3.6
Provision under Subcontract Form in relation to Nominated Subcontractor
In order to have a better understanding of responsibilities and rights of each party,
discussion on the provisions in the standard form of contract is needed. Therefore, this
study will be based on the provisions in nominated subcontract mainly related to delay
and extension of time. According to Arditi and Chotibongs’s125 study, they points out that
subcontractors are very important to the successful completion of most construction
projects, yet the many issues involved in subcontracting practice are seldom
acknowledged.
3.6.1
124
Delay and extension of time
Fong,C.K. (2004). Law and Practice in Construction Contract, 3rd ed., Sweet & Maxwell Asia.
D.Arditi,M.Asce & R.Chotibhongs (2005). Issues in Subcontracting Practice, Journal of Construction
Engineering and Management, 131, 866-876.
125
58
It is unusual for standard form of contract not to contain provisions dealing with
the entitlement of extension of time.126 In addition to that, extension of time as
contractual remedies is so essential to the interest of the employer.
127
In order to grant
extension of time, the delay occur will be measured according to type of delay that has
been explained in chapter 2 such as excusable, non excusable, compensable and
concurrent.128
Generally, delays are classified according to liability into two major types,
namely excusable or non excusable delays.129 Delay causes by nominated subcontractor
are one type of excusable delay. According to PWD 203A Clause 43 (k), PAM 1998
clause 23.7 and CIDB 2000 clause 24 (p) assert that the main contractor are entitled to
claim for extension of time if there is delay on the part of nominated subcontractor.
In relation to that, the provisions of extension of time under subcontract are also
considered in this study. Responsibilities of each party on extension of time differ. In
PWD 203N Clause 26(a), PAM 1998 Subcontract Clause 8.1 and CIDB.B (NSC)/2002
Clause 19.2, it has been set out that the subcontractor is required to give written notice of
the delay progress or completion of the subcontracts works or any section to the
contractor. Moreover, the architect or the S.O is required to grant reasonable extension of
time after receiving the subcontractor’s notice of delay and the main contractor shall give
the notice of delay from the subcontractor to the employer’s responsibilities.130
126
Ventrella,T(1994). A contractor’s Guide to Contract Law, Dunnick Publications Ltd., London
Robinson, M.N. et.al(1996). Construction Law in Singapore and Malaysia, 2nd ed., Butterworth Asia.
128
Alkass.S, Mazerole,M. & Harris, F.(1995). Construction Delay Analysis Techniques, Construction
Management and Economics, 375-394.
129
Ibid.
130
Rajoo.S(1999). The Malaysian Standard Form of Building Contract (The PAM 1998 Form), 2nd ed.,
Malayan Law Journal Sdn.Bhd.
127
59
Based on that, it proves that giving notice by the subcontractor is a condition
precedent to the performance by the architect (PAM 1998) or the S.O (PWD 203A) of his
duties under the contract. The subcontractor’s notice of delay is essential before the
architect is obliged to consider, prior to practical completion, whether an extension of
time might be appropriate. 131
An extension of time can be granted by the architect (PAM 1998) and the S.O
(PWD 203A) by the reasons fixed under the contract. There are a number of causes of
delay which may give rise to an extension of time to the subcontractor, for instance,
variation order, late commencement of works, late of information and other items which
give an entitlement to the nominated subcontractor as well as contractor for an extension
of time for the completion of the main contract.132
3.6.2 Relevant Events in Standard Form of Contract
In general, many of the building contracts contain similar provisions where the
procedure and grounds for granting extension of time set out in the contracts are about
the same. This is due to the reason that commonwealth countries such as Malaysia,
Singapore and Hong Kong have drafted their own standard forms of contract based on the
English JCT contracts.133
131
Fong,L.C.(2004).The Malaysian PWD Form of Construction Contract, Sweet & Maxwell Asia.
I.Ndekugri(1994).Delay, Extension of Time and Liquidated Damages under JCT80, Construction Paers,
Reading University,1-14.
133
Nee,C.H.(2005). Extension of Time: The Issue of Delay Notification, Faculty of Built
Environment,UTM.
132
60
In addition to that, every each contracts also set out ground for granting extension
of time for example PWD 203 under clause 43, PAM 1998 under clause 23.7 and CIDB
2000 under clause 24. A fundamental point is that the time for completion can only be
extended where the contract permits, and strictly in accordance with the contract
provisions. Nevertheless, if delay is caused by some event which the contract does not
cover, then the contractor cannot claim an extension, nor can the employer insist on
giving one.
This study will focus more on delay in nominated subcontractor’s work, thus
provision under subcontract form such as PWD 203N Clause 26(a), PAM 1998
Subcontract Clause 8.1 and CIDB.B (NSC)/2002 Clause 19.2 will be referred accordingly
with the main contract. From provisions of these forms of contracts, it can be concluded
that the nominated subcontractor shall forthwith written notice of the delay in the
progress of the subcontract works to the main contractor. In addition to that, the notice
must be substantiated by relevant events that causing to delay, expected effect of the
delay and an estimate of time required. Further to that, the main contractor shall inform
the architect thereof and of any representations made to him by the nominated
subcontractor.
In PAM 1998 Subcontract Clause 8.2, it has been provided that the relevant
events causing delay for which extension of time may be given. It has been expanded that
after the architect had received the information is of the opinion that the completion of
the subcontract works is likely has been delayed beyond the period based on two main
reasons whereby the first reason is any of the matters specified in the Clause 4.1(
Variations) and Clause 6.1 (Commencement and Completion of Subcontract Works) of
this subcontract or by any act or omission of the main contractor which is included his
subcontractors, his servants or agents, and the second reason is for any (except delay on
the part of the subcontractor) for which the main contractor could obtain an extension of
time for completion under the main contract. For that reason, the architect shall provide
61
his written consent to the main contractor to grant the extension of time to the nominated
subcontractor.
Basically, it could be said that most of the building contracts has set out similar
grounds for granting extension of time in the main contract which is incorporated in the
subcontract. Thus, most common grounds has been adopted from the main contract which
are force majeure, exceptionally inclement weather, insurance contingencies, civil
commotion, strikes and lockout, architect or superintending officer’s instructions,
variation,testing and inspection, late supply of information, employee’s licensees,
materials and goods supplied by the employer, delay or failure to give site possession,
contractor’s inability to secure labour, goods and materials, act of prevention or reach of
contract by employer. The cause or causes of delay of which the nominated subcontractor
enumerate in the notice must fall under the events listed are to qualify for an extension of
time. Table 3.1 below demonstrates the grounds for granting extension of time provided
in different standard forms of contract.
62
Table 3.1: Comparison of Grounds for Granting Extension of Time in Different
Standard Forms of Contract
Forms of Contract
Relevant Events
PWD 203
PAM 98
CIDB
Force Majeure
√
√
√
Exceptionally inclement weather
√
√
√
Insurance Contigencies
√
√
√
Civil commotion, strikes, lockout
√
√
√
Architect or superintending
officer’s instructions
Discrepancies in or between
contract documents
Variation
√
√
√
√
Discovery of antiquities and fossils
√
Testing and inspection
√
√
Prime cost or provisional sum item
which give rise to a variation
Late supply of information
√
√
√
Employer’s Licensees
√
√
√
√
Materials and goods supplied by
employer
√
Delay or failure in giving
possession of site
√
Disputes with neighboring owners
√
Contractor’s inability to secure
labour, goods and materials
√
√
One or ore of the “excepted risks”
√
Compliance with statutory
requirements which result in a
variation
Act of prevention or breach of
contract by employer
√
Any other ground
√
√
63
According to Table 3.1 above, it shows that most of the forms of contract are
provide relevant events which interest to both parties under main contract. However, for
this study, the ground which has been provided in the main contract will be applied in the
subcontract. It could be said that, the most common event is force majeure which this
term refers to acts of God or man-made events which beyond the control of the parties.
However, it must have a restricted meaning as several of the events normally classified
under this term such as war, strikes and lightning are dealth with separately.134
In the classic case of Lebeupin v Crispin (1920) 2 KB 714, McCardie J accepted
that force majeure is normally used ‘with reference to all circumstances independent of
the will of man and which it is not in his power to control’.135 Fundamentally, it is clearly
used to describe situations where an unforeseeable event makes execution of the contract
wholly impossible and is of such important that it cannot be overcome.
136
Nevertheless,
the parties may always revert to force majeure as a residual provision where the events
do not fall precisely within the detailed list.137 It has been demonstrated in the case of
Penang Development Corporation v. Teoh Eng Huat (1992) 1 MLJ 749.
Exceptionally inclement weather is one of the most common grounds on which a
claim or extension of time is made.138 However, the adverse weather conditions do not
excuse the contractor’s non-performance. The case of Maryon v. Carter (1830) 4 C & P
295 is illustrative. The effect of the exceptionally inclement weather must be assessed at
the time and in relation to the work being actually carried out and not when it was
134
I.Ndekugri (1994). Delays, Extension of Time and Liquidated Damages under JCT80, Construction
Papers, Reading University. 35,1-14.
135
Rajoo.S(1999). The Malaysian Standard Form of Building Contract (The PAM 1998 Form), 2nd ed.,
Malayan Law Journal Sdn.Bhd.
136
M.John & Hughes.W. (2000). Construction Contracts-Law and Management, 3rd ed.,Spon Press
137
Rajoo.S(1999). The Malaysian Standard Form of Building Contract (The PAM 1998 Form), 2nd ed.,
Malayan Law Journal Sdn.Bhd.
138
I.Ndekugri (1994). Delays, Extension of Time and Liquidated Damages under JCT80, Construction
Papers, Reading University. 35,1-14.
64
programmed to be carried out by the contractor at the time of delay.139 In addition to that,
to succeed with a claim on this ground the contractor as well as nominated subcontractor
must produce evidence that the conditions complained against are exceptional for that
time of year and location. Weather records covering a reasonable period as well as site
diaries will normally be determined by architects.140
According to Table 3.1, which delay is caused by some specified perils, which
normally covered by works insurance, the nominated subcontractor may be entitled to an
extension of time. The principles of this case can be applied in the delay in nominated
subcontractor’s work. In Surrey Health Borough Council v. Lovell Construction (1990)
48 BLR 108 has construed that even if the loss or damage is brought about by omission or
default of the contractor, it appears that this clause still applies. In addition to that, some
extension of time clause clearly stated that the main contractor shall not be given
extension time where instruction or acts of the employer or the architect or
superintending officer are necessitated by or intended to cure any default of breach of
contract by the main contractor. Based on this provision, the man contractor is not
entitled to a time extension for anything that is his own intentional default as opposed to
his default or negligence.141
This Table 3.1 also shows that civil commotion, strikes and lockout has been
provided in most of the forms of contract. Under this clause the events which justify an
extension of time are civil commotion, strike or lockout affecting any of the trades
engaged in the preparation, manufacture or transportation of any of the goods or materials
required for the works. The first event listed is civil commotion and the essential element
here is that of tumult or turbulence has cited in the case Levy v. Assicurazioni Generali
(1940) 2 AII ER 437. This decision is important to employers. Delays which can be
139
Turner,D.F.(1994). Building Contracts – A Practical Guide, Longman Group Limited,U.K.
Kaming,P.F.,Olomolaiye,P.O, Holt,G.D. & Harris,F.C.(1996). Factors Influencing Construction Time
and Cost Overruns on High-Rise Projects in Indonesia. University of Wolverhampton,U.K.15, 83-94.
141
Rajoo.S(1999). The Malaysian Standard Form of Building Contract (The PAM 1998 Form), 2nd ed.,
Malayan Law Journal Sdn.Bhd.
140
65
attributed to a strike or civil commotion do not entitle contractors to claim loss and /or
expenses against the employer.
Besides, late instruction, drawings and other information is considered as
important ground for the claim or extension of time. This is the most controversial
relevant event. The most frequent use of this ground for extension is in relation to late
receipt or non-receipt of information and instructions on nominations. 142
In short, the nominated subcontractor may attempt to claim for extension of time
in the event of project delay. It must be also noted that an extension of time can only be
granted on the relevant events expressly set out in the contract as in the Table 3.1.
3..6.3 Breach of Contract
Basically, if one of two parties to a contract breaks the obligation which the
contract imposes, a new obligation will in every case arise, a right of action conferred
upon the party injured by the breach.143 A breach of condition at law is a major breach. In
addition to that, when the breach is of a condition and so fundamental in its effect, it may
entitle the aggrieved party to treat the contract during or before progress as repudiated by
the other, so as to bring it to an end, or to treat the precise and apparently binding terms
of the contract as overruled.144
142
I.Ndekugri (1994). Delays, Extension of Time and Liquidated Damages under JCT80, Construction
Papers, Reading University. 1-14.
143
Guest,A.G.(1975). Anson’s Law of Contract, Twenty Fourth Edition., Clarendon Pres.Oxford.
144
Turner,F.D.(1990). Building Contract Disputes-Their Avoidance and Resolution, Longman Scientific
and Technical,UK.
66
The recognition of fundamental breach should be done carefully. Thus, in a case
in which such breach was alleged over the non-availability of a hired ship due to the
defendant’s fault for 20 weeks out of a total hire period of 24 months, it was held that
there was not fundamental breach, as the plaintiff could still obtain a large part of the hire
benefit.145 On the other hand, the installation of defective pipework which led to the
complete destruction of a mill by fire was held to be fundamental.146
In this study, the circumstances where defaulting party breach of the contract and
whether be liable to pay damages to the innocent party will be discussed.
3.6.4 Damages for non-completion
In practice, building contract provides a remedy for breach of contract by the
contractor of his obligation to complete the works on time lies generally in damages. For
that reason, apart from the contracts must be set time is held to be of the essence for the
contract. The same principle commonly applies under subcontract, where the nominated
subcontractor liable for damages in the event of delay in completion of the works. In
essence, the nominated subcontractor’s delay allows the main contractor to be granted an
extension of time.147
In PAM 1998 Subcontract Clause 7.1, it provides that if the subcontractor fails to
complete the subcontract’s work or any section within stipulated time or extended period,
145
Hong Kong Fir Shipping Co. Ltd v. Kawsaki Kisen Kaisha Ltd (1962)
Harbutt’s Plasticine Co. Ltd. v. Wayne Tank & Pump C. Ltd. (1970)
147
Fong,C.K. (2004). Law and Practice in Construction Contract, 3rd ed., Sweet & Maxwell Asia.
146
67
the subcontractor shall pay or allow to the main contractor a sum equivalent to any loss or
damages suffered caused by the failure of the subcontractor. Nevertheless, exceptional
has been sets out in Clause 7.2, it shows the main contractor may not entitle to claim any
loss or damage under Clause 7.1 unless the architect shall have issued to the main
contractor a certificate in writing stating that in his opinion the subcontract works o the
relevant section ought to be have been completed within specified time.
3.7
Nature of Delay in Nominated Subcontracting Work
The primary nature of this event is delay in the execution of work by one of the
nominated subcontractors or nominated suppliers. Usually, a contractor will responsible
towards an employer for whatever nominated subcontractors and suppliers do or fails to
do.
148
However, the contractor is allowed to secure an extension and avoid damages
when a nominated subcontractor has defaulted in the manner stated, provided that
thecontractor has done everything reasonable in the circumstances to mitigate the effects.
In addition, if the contractor has taken appropriate action, he is not liable to the
employer.149
Therefore, PAM 1998 Clause 27.5 deals with delay in the completion of the
subcontract works by the nominated subcontract and the circumstances in which the
contractor may grant an extension of time to the nominated subcontractor. It provides
that, the contractor shall not grant any extension of time to a nominated subcontractor
without the written consent of the architect which must not be unreasonably withheld.
148
Turner,F.D.(1990). Building Contract Disputes-Their Avoidance and Resolution, Longman Scientific
and Technical,UK.
149
Chappell,D., Smith,V.P, & Sims,J.(2006). Building Contract Claims, 4th ed., Blackwell Publishing.
68
The use of the phrase delay on the part of the nominated subcontractors and
nominated suppliers came in for some judicial criticism in Westminster Corporation v.
J.Jarvis 150which arose from JCT 63. According to the court the phrase does not mean the
delay caused by nominated subcontractors or nominated suppliers. It was construed as a
failure to complete the nominated subcontract works within the appropriate subcontract
period. It followed that nominated subcontractors who completed on time but had to
return to carry remedial work could have caused the sort of delay described by the
phrase.151
According to PWD 203A Clause 43(k) and PAM 1998 Clause 23.7(vii) and CIDB
Clause 24.1(p), the contractor is allowed to an extension of time on account of delay on
the part of the nominated subcontractors or nominated suppliers. Furthermore, the
contractor would be entitles to an extension of time in any event if the reason the same
reasons as set out in the PAM 1998 Clauses 23.7(i) to 23.7(vi) and Clauses 23.7(viii) to
23.7(xiii). As the case of Westminster Corporation v. J.Jarvis, the case demonstrated that
this clause is limited and where it was held by the House of Lords that such ‘delay on the
part of nomination subcontractors’ was confined to delay in completing the subcontract
works.
Thus, as has been illustrated by the case if a nominated subcontractor ostensibly
completes his subcontract works but later found to be breach and has to return to the site
to remedy breach, that is not ‘delay on the part of the nominated subcontractor’.152
Accordingly, in those circumstances, the contractor is not entitled to an extension of time.
The House of Lords explained their reasoning as follows:
150
(1970) 1 WLR 637 1 AII ER 943
I.Ndekugri(1994).Delay, Extension of Time and Liquidated Damages under JCT80, Construction
Papers, Reading University,1-14.
152
Rajoo.S(1999). The Malaysian Standard Form of Building Contract (The PAM 1998 Form), 2nd ed.,
Malayan Law Journal Sdn.Bhd.
151
69
“…..the subcontractor is not in delay so long as, by the subcontract completion
date, he achieves such apparent completion that the contractor is able to take
over, notwithstanding that the work so apparently completed may be defective.”
On the other hand, if the breach is discovered before the subcontract works or the
supply of goods or materials period ends so that completion is then delayed beyond the
completion date, either case while the breach is being remedied, this would amount to
‘delay on the part of the nominated subcontractor’ and thus gives rise to a right to
extension of time.153
The distinction between delays on the part of nominated subcontractor and delay
caused by a nominated subcontractor can be illustrated in figure 3.3 and figure 3.4 as
follows.
NSC Programme completion period
Delay on the part of
NSC
Default rectification
Default discovered
Actual completion date
Figure 3.3: Delay on the part of Nominated Subcontractor
Source: Adopted from Robinson et.al (1996)
153
Robinson, M.N. et.al(1996). Construction Law in Singapore and Malaysia, 2nd ed., Butterworth Asia.
70
With reference to the illustrations in Figure 3.3, it established the contractor’s
claims and entitlement to an extension of time. In a contrasting situation, no liquidated
damages may be claimed by the employer, and the employer suffers his own loss caused
by the delay. In other words, both nominated subcontractor and employer lose, while the
contractor is compensated.
NSC Programme completion period
Delay caused by NSC
Default rectification
(Apparent
completion)
(Default
discovered)
Actual
completion
date
Figure 3.4: Delay caused by Nominated Subcontractor
Source: Adopted from Robinson et.al (1996)
However, according to illustration in Figure 3.4, it demonstrated that the situation
whereby the contractor cannot claim extension of time and must be therefore either
accelerates his programme to meet the original date for completion or suffer liquidated
damages for delay.154 In fact, the employer is either not affected or is recompensed for his
own loss. Further, the contractor claims his disturbance cost (which includes any
liquidated damages he has suffered under the main contract) from the nominated
subcontractor. As a result, nominated subcontractor loses and both contractor and
employer are compensated.
154
Westminster City Council v. Jarvis & Sons Ltd. (1970) 7 BLR 64
71
3.8
Circumstances Contributes to Delay in Nominated Subcontractor’s Works
Further discussion will be focuses more on circumstances that constitute to delay
in nominated subcontractor works will be carried out in this study. The circumstances are
illustrated based on the court cases. However, for those circumstances which are not
supported by the court cases will be substantiated by the relevant clauses of the standard
form of contract (i.e PWD203A, PAM 98, CIDB 2000). The circumstances which will be
discussed on account of common causes which are contribute delay in nominated
subcontractor’s works. The circumstances are include late instructions, delay in delivery
of materials and goods by the employer, late payment, changes, delay in giving
possession of the site, suspension of works, discrepancies between contract drawings and
contract bills, main contractor fail to provide and erect facilities, interference by the main
contractor, negligence by the nominated subcontractor, delay to rectify damages and
default by the main contractor.
3.8.1 Late Instructions
Basically, this problem is caused by the late constructional information furnished
by the S.O (PWD 203A) or architect (PAM 1998) for execution of work. In practice,
under main contract, the S.O (PWD 203A) or architect (PAM 1998) is obliged to provide
the main contractor with further reasonably necessary information to amplify the
drawings or bill of quantities as and when necessary. Meanwhile, under subcontract PAM
1998 Clause 5.1 asserts that, a nominated subcontractor may requires the main contractor
to request the architect to specify in writing the provision of the main contract which
empower the issue of the said instruction. Further to this, the main contractor shall
convey the architect’s answer of the request.
72
However, the failure of the S.O (PWD 203A) or architect (PAM 1998) to provide
the instruction in good time puts the employer in breach of contract. Thus, the
subcontractor has to make the request for the information at the right time. 155 In Neodox
Ltd v. Swinton and Pendlebury Borough Council (1958) 5 BLR 34, the main contractor
alleged that there was an implied obligation on the part of the employer to provide all
necessary information ‘in sufficient time to enable the contractor to execute and compete
the works in an expeditious and economic manner and/or sufficient time to prevent the
main contractor being delayed in such execution and completion.” Nevertheless, Diplock
J ruled that:
“What is reasonable time does not depend solely upon the convenience and
financial interest of the claimants (contractors). No doubt it is to their interest to
have every detail cut and dried on the day the contract is signed, but the contract
does not contemplate that. It contemplates further details and instructions being
provided, and the engineer is to have a time to provide them which is reasonable
having regard to the point of view of him and his staff and the point of the
Corporation (employer), as well as the point of view of the contractors.”
With reference to that, delay may occur in nominated subcontractor’s work when
the instruction is not given in appropriate time. It was illustrated in the case of Shen Yuan
Pai v. Dato’ Hood Teck & Ors.156 This case cites that, the plaintiff was the main
contractor, and the defendant was the employer, had contracted for the construction of an
office building in Thompson Road in Kuching. The defendant was found that contractor
had delay in completion. The plaintiff contended that the delay has been caused by
nominated subcontractor because of the lack of instructions or directives by the architect.
It was held that the delay was solely by the defendant’s default and that such failure led
to delay in the progress of the main contract works. Thus, the main contractor was not
liable to pay damages. By this case, it proves that the late instruction by the architect can
155
Fong,L.C. (2004). The Malaysian PWD Form of Construction Contract, Sweet & Maxwell
Asia,Malaysia.
156
Shen Yuan Pai v. Dato’ Wee Hood Teck & Ors (1976) 1 MLJ 16
73
be results delay in nominated subcontractor. In addition to that, the contractor is not
entitled to receive necessary information to enable early completion too. This principle
has been illustrated in Glenlion Construction Ltd v. Guiness Trust (1987) 39 BLR 89.
3.8.2 Delay in delivery of materials and goods by the employer
The employer may choose to supply some of the materials or goods for
incorporation in the works. In PAM 1998 Clause 23.7 (ix) has provided that the delay or
failure by the employer to supply materials and goods which it has been agreed to
provide for the works which may entitle the nominated subcontractor to attain an
extension of time.
It must be noted that, in PAM 1998 there is no express provision in the conditions
to allow for the possibility of the works being carried out using materials and goods
which are to be supplied by the employer. However, certain circumstances do in reality
exist and if there is a delay caused the employer in supplying the materials and goods,
thus the main contractor should be entitled to an appropriate extension of time. Same
goes if the delay occurs in nominated subcontractor’s work. It could be possibly if the
employer caused to delay by failure to deliver such important material for nominated
subcontractor’s work. It has been established in the case of Lightweight Concrete
Sdn.Bhd. v. Nirwana Indah Sdn.Bhd. (1999) 5 MLJ 351. Based on this case, the plaintiff
was nominated subcontractor to design, manufacture, supply, delivery and installation of
the pre-finished concrete panel with granite slabs. The defendant was developer
(employer).The plaintiff was late in completion. Thus the defendant claimed the damages
for the delay. However, the plaintiff contended that the delay was due to the neglect of
74
the defendant himself to secure sufficient and timely granite to the plaintiff. It was held
that the defendant claimed was dismissed.
In view of the above case, it has proven that circumstances may contribute in
extending of completion date in nominated subcontracting. For that reason, the employer
should liable to be granted an extension of time to the main contractor if that delay which
has been illustrated affected to the work programme.
3.8.3 Late Payment
This study will also look an overview of this circumstance which is considered as
a significant cause of delay in nominated subcontractor’s work. Problems in the payment
delays become common in construction contract.157It includes where the architect or
quantity surveyor fails to consider or evaluate claims submitted by the main contractor
within reasonable time, delay payment by the employer, payment is disputed by the main
contractor or the employer, problem with certificate and withhold the payment without
reasonable reasons.
Normally, as provided in standard form of contract, the main contractor has to pay
the nominated subcontractor when he receives payment certificates from he employer
(PAM 1998)158 or when he receive payment from the employer (PWD 203N).159 In other
word it also known as pay when paid clause. Based on PAM 98 Clause 27.3, has asserts
157
Croudace Ltd. v London Borough of Lambeth (1986) 33 BLR 25.
Rajoo.S(1999). The Malaysian Standard Form of Building Contract (The PAM 1998 Form), 2nd ed.,
Malayan Law Journal Sdn.Bhd.
159
Fong,L.C. (2004). The Malaysian PWD Form of Construction Contract, Sweet & Maxwell
Asia,Malaysia.
158
75
that the nominated subcontractor is entitle to be paid by the main contractor within 14
days after received the certificate from the architect. The question that should be noted is
the main contractor fails to pay the nominated subcontractor and whether the main
contractor entitles to withhold the money which is has been certified by the employer.
The non payment of the employer does not necessary due to employer default in
payment. The employer might withhold the payment due to default by the main
contractor. The problem arise is when the nominated subcontractor request for payment
but he rely on the clause pay when paid. There is a case illustrated that this clause is
enforceable. In DEC Electric, Inc. v. Raphael Construction Corp.160 under the
subcontract provided that no funds will be due to the subcontractor unless the main
contractor is paid by the owner in accordance to the sworn statement. Thus, the court
found that as a matter of law, that language was a condition precedent and that the
subcontractor was not entitle. Further discussion on the cases which are same issues such
as Antara Elektrik Sdn.Bhd. v. Bell & Order Bhd (2002) 3 MLJ 321, Engineering
Construction (PTE) Ltd v. Ohbayashi – Guni Ltd. (1986) 1 MLJ 218, CSK Electrical Co.
Bhd. V. Regional Construction Sdn. Bhd. (1987) 2 MLJ 763, and Alliance (Malaya)
Engineering Co. Sd. Bhd. v. San Development Sdn. Bhd. (1974) 2 MLJ 94.will be carried
out in the following chapter. According to above elaboration, it shows that this
circumstance can be delayed in nominated subcontracting and the entire construction.
3.8.4 Changes Out of Scope of Work
160
(1989) 538 So. 2d 963, 964.
76
Most of the standard forms of contract provide a clause in relation to changes or
commonly known as variation. This clause is one of the important provisions for
covering any changes in terms of scope of work procedure, materials and goods to be
used. However, by this clause it also creates some problem to delay in nominated
subcontractor’s work. In addition to that, the Privy Council decision can be referred as in
Mitsui Construction Co. v. The Attorney General of Hong Kong (1986) CLJ 134. Thus ,
it is conceivable, in most cases that the basis for determining a contractor’s entitlement to
time extension on this ground could be different from the basis for determining the effect
of a variation on the contract price.
Furthermore, both of the subcontracts PWD 203N and PAM 1998 Subcontract
have been provided that the provisions on the scope of changes. As a result, the time of
the construction work can be delayed by this circumstance. This discussion will be
referred to substantial changes where normally require work beyond the scope of the
contract. In the case of Peter Kiewit Sons Co. v. Summit Construction Co. (DDC 1968)
292 F, the plaintiff was a main contractor and he substantially increased the magnitude
and difficulties of the subcontractor’s back filling work on missile project. The court
found that the main contractor breached the subcontract by ordering changes beyond the
scope of the contract.
3.8.5 Delay in giving possession of the site
77
Normally, the main contractor and nominated subcontractor may suffer due to the
failure on the part of the employer to grant him timely possession of site. Furthermore, if
the delay or any deferment without reasonable reason may constitutes a breach of
contract and sets time to become at large.161
The contractor shall from time to time make available to the nominated
subcontractor such part of the site and main contracts works and such means of access
thereto within the site is reasonably necessary to enable the nominated subcontractor to
execute his works.
162
However, the main contractor shall not be bound to give to the
nominated subcontractor possession or exclusive control of any part of the site or the
main contract works. With reference to that, the problems may arise when the part of the
site of subcontract work not ready for the nominated subcontractor to carry out his work.
Subsequently, this problem may constitute to delay in the subcontract works thus, the
issue is whether the main contractor is entitling to an extension of time.
According to Rajoo163, the contractor may allowed an extension of time if the
delays of the nominated subcontractors or suppliers fall within the relevant events which
identified in PAM 1998 Clause 23.7(except clause 23.7(vii)). However, PWD 203A
Clause 38(d) has highlighted that the S.O is empowered to issue an instruction to revise
the Date for possession in the event of any delay in the giving of possession of site or
sections or part thereof by the date for possession. In consequence the S.O is also
empowered to grant the appropriate extension of time pursuant to PWD 203 Clause
43(g). However, it is clearly provided that the contractor would not entitle to any losses
161
Turner,F.D.(1990). Building Contract Disputes-Their Avoidance and Resolution, Longman Scientific
and Technical,UK
162
Clause 11(a), PWD 203N Standard Form of Subcontract
163
Rajoo.S(1999). The Malaysian Standard Form of Building Contract (The PAM 1998 Form), 2nd ed.,
Malayan Law Journal Sdn.Bhd.
78
or damages caused by such delay in giving possession of the site.164 Thus, in order to
determine the circumstances that cause to delay in nominated subcontractor, further
discussion on the case of Thamesa Designs Sdn. Bhd. v Kuching Hotels Sdn.Bhd. (1993)
2 AMR 2083) will be carried out in chapter 4.
3.8.6 Suspension of works
Basically, on account of the main contractor fails to make a payment in
appropriate time, the nominated subcontractor have the right to suspend the further
execution of the subcontract works until such payment being paid and such period
suspension shall be deemed to be an extension of and be added to the period of
completion.165 Moreover, in PAM 1998 Clause 11.7, it emphasizes that any extension of
time granted to the nominated subcontractor in this respect will not entitle the main
contractor to an extension of time under the main contract.
In addition to that, it has been illustrated in the case of J.M. Hill v London
Borough of Camden (1980) 18 BLR 31,CA. According to this case, the contractor was
held entitled to suspend the works because he was being paid certified sums and his claim
for loss and expense were being ignored by the architect. As a result, the contractor was
held to have reasonable grounds for suspending the works. But, the problem may arise if
the nominated subcontractor suspends the work without any reasonable grounds. With
reference to that, delay in nominated subcontractor has a potential to be occurred by this
occasion.
164
Fong,L.C.(2004).The Malaysian PWD Form of Construction Contract, Sweet & Maxwell Asia.
Rajoo.S(1999). The Malaysian Standard Form of Building Contract (The PAM 1998 Form), 2nd ed.,
Malayan Law Journal Sdn.Bhd.
165
79
3.8.7 Main contractor fail to provide and erect facilities
Under normal construction, a main contractor has an obligation to provide and
erect facilities for the nominated subcontractor. In this situation, the main contractor
should provide all the facilities for the subcontract works such as water, lighting,
watching, site security, allocation of space for storage and accommodation and rubbish
clearing at his own cost. Thus, a nominated subcontractor has right to make all necessary
in appropriate manner. It has been clearly stated in PAM 1998 Subcontract Clause 15.1,
PWD 203N Clause 5, Clause 6 and Clause 7 and CIDB.B (NSC)/2002 Clause 8.
However, CIDB.B (NSC)/2002 expands the clause and states that such utilities
are supplied by the main contractor then the nominated subcontractor have to pay the
main contractor for the consumption of the same in connection with the subcontract
works. Besides that, the nominated subcontractor has to bear at his own cost. The
problem may arises when the main contractor failed to supply any utilities such as
electrical for the nominated subcontract works. As a result, the delay may occurred in the
process of the nominated subcontractor to carry out his work. It has been demonstrated in
the case of CSK Electrical Co. Bhd. V. Regional Construction Sdn. Bhd. (1987) 2 MLJ
763. According to this case, the plaintiff was the nominated subcontractor for the
execution of electrical works under the main contract. The defendant was the main
contractor. One of the issue has been highlighted in this case is when the main contractor
failed to pay to CSK in full amount due to late in completion in nominated subcontract
works. However, the plaintiff contended that the delay has been caused by failure of
plaintiff to obtain some of the necessary electrical equipment. The court found that, the
plaintiff’s order because the delay caused by the defendant. As an implication, the
defendant should liable for damages if it affected in the main contract. Thus, it proves
that the delay in nominated subcontracting works may also caused by this circumstances.
3.8.8 Interference by the main contractor
80
Delay in nominated subcontractor’s works also can be caused by wrongfully
interfere by the parties of the project. The problem which may occurs is when the
nominated subcontractor not able to precede the subcontract works in properly within
specified time and it lead to delay in completion. According to PAM 98 Subcontract
Clause 17, it has been highlighted that the contractor and subcontractor shall not
wrongfully use or interfere with the plant, ways, scaffolding, temporary works,
appliances or other property respectively belonging to or provided by either of them.166
Besides, the same provision also has been asserted in PWD 203N Clause 9.
This problem also has been highlighted in the different approach. There is a
classic case of British Waggon Co. v Lea (1880), where the contract involved the repair
of railway wagons. It was held that the defendants did not attach any importance to
whether the repairs were done by the company or anyone with whom the company might
enter into a subsidiary contract to do the work. According to the principle of the case, it
can be apply into this discussion which the nominated subcontractor was delay due to
unreasonable information had given.
3.8.9 Negligence by the nominated subcontractor
The main contractor is liable to the employer for all defaults in the work of
nominated subcontractor, irrespective of whether the subcontractor’s default arises in his
design, fabrication or workmanship. It has been demonstrated in the case of Equitable
166
Rajoo.S(1999). The Malaysian Standard Form of Building Contract (The PAM 1998 Form), 2nd ed.,
Malayan Law Journal Sdn.Bhd.
81
Debenture Assets Corporation Ltd v. Morgan Branch Roberts and Ors. (1984) 2 CLD 1001.
Furthermore, PAM 1998 Clause 23.7(vii) provides that for the architect to grant
extension of time to the main contractor in respect of delays on the part of nominated
subcontractor or nominated suppliers, but this does not affect the fundamental principle.
With reference to that, the employer cannot bring a contractual claim directly against
nominated subcontractor because there is no privity of contract. Besides that, the way in
which the employer must pursue a claim against the nominated subcontractor is through
suing the main contractor for breach of the main contractor. In turn, the main contractor
sues the defaulting by nominated contractor. This event may also caused delay in the
construction work.
3.8.10 Delay to rectify damages
In general, a main contractor’s responsibility for a nominated subcontractor’s
work is most likely to arise in respect of failure to comply with required standards of
workmanship or the quality and fitness for their purpose of any materials supplied.
It has been already noted that, apart from any express terms in a building contract,
it is the contractor’s implied obligation to build in a workmanlike manner with materials
that are of good quality and fit for their intended purpose. Nevertheless, while the
obligation as to the fitness of materials only arise where the employer has relied on the
skill judgment of the contractor and will therefore be excluded where a subcontractor is
nominated, the obligation as to quality is strict and will therefore normally remain
82
intact.167With reference to the above discussion, PWD203A clause 28, PAM 1998 clause
27 and CIDB clause 40 laid down the list of obligations for nominated subcontractor.
Clause 27.2 (i) provides that the nomination subcontractor must carry out and complete
the subcontract works in every respect to the reasonable satisfaction of the contractor and
the architect and in conformity with all reasonable directions and requirements of the
contractor.
Normally, the nominated subcontractor is still liable for making good of his
defects. In addition to that, the subcontractor’s liability to remedy defects is worded to
keep him in step with the main contractor as a similar liability to any liability of the main
contractor.168 Most subcontracts such as in PWD 203N Clause 18 (a) to (c), PAM 1998
Subcontract Form Clause 10.2 to 10.4 and CIDB.B (NSC)/2002 Clause 21 included the
provision in relation to the defects in subcontract works.
For that reason, the main contractor may ask the nominated subcontractor to carry
out rectification works for the defective. In addition to that, the nominated subcontractor
has to complete the rectification works within due date. The problem arise is when the
nominated subcontractor has delayed in carrying out the work due to many of defective to
be done. In was held in the case of Wesminster CC v. Jarvis, the delay occur in this
construction due to rectification work was not consider as delay on the nominated
subcontractor. For this study purposes, it has been proven that delay can be occurred by
rectification of the defective works.
167
168
Young & Marteen Ltd v. Mcmanus Childs Ltd (1969) 1 AC 454.
Turner,D.F.(1994). Building Contract- A Practical Guide, 5th. Ed., Longman Scientific&Technical,UK.
83
3.8.11 Default by The Main Contractor
The failure of the main contractor to pay regularly for the substantial completion
may effect to the progress of the nominated subcontractor. Another problem occurs when
the main contractor determine subcontract without reasonable reason. It has been
established in the case of Engineering Construction (PTE) Ltd v. Ohbayashi –Gumi Ltd
(1986) 1 MLJ 218. In this case, the plaintiff was a nominated subcontractor of the
defendant and claimed that the termination of their employment by the defendant was
wrongful. The defendant alleged that the plaintiff was lack of progress and delay in
completion and claims damages. However, the plaintiff argued that the delay was due to
defendant wrongfully withholding payment. It was held the defendant had wrongly
terminated.
Thus, this case has proven that this circumstance also caused to delay in
nominated subcontractor’s work.
3.9 Summary
Most of construction project will rely on subcontractor. There are several ways to
delegates the works to the subcontractor. The process of distinguishing of right and
obligation can be done through subcontracting are namely as assignment, nominated
subcontract and domestic subcontract. The parties involved commonly are the employer,
main contractor, nominated subcontractor and domestic subcontractor. All of them have
been bound in a contractual relationship. A nominated subcontractor plays an important
84
role in construction especially for the works that requires highly expertise and specialties.
Under construction contract, there have a standard forms for the nominated subcontractor
to be incorporated with the main contract. It consists of PWD 203N, PAM 1998
Subcontract and CIDB.B (NSC)/2002. With reference to that, it also has been provided a
clause in relation to delay and extension of time. Delay in nominated subcontracting
works has also considered as a significance cause to delay in construction. There are
several circumstances that contribute to delay in nominated subcontractor and their
implication to the main contractor whereby it has been elaborated in this chapter.
85
CHAPTER 4
COMMON CIRCUMSTANCES CAUSING DELAY IN NOMINATED
SUBCONTRACTING
4.1
Introduction
It has been decided that the objective of this study is to identify circumstances
which caused delay in nominated subcontractor’s work. Hence, this chapter will highlight
the issues gathered from cases that caused nominated subcontractor unable to proceed
their work within specified time. Discussion will be conducted according to
circumstances that have been highlighted in chapter 3. However, only six (6) common
circumstances will be discussed which will be supported by relevant cases. In addition to
that, the achievement of the objective and the analysis of data collection will be presented
in further details.
86
4.2
Analysis of Cases
The legal cases which are related to this study have been assembled in order to
achieve the objective of this study. Most of the relevant cases reported in Malayan Law
Journal have been collected through Lexis Nexis databases. With reference to that, there
is no limitation in terms of time frame, as long as it has not been overruled by higher
court and established as good law.
Basically, this analysis is based on cases which have been selected in connection
with delay caused by nominated subcontractor. The relevant cases to this research are
limited even though there are long list of cases dealing with delay, extension of time as
well as liquidated damages. Initially, 100 cases have been found but only 24 cases were
relevant to subcontract. Finally, there were only 10 relevant cases that have been
investigated in this study. In relation to this, numerous keywords have been used for this
process. For instance, delay in subcontract, delay caused by nominated subcontractor,
delay in building contract, extension of time in building contract, default by nominated
subcontractor and default by main contractor.
4.2.1 Number of cases within time frame
As has been mentioned above, only 10 cases have been investigated in order to
achieve the objective of this study. These cases are divided into 4 main categories
according to the year cases were decided (refer to Table 4.1). Table 4.1 shows that from
year 1970 to 1979, 2 cases have been reported relating to delay in nominated
subcontractor’s work. However, only 3 cases have been reported from 1980 to 1989 and
87
1990 to 1999. It has been noted that only 2 cases were reported within year 2001 to 2007.
In other words, 60% of the cases studied are within the year of 1980 to 1999 (refer Figure
4.1). Thus, it can be concluded that nominated subcontractor played a vital role in
construction industry.169 The analysis on the number of cases has shown that
subcontracting method has become a norm in construction industry. This is due to the
fact that during such period of time, the construction industry is expanding.170
Table 4.1 : Number of Cases Within Time Frame
Source
169
: Cases from Malayan Law Journal
Period of Time
No. of Cases
1970 – 1979
2
1980 – 1989
3
1990 – 1999
3
2000 – 2007
2
Total
10
Arditi,ASCE,M. & Chotibongs,R.(2005). Issues in Subcontracting Practice, Journal of Construction
Engineering and Management, Volume 131, 866-876
170
Asem,M.,Malak,A.,Member,A.,ASCE & Hassanein,Z.(2001). Asphalt Works Subcontracting Disputes
in Large Construction Programs, Journal of Performance of Constructed Facilities, Volume 15.
88
Figure 4.1 : Number of Cases Within Time Frame
Source
: Cases from Malayan Law Journal
No. of Case
50%
30%
30%
30%
20%
20%
10%
1970 – 1979
1980 – 1989
1990 – 1999
2000 - 2007
Year of Case
4.2.2 Types of Nominated Subcontractor according to specialisation
In general, nominated subcontractors profess various skills and specialisation. In
reference to this, ten (10) cases have been categorized based on their expertise as
presented in Table 4.2 and Figure 4.2. The categorization are based according to scope of
work such as Mechanical and Electrical (including air conditioning, lift, sewerage
system, electrical works and ventilation), Furniture and Equipment and Building works.
Table 4.2 shows that the highest number dealing with this problem is nominated
subcontractor who are expert in mechanical and electrical works. It can clearly be stated
that 70 % or 7 cases out of 10 cases related to delay in mechanical and electrical works. It
can also asserted that only 2 cases or 20% deal with furniture and equipment experts.
However, only one case is related to the nominated subcontractor who is an expert in
building works. The observation shows that, most of the arguments of delay comes from
89
mechanical and electrical works. It could be due to the long duration of completion,
complexity of the process, highly skill and expertise required and costly. 171
Table 4.2 : Types of Nominated Subcontractor and the Number of Cases
Source
: Cases from Malayan Law Journal
Type of Nominated Subcontractor
No. of Cases
Mechanical and Electrical
7
Furniture and Equipment
2
Building Works
1
Total
10
Figure 4.2 : Type of Nominated Subcontractor and the Number of Cases
Source
: Cases from Malayan Law Journal
No. of Case
80%
70%
60%
40%
20%
20%
10%
0%
Mechanical and Electrical
Furniture and Equipment
Building Works
Type of Nominated Subcontractor
171
Arditi,ASCE,M. & Chotibongs,R.(2005). Issues in Subcontracting Practice, Journal of Construction
Engineering and Management, Volume 131, 866-876
90
4.2.3 Causes of Delay
Delay is the most common problem in construction projects. There are many
reasons why delay occurs. One of the reasons is delay caused by nominated
subcontractor.172 In actual fact, there are several causes that may contribute to delay in
nominated subcontracting. Thus, this study has categorized the causes into 2 major
groups as demonstrated in the following Table 4.3.
Table 4.3 : Causes of Delay
Source
: Cases from Malayan Law Journal
Causes of Delay
No. of Cases
Employer
5
Main Contractor
5
Total
10
Table 4.3 indicates that the main contractor is one of the contributors in causing
delay in nominated subcontracting. Based on this study, it is shown that 50% out of cases
studied are in respect to delay in nominated subcontracting caused by main contractor.
The problems could be due to bad site management, improper planning, inadequate
experience, mistakes during construction and improper construction methods.173 Besides
that, the problems where the nominated subcontractor is unable to complete their
172
S.Alkass, M.Mazerolle & F.Harris(1995). Construction Delay Analysis Techniques, Shool of
Construction,Engineering and Technology,University of Wolverhampton,UK.14,375-394
173
A.M.Odeh & H.T. Battaineh.(2002) Causes of Construction Delay:Traditional Contracts, International
Journal of Project Management.20, 67-73
91
subcontract works within specified time has also been caused by the employer. Thus,
another 50% of the cases studied proved that the employer has contributed to delay in
nominated subcontracting.(Refer to Figure 4.3)
Figure 4.3 : Causes of Delay
Source
: Cases from Malayan Law Journal
60%
50%
50%
Employer
Main Contractor
No. of Case
50%
40%
30%
20%
10%
0%
Causes of Delay
4.3
Circumstances Causing Delay in Nominated Subcontracting
Basically, projects can be delayed for a large number of reasons.174 Normally,
most of the previous studies that have been conducted focused on reasons or causes for
delay in main contract. Delays in nominated subcontracting are very seldom
acknowledged and the ways to improve are also seldom discussed,175 but it is a
significant cause to delay the construction project. In addition to that, delay on the part of
nominated subcontractors will entitle the main contractor to obtain an extension of time.
174
Kumaraswamy,M.M & Chan,D.W.M. (1996). Contributors to Construction Delays, Construction
Management and Economics.The University of Hongkong, 16,17-29.
175
Arditi,ASCE,M. & Chotibongs,R.(2005). Issues in Subcontracting Practice, Journal of Construction
Engineering and Management, Volume 131, 866-876
92
Thus, this study will focus on delay in nominated subcontracting in order to define
circumstances that contribute to delay.
Furthermore, after reviewing the nature of delay in construction as well as delay
in subcontract in the previous chapter, this chapter will identify and analyse the
circumstances which will render delay in nominated subcontractor’s work and their
implication to the main contractor. Those circumstances are based on decided cases and
provision that have been provided in the standard form of contract.
4.3.1 Circumstances No.1 – Delay in Nominated Subcontractor’s Work Due to
Late Payment
Most of building contracts provide for payment by installment as the works
proceeds normally against an architect’s certificate. In relation to this, failure to make
payment when due does not normally amount to a repudiation of the contract, nor entitle
the contractor to repudiate the contract.176 In addition to that, an employer’s obligation to
pay the main contractor is determined by the payment arrangement envisaged in terms of
the underlying contract. In practice, the most common payment arrangement is one where
work is certified and paid progressively according to the value of work completed
through a series of interim payment or progress payment.
Furthermore, the primary obligation upon the employer is to give the main
contractor the sum of money which forms the consideration for the contract. Money must
be paid promptly and fully unless there are specific reasons for withholding it. All these
176
Smith,V.P. & Furmston,M.(1987). A Building Contract Casebook, BSP Profesional Books.
93
events explain the employer’s obligation on payment for the main contractor. The
question that now must be considered is regarding to payment for completion of
nominated subcontractor’s work and the nominated subcontractor’s right against the main
contractor.
It is worth being mentioning here that the payment rights of a nominated
subcontractor are to be found exclusively within the terms of subcontract. However,
nominated subcontractor’s demand to be paid is frequently challenged by the main
contractor on the ground that the subcontractor is guilty of delay, defective work or other
breach of contract.177 Due to these circumstances, it can lead to a slow progress of
subcontract work mainly in nominated subcontracting. It has been pointed out that
timeliness of payments affects many nominated subcontractors, for whom receiving
delayed payments from their main contractor is caused by friction between the two
parties. The nominated subcontractor may delay in their progress of work due to the late
payment and expose to payment clauses of ‘pay when paid’ and ‘pay if paid’. This can be
illustrated in the case of Alliance (Malaya) Engineering Co. Sdn.Bhd. v. San
Development Sdn.Bhd. (1974) 2 MLJ 94. In this case, the plaintiff was a nominated
subcontractor. The defendant was a main contractor. In this contract, the plaintiff was a
specialist in kitchen and medical equipment. The defendant contracted to build for the
Sarawak Government, a General Hospital in Kuching. The plaintiff and defendant
entered into two subcontracts, one for the supply and installation of kitchen cabinet and
the other for the supply and installation of medical equipment. The defendant alleged that
there has been a delay in plaintiff’s performance and that he is failed to supply the cabinet
and equipment accordingly. One of the issues that arose was related to the defendant’s
refusal and withholding of the progress payment due to the nominated subcontractor.
This case highlighted that the money had been paid by the employer to the main
contractor but half of the payment for nominated subcontract works were still outstanding
and thus the employer withholding it without reason. The court allowed the plaintiff’s
appeal to claim for the money due.
177
M.John & Hughes.W. (2000). Construction Contracts-Law and Management, 3rd ed.,Spon Press
94
Basically, many nominated subcontract contained a provision to the effect that the
main contractor would become liable to pay the nominated subcontractor not when the
relevant sum has been certified by the architect, but only when the main contractor has
actually received the money from employer. This provision is known as “pay when paid”
clauses, which are inserted in the subcontract for two main purposes.178 The first is to
protect the main contractor’s cash flow. This occurs because the main contractor will
merely act as a channel payment between the employer and the subcontractor and will
thus be in no danger of having to finance the subcontract work. The second purpose
which is less obvious is to make the nominated subcontractor carry the risk of the
employer becoming insolvent. This will happen in circumstances where the employer’s
insolvency occurs after subcontract work has been certified, but before the main
contractor has been paid for it. However, most of the standard forms of subcontract
stipulate that specific periods of time for payments to subcontractor which is normally
reached through by negotiation. According to the above case, it shows that, the clause in
relation to pay when paid has not been applied for the payment purposes. Thus, the main
contractor has no right to hold the money by relying on that reason.
This has also been established in the case of Ryoden (M) Sdn Bhd v. Syarikat
Pembenaan Yeoh Tiong Lay Sdn.Bhd. (1992) 1 MLJ 33. In this case, the main contractor
was the defendant and the plaintiff was a nominated subcontractor. One of the problems
in this case is when the delay occurs in nominated subcontractor’s work due to the late
payment by the main contractor. The problem arose when the defendant wrongly
withholds one of the progress payment and he also relied on “pay when paid” clauses
which is not applicable. In this contract, they successfully applied summary judgment in
respect of the unpaid amounts. The main contractor appealed against this judgment,
arguing that the plaintiff would be paid until they themselves have received the certified
sums from the employer. The court considered two clauses in the subcontract which
provided that the nominated subcontract shall be deemed to have notice of all the
178
Arditi,ASCE,M. & Chotibongs,R.(2005). Issues in Subcontracting Practice, Journal of Construction
Engineering and Management, Volume 131, 866-876
95
provisions of the main contract and required the nominated subcontractor to observe and
conform with all provisions of the main contract so far as they were applicable to the
subcontracts work and were not inconsistent with the express provisions of the
subcontract. However, the court decided that these clauses did not apply to the
subcontract. In these circumstances, the court further held that the payments for the
subcontract works were regulated only by the payments terms of the subcontract and
these provided that the subcontractor’s right to be paid within 14 days from the main
contractor’s receipt of any certificate issued by the architect.
Nevertheless, in the above case, it is clearly stated by Clause 10 of the subcontract
that the defendant as the main contractor agreed, subject to and in accordance with the
main contract, where from time to time to apply to the Director of Public Works for
certificates of payment of the amount which at the date of the application fairly
represented the value of the nominated subcontract works, and within 14 days of the
receipt by them of such certificates aforesaid to pay the nominated subcontractors the
amount certified to be due in respect of the nominated subcontract works and any
authorized variations thereof less the due proportion of retention money(10%) retained by
the employer. It has also been provided in PAM 98 Subcontract Clause 11.3, which says
that;
PAM 98 Subcontract
Clause 11.3 – Contractor’s Obligation to Pay the Subcontractor
Within fourteen (14) days of the receipt by the Contractor of any certificate or
duplicate copy thereof from the Architect the Contractor shall notify and pay to
the Subcontractor the total value certified therein respect of the Subcontract
Works and in respect of any authorized variations thereof and in respect of any
amounts ascertained under Clause 9.4 hereof less:-
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i)
Retention Money, that is to say the proportion attributable to the
Subcontract Works of the amount retained by he Employer in
accordance with the Main Contract and
ii)
The amounts previously paid.
Thus, due to the above clause, if it is incorporated in the subcontract, thus the
main contractor shall pay the nominated subcontractor accordingly based on his work
done. The main contractor who refused to implement it accordingly will lead to a breach
of contract. It could be said that this problem is similar to the case of Antara Elektrik
Sdn.Bhd. v. Bell & Order Bhd. (2002) 3 MLJ 321., whereby the argument in this case is
related to payment whether it should follow the “pay when paid” clause or payment
should be made after 14 days of the receipt the certificate. In addition to that, the
nominated subcontractor also failed to procede their work due to the main contractor
wrongfully withholding their payment. It also has been demonstrated in the case of
Engineering Construction (Pte) Ltd. Ohbayashi-Gumi Ltd (1986) 1 MLJ 218 and
Mahkota Technologies Sdn.Bhd. v. BS Civil Engineering SdnBhd. (2000) 6 MLJ 505. In
these circumstances, what can the nominated subcontractor do if the main contractor still
refused to make a payment? It can be suggested that, based on the following principle the
problem may be overcome. In the decision before the Illinois Court of Appeal, a
subcontractor was held entitled to suspend his work following the principal
subcontractor’s failure to make monthly payments. This has been illustrated in Watson v
Auburn Iron Works (1974) 318 NE 2d 508. Besides that, PAM 1998 Subcontractor
Clause 11.7 and CIDB.B (NSC)/2002 Clause 29.2 provide that the subcontractor have the
right to suspend work upon failure. But it was silent in PWD 203N and does not have any
other provision that can be related to this part. It has been stated that, if the main
contractor fails or neglects to make payment of any amount due to the nominated
subcontractor and he continues for 14 days or more, the nominated subcontractor may
give notice of his intention to suspend the work. In addition, if the main contractor
continues such default for 14 days after the receipt of such notice, the nominated
subcontractor may suspend wholly or partly the execution, Clause 29.2(i) asserts that the
97
time for completion of the subcontractor works shall be extended by the contractor by
such suspended period.
Therefore, according to the above case, this study determines that the nominated
subcontractor is unable to carry out their subcontract work due to the circumstances
which are caused by late payment. It also shows that, without proper progress payment
and regular payment the subcontract work cannot be completed within specified time in
the subcontract. It also asserts that, the principle of clause “pay when paid” where the
main contractor is only liable to pay the nominated subcontractor for work performed
under subcontract after the main contractor had been paid for the same work by the
employer is not practical. Thus, delay in nominated subcontractor’s work may give an
entitlement to the main contractor for an extension of time but not for such circumstances
which delay has been caused by the main contractor. In other words, the main contractor
should liable for any damages on account of the delay.
4.3.2 Circumstances No.2 - Delay in Nominated Subcontractor’s Works Which
Was Caused By Main Contractor’s Default.
As a general principle of law, failure to pay on time what is due under a contract
will not normally be treated as a sufficient breach to justify the other party in terminating
that contract.
179
Besides that, problems may arise when the main contractor wrongly
terminate the nominated subcontractor. Due to this, delay in nominated subcontract
works could be caused by this type of circumstances.
179
Carr v. JA Berriman Pty Ltd (1953) 89 CLR 327
98
The principle can be illustrated in the case of Engineering Construction (Pte) Ltd
v Ohbayashi-Gumi Ltd (1986) 1 MLJ 218. In this case, the plaintiff was a nominated
subcontractor for sewerage treatment works stage 1 and stage 2. The defendant was a
main contractor. The argument was based on wrong termination by the main contractor in
respect of lack progress of nominated subcontract works. Therefore, the nominated
subcontractor was unable to proceed the subcontract work within time prescribed. The
defendant alleged that the plaintiff had done unsatisfactory works, and also lack in
progress. The problem became more critical when the defendant was not satisfied with
the progress of work of the aluminum works. Due to that, the employer had started to
impose the liquidated ascertained damages (LAD) against the defendant. The judge found
that, the main reason for the delay occurred on the part of the plaintiff’s work including
aluminum works was due to the main contractor’s wrong termination on the nominated
subcontractor. Thus, he could not proceed with the subcontract works as required. Thus,
the main contractor also failed to make duly payment according to subcontract as agreed
by both parties.
With reference to this case, the main contractor has to follow the subcontract
agreement that has been agreed by both parties. One of the terms of the agreement that
has been highlighted is monthly progress payment and final payments should be done
within 14 days of submission of claims. Thus, it is clearly stated that to pay the
nominated subcontractor as in the contracts is the main contractor’s obligations.
In addition to that, there is a provision that can be referred in PAM 1998
Subcontract Clause 20.1 which asserts that:
if before the date of practical completion of the subcontract works the main
contractor shall make default in one or more of the following respects:
99
i)
without reasonable cause he wholly or substantially suspends the carrying
out of the main contract works; or
ii)
without reasonable cause he fails to proceed with the works so hat
reasonable progress of the subcontract works is seriously affected; or
iii)
without reasonable cause, he fails to make payment to the subcontractor
for a period of one (1) month or longer from the date of suspension of
work by the subcontractor pursuant to clause 11.7
then the subcontractor may give the main contractor notice by registered post or
recorded delivery specifying the default or defaults.
Thus, based on the above provision the nominated subcontractor has the right if
the delay due to default of main contractor. Besides that, there is also a provision in PAM
1998 Subcontract Clause 20.2 which provides an option to the nominated subcontractor
to proceed or to determine his own employment under the subcontract. Other alternative
to obtain the payment, it could be suggested that the nominated subcontractor can refer to
PAM 1998 Clause 27.4. It is refers to limited provisions for direct payment to the
nominated subcontractor by the employer of amount previously certified but not paid by
the contractor. This alternative can help to prevent delays on a project in the event the
main contractor either fail to make regular payments to nominated subcontractors or fail
to pass on to the subcontractor’s money when certified to them.
On the other hand, other issue which has been demonstrated in the case of Woh
Hup (Pte) Ltd & Anor v. Turner (East Asia) Pte Ltd. (1987) 1 MLJ 443 shows that the
delay in nominated subcontractor which deals with the default of the main contractor is
when the employer withholds the payment to the main contractor due to termination of
the employment by the main contractor. Thus, the nominated subcontractor may not
proceed their works and non payment was due to them. It was held that the plaintiff was
entitled to obtain his claims.
100
In view of the above, this study highlight that the progress of the nominated
subcontractor’s work can be impeded by the default of the main contractor in carrying out
the project. In other words, this circumstance is considered as a cause of delay in
nominated subcontractor’s works. Due to this, it has been clearly shown that the main
contractor is not entitled to obtain any extension of time for this type of delay. In fact, the
main contractor may be liable for damages on the employer as well as nominated
subcontractor because the delay has created by him and it is not be covered under any
relevant events in the contract. Default by the main contractor may be brought to an end
of the contract.
4.3.3 Circumstances No.3 – Delay on the Part of the Nominated Subcontractor’s
Work Has Been Caused By Late Possession of Site.
In construction contract, there are numbers of employer’s obligation which has
been set out. The most important obligation is to give the possession of site or access to
the main contractor. However, this study will only refer to nominated subcontractor. It
has been mentioned earlier in the chapter 3, the problems may arise in respect of delay in
giving site possession to start work. In addition to that, the employer is regarded to have
committed a breach of contract if he fails to give timely possession of site.180
Consequently, to ensure that time will not to be set at become at large in the event of late
hand over of site to the nominated subcontractor, most standard forms of contract
expressly includes this event as one of the grounds for time to be extended.181 Without it,
any deferment of possession of site will contribute to breach of contract and will set the
time at large as has been established in Freeman & Son v. Hensler (1900), 64 JP 200. It
was held that, it was an implied term of the contract that the contractor would be given
180
Fong,C.K. (2004). Law and Practice in Construction Contract, 3rd ed., Sweet & Maxwell Asia.
Turner,F.D.(1990). Building Contract Disputes-Their Avoidance and Resolution, Longman Scientific
and Technical,UK
181
101
possession of the site immediately. The agreement between the parties had waived that
obligation and had substituted a reasonable time clause, therefore the plaintiff was
entitled to damages for the loss which he had sustained by reason of the delay.
However, in PAM 98 there is no specific provision in relation to this event. But under
Clause 23.7(xi), the clause can be activated as an alternative to solve this problem. It
stipulates that, if the main contractor alleges that there has been an act of prevention or
breach of contract by the employer, the architect can continue to administer the contract
and grant of extension of time as and when he considers these as appropriate.182
In view of the above discussion, the case of Thamesa Designs Sdn Bhd & Ors v
Kuching Hotels Sdn.Bhd. (1993) 3 MLJ 25 can be referred to, where four appellants were
the nominated subcontractors. The respondent was the employer. The appellants were
appointed in respect of supply and install of furniture and fittings to the respondent. As a
result of non payment for works done, the appellants sued the judgment debtor and
obtained judgment for a total of outstanding balance which had remained unsatisfied.
Furthermore, they then proceeded with garnishee actions against the respondent, the
employer of the judgment debtor, to garnish the retention money in the hands of the
respondents, which was due to the judgment debtor under the contract. Consequently, the
garnishee orders were served on the respondents.
The respondent alleged that there was no money to be paid because the retention
fund had been utilized to pay for the rectification of defects. He also claimed for
liquidated damages (LAD) to account for 36 days delay in completion of the works. The
appellant challenged the validity of the final certificate in respect of the imposition of 36
days liquidated damages. The judge found that, the facts showed that the employer
handed over the site late which led to delay on the contractor to complete the works and
182
Rajoo.S(1999). The Malaysian Standard Form of Building Contract (The PAM 1998 Form), 2nd ed.,
Malayan Law Journal Sdn.Bhd.
102
this affected to the nominated subcontractor’s works. Therefore, the employer should not
be entitled to claim for liquidated damages under the said contract because by his
omission to give possession of the site in time. Due to that, the time for completion
becomes at large and there was no date from which the damages could be assessed.
With reference to the above case, it could be said that the main contractor
normally is entitled to exclusive possession of the entire site, but the degree of possession
to be given depends on the circumstances of the site. It has been highlighted in the case of
London Borough of Hounslow v. Twickenham Garden Developments Ltd. (1970) 7 BLR
81. In addition to that, the employer must also give the main contractor a sufficient
degree of possession to permit the execution of the work unimpeded by others. A case of
The Queen in Right of Canada v Walter Cabott Construction Ltd (1975) 21 BLR 42 has
cited that Cabott contracted with the Crown for the erection of the hatchery building. The
contract was one of six contracts for the project as a whole. The work required fewer than
two of the later contracts interfered with Cabott’s work because they encroached on the
site. One of the latter contracts was awarded to a third party, but Cabott successfully
tendered for another to mitigate the effects of that contract on its work. Cabott claimed
damages for breach of implied terms relating possession of site. It was held that Cabott’s
claim succeeded. The Crown was in breach of contract by denying Cabott part of the site
of the work. A clause of the contract provided that there were implied terms to make
ready an appropriate working space which it is fundamental to a construction contract.
However, where the delay in giving site possession is so serious as to evince an
intention by the employer not be bound by the contract, it would seem that a case could
be made to treat the contract as at an end. In has been cited in Carr v. JA Berriman Pty
Ltd. (1953) 27 ALJR 273. There is different situation when the main contractor brought
an action for damages instead of bringing the contract to an end. This has been proven in
the case of Freeman v Henser (1900) 64 JP 260 (CA).
103
With reference to the above circumstances, it could be said that it is essential for
an employer to give possession of the site to the main contractor as well as nominated
subcontractor within the stipulated date in the contract.183 It also has been asserted in
PWD203N Clause 11(a) that the main contractor shall from time to time make available
to the nominated subcontractor such part of the site and main contract works to enable
them to execute the subcontract works in accordance with this subcontract. However, it
could be said that the permission to access the site still depends on the employer.
Based on the observations from the above cases, this study has identified the
circumstances which can delay the performance in nominated subcontracting. One of the
causes of the delay which may occur from this circumstance is when the employer is late
in giving site possession to the nominated subcontractor. If there are provisions for this
circumstances in the contract, the nominated subcontractor is therefore entitled to obtain
an extension of time. Nevertheless, normally this provision does not provide such event
that may entitle the nominated subcontractor as well as the main contractor to an
extension of time. Under PWD203A Clause 43(g) which is interrelated with Clause 38(d)
asserts that the nominated subcontractor should carried out the work in extended time
when time is set to become at large and completed the works within reasonable time. In
addition to that, PAM 1998 Clause 23.7 (xi) also provides that the architect can issue an
extension time or fix a new completion date in the event which delay is caused by any act
of prevention or breach of contract by the employer. For that reason, the employer may
not be entitled to claim liquidated damages in the absence of provision that provides for
late possession of site in the contract.
183
Fong,L.C. (2004). The Malaysian PWD Form of Construction Contract, Sweet & Maxwell
Asia,Malaysia.
104
4.3.4 Circumstances No.4- Delay in Nominated Subcontractor’s Work Due to The
Failure of the Employer to Supply Materials And Goods
Basically, PWD 203A Clause 43(k), PWD 203A Clause 23.7(vii) and PWD 203A
Clause 24.1(p) provide that, the date of completion can be extended in circumstances
where the delay is on the part of nominated subcontractor on their work. According to
that, the clauses also allow the main contractor to secure time extension and avoid
damages when a nominated subcontractor has defaulted in the manner stated.
Furthermore, most of the building contract forms (PWD 203A,PAM 1998 and
CIDB 2000) have stipulated that the additional usefulness to the contractor in the event of
delay on the part of the nominated subcontractors where it has been caused by similar
reasons as set out, for instance in PAM 1998 Clause 23.7(i) to 23.7(xiii) except clause
23.7(vii). Due to this, it benefits the main contractor because he would be given an
extension of time for completion date under a construction contract.
There are several causes which constitute delay which are considered in
construction contract and one of them is caused by the employer. Delay caused by the
employer consists of delay in the supply of materials and goods which has been agreed to
supply for the works,184 any act of prevention and breach of contract.185 As a result, the
contractor is not liable for any liquidated damages for the delay in completion of the
works. Problems arise when the nominated subcontractor delays his work in respect of
this event, but the employer insists to claim for any damages. Thus, there was a
circumstance where the employer had imposed liquidated damages to the nominated
subcontractor for the delay in completion of the works within specified time. In
Lightweight Concrete Sdn.Bhd. v. Nirwana Indah Sdn.Bhd.(1999) 5 MLJ 351, the
184
185
Clause 23.7(ix), The Malaysian Standard Form of Building Contract (The PAM 1998 Form)
Clause 23.7(xi), The Malaysian Standard Form of Building Contract (The PAM 1998 Form)
105
defendant was a developer of a project. The plaintiff was appointed as nominated
subcontractor by a subcontract agreement. In this case, the nominated subcontractor’s
obligation was to design, manufacture, supply, delivery and installation of the prefinished pre-cast concrete panel with granite slabs. The defendant argued that the
plaintiffs delayed and only completed the work on 20 March 1993 instead of 30
September 1992. In addition to that, the plaintiff agreed that they completed this stage on
20 March 1993. However, the plaintiff highlighted that, delay in completion occasioned
by the neglect of the defendant itself in failing to secure sufficient and timely supply
granite to the plaintiff in order for the plaintiff to make the pre-cast granite panels.
Furthermore, the defendant argued that the plaintiff was responsible for the supply
and delivery of the granite required for its pre-cast granite panels. The defendant relied
heavily on the first agreement dated 30 May 1992 which the main contractor and the
plaintiff, where in the first recital described the subcontract works as design, supply,
delivery and installation of pre-cast concrete panels pre-finished with granite slab. Based
on this, the defendant argued that it was the duty of the plaintiff to have sourced the
supply of granite in sufficient amount to thwart any delay. The Judge found that, the
agreement spelled out that the supply by the plaintiff was only limited to completed
panels and slabs and not to supply of raw granite. In addition to that, the decision made
was based on the agreement between the defendant and the supplier of the granite for this
project. The defendant argued further that, the delay also had been caused by the supplier
to supply the granite. However, the decision shows that the supplier was under the control
of the defendant. Thus, the plaintiff cannot be held responsible for the delay.
With reference to the above case, initially, the employer contended that the delay
was caused by a nominated contractor in carrying out the works. Usually, a nominated
subcontractor has to be liable for liquidated damages for any extended time in completion
of the works if the default was caused by himself. The nominated subcontractor was also
ordered to indemnify the main contractor against the liabilities in respect of the
106
subcontract works as those for which the main contractor is liable to indemnify the
employer under main contract.186 Basically, Section 74 of Contract Act 1950, provides
that when a contract has been breached, the party who suffers is entitled to receive
compensation for any loss or damage caused to him which naturally arose in the usual
course of things from the breach. In addition, such compensation is not to be given for
any remote and indirect loss or damage sustained by reason of the breach. Furthermore, it
has been highlighted that, under common law the remedy for breach of contract is an
action for damages. The innocent party is entitled to claim for financial amount which
would compensate him for the loss incurred as a result of the breach committed by other
party. In the case of late completion or delay, the employer is entitled to claim in
liquidated damages calculated according to the stipulated time in the contract. It has been
demonstrated in Robinson v Harmon (1848) 1 Exch 850 at 855, Teoh Kee Keong v.
Tambun Mining Co. Ltd. (1968) 1 MLJ 39 and Tham Cheow Toh v. Associated Metal
Smelters Ltd. (1972) 1 MLJ 171.
In addition to that, the defendant alleged that the plaintiff was late in completion
due to the failing to secure sufficient material (granite) for wall paneling within
appropriate time. The defendant then added that the plaintiff should be responsible to
supply the granite according to contract between the nominated subcontractor and the
main contractor. With reference to that, the defendant has wrongly interpreted the
contract. In fact, the granite should be supplied by the supplier based on agreement
between the defendant and his supplier. However, the material has been delayed in
delivery to site due to his supplier.
In a building contract, the circumstances that caused delay due to failure by the
employer to supply materials and goods in appropriate time has been provided under list
of events in the contract (PAM 1998 Clause 23.7(ix), PWD 203A is silent on this) which
186
Rajoo.S(1999). The Malaysian Standard Form of Building Contract (The PAM 1998 Form), 2nd ed.,
Malayan Law Journal Sdn.Bhd.
107
give entitlement to the nominated subcontractor an extension time in the subcontract. It
must be noted that there is no express provision in the conditions to allow for the
possibility of the works being carried out using materials and goods which are to be
supplied by the employer. However, such circumstances do in reality exist and if there is
a delay which are caused by the employer in supplying the materials and goods, the
contractor should be entitled to an appropriate extension of time. Thus, the delay in this
case has been caused by the employer in supplying the materials and goods specifically
granite and as a results the nominated subcontractor should be entitled to an appropriate
of extension of time.
To recapitulate, according to the above case, this study identify that the delay in
nominated subcontractors can be caused by the circumstances which the employer fails to
supply materials and goods in an appropriate time. Thus, the nominated subcontractor is
not liable for the delay. This study has also considered the implication of the delay to the
main contractor whether he is entitled to be granted an extension of time or to be liable
for damages. As an implication that has been determined from this case, it can be said
that the main contractor is entitled to an extension of time due to this circumstances if it
effected the whole schedule of the project in the main contract. In addition to that, for
those contracts which are based on Clause 23.7(ix) of PAM 1998, the entitlement of
extension of time can be given to the main contractor. Besides that, in order to be able to
claim for an extension of time under this provision, it must be proved that the contractor
could not have reasonably unforeseen such at the date of tender.
4.3.5 Circumstances No.5 – Delay In Nominated Subcontractor Due to the Late
Instructions
108
In general, an employer’s failure to issue plans, drawings and other information
necessary for the execution of the works and at the proper time is a breach of contract by
the employer, through the agency of the architect unless the express terms of the contract
stated otherwise.187 The late instructions which was referred to was by PAM 98 Clause
23.7(vi) and include any instructions which empowers the architect. In addition, to enable
the works to proceed properly, it is normally necessary for the architect or engineer to
issue instructions or additional drawings during the course of the works. Thus, most of
the extension o time provisions provide for time to be extended where the architect or
engineer fails to issue these instructions or drawing in a timely manner.188
The problem arises when the main contractor is unable to proceed their work
under main contract in time due to the delay caused by the nominated subcontractor in
nominated subcontract works which is a consequences of the nominated subcontractor
delayed in their works in respect of insufficient or late of instruction by the architect or
employer. It has been demonstrated in the case of Shen Yuan Pai v. Dato’ Wee Hood
Teck (1976) 1 MLJ 16. According to this case, the plaintiff was the main contractor. The
defendant was the employer. By a contract in writing dated 16 November 1965, the
defendants contracted with the plaintiff for the construction of an Office Building at
Thompson Road, Kuching. The problem arose when the plaintiff claimed that he had not
received payment from defendants due to delay in the completion of the construction
work.
Furthermore, regarding the agreement that has been agreed by both parties, it
shows that the date of completion of the contract was 31 March 1966. However, the time
had been extended for specific reason. On the other part of this case, the plaintiff had
187
188
Smith,V.P. & Furmston,M.(1987). A Building Contract Casebook, BSP Profesional Books.
Fong,C.K. (2004). Law and Practice in Construction Contract, 3rd ed., Sweet & Maxwell Asia.
109
raised the question of specialist installations with the architect and had reminded the
latter that the specialist works had to be completed by first week of February 1966 in
order to allow him to complete the work by the agreed time. Moreover, until certain
period of the construction, the plaintiff informed that the work cannot be completed by
the completion date given in respect of delay in specialist work. Thus, the plaintiff asked
for an extension of time where a minimum period was eight weeks. However, the
plaintiff still failed to complete the works due to the inability of specialist to commence
their work by that extension period.
For that reason, the architect sent a letter to the defendant to inform that due to the
lack instructions and directions have resulted in the work cannot complete on time. The
defendant replied the letter and informed that there was no suggestion from the architect
for that problem. It seems that the defendant put the duty on the architect to propose any
suggestion to prevent the delay. However the judge found that the delay occurred was
due to default of the defendant in the fulfillment of their own part of the contract.
The above case can relate to the provision in the standard form of contract. In
PAM 98 Clause 23.0, it has been asserted that the main contractor has to give notice to
the architect and specify the cause of delay which affects the progress. Besides that, the
main contractor must also indicate the relevant event causing the delay with sufficient
information given. In the case, the plaintiff sent a notice and relevant information to the
architect on the causes of delay which is due to the delay on the specialist works. Clause
23.1 stipulates that the contractor’s notice of delay is essential before the architect is
obliged to consider whether an extension of time might be appropriate. However, the
failure to give notice, if the contractor knows he is delayed or will likely be delayed, will
be breach of contract on his part. As a result, no extension of time is to be given on the
account of those circumstances.
110
However, it could be argued that, the problem arose when the architect lack in
giving the instruction and direction to the main contractor as well as nominated
subcontractor. In addition, the problem became worse when the employer failed to
exercise his power in order to take action on the problem caused by nominated
subcontractor in specialist works. Besides that, failure by the architect to properly
exercise the power to extend time, where any delay to completion is caused by the
employer or those for whom he is responsible in law, relieves the main contractor from
his liability to pay damages. Dodd v. Churton (1897) 1 Qb 562 cites that where the time
for completion becomes at large, that is the contractor’s obligation is then to complete
within a reasonable time. See also the case of Holme v.Guppy (1838) 2 M & w 387 &
Wells v. Army & Navy Co-operative Society (1902)86 LT 764.
In addition, the judge also pointed out his point which is according to Halbury’s
Laws of England and it could be concluded that, in the event that any breach of contract
and reason for variation works ordered by the employer is not in the contract, and
contract clearly stated that the contractor shall take risk for prevention by such extra
works, the employer then cannot insist upon completion by the date fixed, but only for
completion within a reasonable time. For that reason, the judge decided that the delay
was solely due to the defendant’s default. Thus, because of the breach of the contract, the
plaintiff has to proceed the work in reasonable time.
It could be said that, the employer is in breach of his obligation to supply timely
instruction for the execution of works. In the leading case of Roberts v Bury
Commissioners (1870) LR 5 CP 310, Blackburn and Mellor LJJ stated in their judgment
that there is an implied obligation on the part of the employer and their architect to supply
plans and necessary particulars for the execution of the works within a reasonable time
and a breach of this implied obligation would entitle the main contractor to a cause of
action in damages.
111
In view of the above case, this study has derived the circumstances which have
caused to delay in nominated subcontract works. Due to the late instruction by the
employer as well as architect, it can be resulted in the completion of subcontract works
and a breach of contract. In practice, most of the contracts do not prefer to provide a
clause which enabling the employer or his agent to fix the new completion date after the
employer has caused delays to the contractor’s progress. The defendant therefore is not
entitled for the damages incurred. The same principles has been applied in the previous
circumstances where the main contractor is entitled to extension of time or may only
allowed to carry out the works within reasonable time.
4.3.6 Circumstances No.6 – Delay in Completion of the Subcontract Works Due to
the Failure of Main Contractor to Provide Amenities And Facilities
In general, the main contractor is responsible to undertake numerous obligations.
A part of the obligation is to provide facilities for the nominated subcontractor to proceed
with the subcontract works. Besides that, as has been highlighted previously in the case
of nominated subcontracting, a main contractor has to provide a sufficient of site for the
nominated subcontractor to carry out nominated subcontract work. In addition to that, the
main contractor must also consider the condition of the site whether the facilities and
amenities has been ready for the nominated subcontractor to carry out the subcontract
works without any disruptions.
Nevertheless, the problem arises when the main contractor fails to provide
necessary amenities and facilities for the purpose of the subcontract works. Due to this,
the nominated subcontractor may not commence their works in accordance with the work
programme and most probably it may lead to delay in completion.
112
It has been presented in the case of the CSK Electrical Co. Bhd. v. Regional
Construction Sdn. Bhd. (1987) 2 MLJ 763, the plaintiff was nominated subcontractor for
the execution of electrical works under the main contract. The defendant was the main
contractor. One of the issue which has been highlighted in this case is when the main
defendant failed to pay to the plaintiff in full amount due to the late in completion in
nominated subcontract works. However, according to the judgment by Robert CJ, the
delay has been caused by the failure of the plaintiff to obtain some of the necessary
electrical equipment. As a result the plaintiff was unable to complete the subcontract
works according to completion period. The judge found that the plaintiff’s order was
agreed because of the delay caused by the defendant. As an implication, the defendant
was liable for the damages if it affected the main contract.
In practice, most of the standard form of contract mainly building subcontract has
set out the provision whereby the main contractor is responsible to provide the facilities
for the purpose of the nominated subcontract works. It has been clearly stated in PAM 98
Subcontract Clause 15, which says that:
PAM 98 Subcontract-Clause 15.1
Contractor to provide amenities and facilities if so required in main contract
“if and so as it is so provided in the main contract (but not otherwise) the
contractor shall supply at his own cost all necessary water, lighting, watching,
site security, allocation of space for storage and accommodation, rubbish
clearing and attendance for he purposes of the subcontract works, subject as
aforesaid the subcontractor shall make all necessary provision in regard to the
said matters and each of them.”
113
In addition to that, CIDB.B/(NSC) 2002 has been expanded by the Clause 8.1 of:
CIDB.B/(NSC) 2002 Clause 8.1
Utilities provided by the contractor
b) where such utilities are supplied by the contractor then the nominated
subcontractor shall pay the contractor for the consumption of the same in
connection with the subcontract works.
c) subject to sub-clauses 8.1 (a) and (b) above, the nominated subcontractor shall
at his own cost make provision of all utilities necessary for he proper execution of
the subcontract works.
Furthermore, there is a principle which can be referred to and it has been derived
from the case of Pigott Construction Co. Ltd. v. W.J. Gowe Ltd (1961) 27 DLR (2d) 258,
CA Ontario. The plaintiff was the contractor and the defendant was the nominated
subcontractor. One of the plaintiff’s obligations was to supply equipment necessary to the
subcontractor. The contractor failed to provide temporary heating as required in the
contract. As a result of the failure by the contractors, a number of trades could not
proceed with the work in the buildings under construction. The Ontario Court of Appeal
held that failure to provide heating prevented the subcontractors, in the depth of the
Canadian winter, doing the work at all. Thus, the contractor was held liable to the
subcontractor for the cost of providing subcontractor’s own heating equipment.
Thus, it could be said that to provide all the facilities to the site is a main
obligation for the main contractor in construction. It has been proven in the above case
that, where the delay occurred is due to failure of the main contractor to provide the
required facilities in time and therefore the nominated was unable to proceed their
subcontract works as has been stated in the contract. As a result, the main contractor is
114
responsible for the damages which caused in the event of delay in nominated
subcontracting.
In view of the above discussion, it can be concluded that the nominated
subcontractor cannot complete the subcontract works within the completion period if the
condition of the whole site including all facilities are still not ready to be commenced. In
short, this circumstance is considered as a cause of delay in nominated subcontracting.
Consequently, the nominated subcontractor is entitled to obtain extension of time in such
event, but the main contractor should liable for any damages for the employer and
nominated subcontractor.
115
CHAPTER 5
CONCLUSION AND RECOMMENDATIONS
5.1
Introduction
This is the final chapter which summarizes the finding of the research in
accordance with the research objective. Problems encountered during the research as well
as recommendations for future research are also discussed in this chapter.
5.2
Summary of Research Findings
In general, the objective of this research has been achieved through the
documentary analysis of law journals. By carrying out this research, six (6) circumstances
have been identified which causes delay in nominated subcontractor’s work and their
implication to the main contractor. The findings are summarized in Table 5.1 and Table
5.2.
116
Table 5.1 : Analysis For Circumstances Which Causes Delay In Nominated Subcontractor’s Work and Their Implication to The Main
Contractor
Item
Circumstances
Party in dispute
Cause of delay
MC & NSC
1
Circumstances No.1
Delay in nominated subcontractor’s work due to late
payment.
Main Contractor
√
2
Circumstances No.2
Delay in nominated subcontractor’s works which was
caused by main contractor’s default.
Main Contractor
√
3
Circumstances No.3
Delay on the part of the nominated subcontractor’s
work which has been caused by late possession of site.
Employer
4
Circumstances No.4
Delay in nominated subcontractor’s work due to the
failure of the employer to supply materials and goods.
MC & E
√
√
Employer
5
Circumstances No.5
Delay caused by nominated subcontractor due to the
late instructions.
Employer
6
Circumstances No.6
Delay in nominated subcontractor’s work due to the
failure of main contractor to provide amenities and
facilities.
Main Contractor
NSC & E
√
√
117
Table 5.2 : Analysis For Circumstances Which Causes Delay In Nominated Subcontractor’s Work and Their Implication to The Main
Contractor
Item
1
Circumstances
Cause(s) of Delay
Implication to The Main Contractor
Circumstances No.1
Delay in nominated subcontractor’s work due to late
payment.
Discussed in the court case of:
• The main
contractor
refused to pay the
progress payment
to the nominated
subcontractor as
stated in the
contract
• Repudiatory breach by the main contractor.
• The main contractor is not entitled to
obtain any extension of time.
• The main contractor is liable to pay
damages to the employer
• The main
contractor has
wrongly terminated
the employment of
nominated
subcontractor and
withhold progress
payment without
reason
• In CIDB 2000 Clause 24.1-not allow any
extension of time due to main contractor’s
default
• Repudiatory breach by the main contractor
• The main contractor is not entitled to
obtain any extension of time
• The main contractor liable to pay damages
to the employer
• The nominated subcontractor also have
rights to be compensated
•
2
Alliance (Malaya) Engineering Co. Sdn.Bhd.
v. San Development Sdn.Bhd. (1974) 2 MLJ
94
• Ryoden (M) Sdn Bhd v. Syarikat Pembenaan
Yeoh Tiong Lay Sdn.Bhd. (1992) 1 MLJ 33
• Antara Elektrik Sdn.Bhd. v. Bell & Order
Bhd. (2002) 3 MLJ 321
• Engineering
Construction
(Pte)
Ltd.
Ohbayashi-Gumi Ltd (1986) 1 MLJ 218.
• Mahkota Technologies Sdn.Bhd. v. BS Civil
Engineering SdnBhd. (2000) 6 MLJ 505
Circumstances No.2
Delay in nominated subcontractor’s works which
was caused by main contractor’s default.
Discussed in the court case of:
•
•
Engineering Construction (Pte) Ltd v
Ohbayashi-Gumi Ltd (1986) 1 MLJ 218.
Woh Hup (Pte) Ltd & Anor v. Turner (East
Asia) Pte Ltd. (1987) 1 MLJ 443
118
Table 5.2 : Analysis For Circumstances Which Causes Delay In Nominated Subcontractor’s Work and Their Implication to The Main
Contractor
Item
3
Circumstances
Circumstances No.3
Delay on the part of the nominated subcontractor’s
work which has been caused by late possession of
site.
Discussed in the court case of:
•
4
Implication to The Main Contractor
• Failure of the
employer in giving
the possession of site
within appropriate
time
• CIDB 2000 Clause 24.1(i) - a ground that
entitled the main contractor to an
extension of time.
• PWD 203A Clause 43(g) - a part of
ground that allows the main contractor to
be given extension of time.
• PAM 1998 Clause 23.7 (xi) - Act of
prevention or breach of contract by
employer.
• Breach of contractor by the employer – the
main contractor entitled to get extension of
time.
• Time is set to become at large, the
employer has no right to be compensated.
Since no new completion date has been
provided, the main contractor has to
proceed the work within reasonable time.
• PAM 1998 Clause 23.7 (ix) provides such
ground which give entitlement to the main
contractor to obtain an extension of time.
• The nominated subcontractor is also entitle
to an extension of time on account of this
delay.
• The employer is not entitled to be
compensated for any damages due to the
delay caused by his own fault.
Thamesa Designs Sdn Bhd & Ors v
Kuching Hotels Sdn.Bhd. (1993) 3 MLJ
Circumstances No.4
Delay in nominated subcontractor’s work due to
the failure of the employer to supply materials and
goods.
Discussed in the court case of:
•
Cause of Delay
Lightweight Concrete Sdn.Bhd. v. Nirwana
Indah Sdn.Bhd.(1999) 5 MLJ 351
• The employer fails
to deliver material in
time
119
Table 5.2 : Analysis For Circumstances Which Causes Delay In Nominated Subcontractor’s Work and Their Implication to The Main
Contractor
Item
5
Circumstances
Circumstances No.5
Delay caused by nominated subcontractor due to
the late instructions.
Discussed in the court case of:
•
6
Implication to The Main Contractor
• The employer lack
of giving instruction
and direction to the
main contractor
• PAM 1998 Clause 23.7 (xi)-act of
prevention or breach of contract by
employer will allow the architect to give an
extension of time to the main contractor.
• In the absence of the provision, time for
completion becomes at large, thus the main
contractor’s obligation is then to complete
within a reasonable time.
• Therefore, the employer is not entitled for
the damages incurred.
• The main
contractor not
provides facilities as
has been required in
the contract
• PWD 203N Clause 5- a provision for the
main contractor to provide necessary
facilities for the purpose of subcontract
works.
• The main contractor is liable for the
damages incurred to the nominated
subcontractor as well as to the employer.
• The nominated subcontractor may be
entitled to obtain extension of time.
Shen Yuan Pai v. Dato’ Wee Hood Teck
(1976) 1 MLJ 16
Circumstances No.6
Delay in nominated subcontractor’s work due to
the failure of main contractor to provide amenities
and facilities.
Discussed in the court case of:
•
Cause of Delay
CSK Electrical Co. Bhd. v. Regional
Construction Sdn. Bhd. (1987) 2 MLJ 763
120
5.3
Problems Occurred When Conducting This Study
There are some constraints in conducting this study. The first is the time in doing
this study is very limited and thus the scope of this study is quite limited. Besides that,
the cases that related to this study is also limited. It is because most of the cases in
associated with nominated subcontractor are not recorded and thus it has to be searched
within Malayan Law Journal. Thus, this limitation led to less cases being found to
support the findings, especially those decided in Malaysia court. If more time is given,
most probably the circumstances illustrated will be more comprehensive and thorough.
5.4
Further Studies
The following is a possible topic that related to this research recommended for
future research:
a) The entitlement of extension of time due to concurrent delay -The objective of
this research is to determine the circumstances of concurrent delays in
construction and the entitlement of extension of time to the main contractor.
121
5.5
Conclusion
As a conclusion, there are many causes of delay in construction. Causes of delay
can be further detailed into delay caused by owner/employer, delay caused by designer,
delay caused by contractor, delay caused by subcontractor and delay not caused by party
to the design and construction process. Delay can be categorized as excusable, nonexcusable, compensable, non-compensable and concurrent delay. An excusable delay
gives entitlement the main contractor to be granted extension of time and not liable for
damages. Delay on the part of the nominated subcontractor is considered under this type
of delay. Further to this, there are circumstances that may cause the completion period of
nominated subcontract work become delay. This study has also determined six (6)
circumstances, which may contribute to delay in nominated subcontractor’s work. In
addition to that, based on these causes of delay, this study has identified the implications
to the main contractor whether they should be entitled an extension of time or to be
liable of damages. This study could be considered as guidance to the parties in
construction industry in reducing and preventing of delay in construction.
122
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