BREACHES OF CONTRACT IN CONSTRUCTION INDUSTRY
LAWRENCE YAP SIE KIONG
UNIVERSITI TEKNOLOGI MALAYSIA
BREACHES OF CONTRACT IN CONSTRUCTION INDUSTRY
LAWRENCE YAP SIE KIONG
A project report submitted in partial fulfillment of the requirements for the award of
the degree of Master of Science (Construction Contract Management)
Faculty of Built Environment
Universiti Teknologi Malaysia
JULY 2009
iii
Especially to…….
My Beloved Dad, Mum, Sisters
Friends
and
SIC Members
Thanks for everything!!
iv
ACKNOWLEDGEMENT
A debt of gratitude is owed to many individuals who have given me the
benefit of their unconditional help, tolerance and knowledge in writing and
completing this master project. First of all, I would like to express my highest
gratitude to my supervisor, Encik Norazam Othman for his guidance, advice and
support in order to complete this master project.
My appreciations also go to all the lecturers for the course of MSc
Construction Contract Management, for their patient and kind advice during the
process of completing the master project. Further, I would like to express my
special thanks my fellow classmates, who have in their own way helped me a great
deal throughout the preparation and production stages of this master project.
Finally, I would like to extend my truthful appreciation to my dearest parents
and sisters for giving their full supports.
v
ABSTRACT
The doctrine of freedom to contract, as the cornerstone of contract law in the
common law countries (Malaysia inclusive) has consequently generated an
extensive array of contracts of various characteristics and varieties. In Malaysia,
there are two basic components in the contract documents used for the contracting of
most construction work that is the Contract Conditions and technical specifications
and drawings. As a general principle, once a party enters into a contract, he must
perform his obligations strictly according to the terms of the contract. However, in
the construction industry, breaches of contract are commonplace to the point of
routine. Moreover, under the complicated provisions of many construction contracts
the possible breaches of contract either by contractor or employer are numerous, and
in each case the general principles must be applied in order to determine what, if any,
damage is recoverable for the breach. This research therefore set out to illustrate the
types of breaches of contract that are currently fashionable in Malaysian
construction industry. The research is also to address the legal issues in relation to
damages. The approach adopted in this research is documentary analysis of case
laws.
A total number of 53 cases were studied, where only 11 of them were
associated with the breaches of contract. Findings show that there are 7 types of
breaches existed in construction industry for the past thirty years. Most of the cases
were breached due to the reason of “abandonment of work”. On the other hand, 3
legal issues closely related to damages were addressed in this research. In summary,
findings of this research may assist the relevant parties in addressing and
overcoming the problems associated to breaches of contract and creates a win-win
situation
for
all
parties
in
the
Malaysian
construction
industry.
vi
ABSTRAK
Doktrin kebebasan berkontrak, kerana asas undang-undang kontrak dalam
negara-negara “common law” telah mengakibatkan penjanana satu tatasusunan yang
meluas dalam pelbagai ciri and jenis-jenis kontrak.
Di Malaysia, terdapat dua
komponen asas dalam dokumen-dokumen kontrak yang digunakan untuk kontrak
kerja pembinaan iaitu Syarat-syarat Kontrak dan penentuan-penentuan teknikal serta
lukisan-lukisan. Secara prinsip umum, apabila satu pihak memasuki suatu kontrak,
pihak tersebut perlu menjalankan kewajipannya semata-mata menurut syarat-syarat
kontrak. Bagaimanapun, dalam industri pembinaan, pelanggaran kontrak adalah
biasa dan menjadi rutin.
Lagipun, di bawah peruntukan-peruntukan rumit itu
banyak kontrak pembinaan kemungkinan mempunyai pemungkiran kontrak sama
ada oleh kontraktor atau majikan, dan dalam setiap kes , prinsip umum itu mesti
digunakan dalam perintah bagi menentukan apa, jika mana-mana, kerosakan boleh
dibaikpulihkan. Oleh itu, penyelidikan ini mengenalpasti jenis-jenis pemungkiran
kontrak yang cukup lazim pada masa kini dalam industri pembinaan di Malaysia.
Penyelidikan ini juga adalah untuk melihat isu-isu berkaitan kerosakan. Pendekatan
itu menggunakan penyelidikan secara menganalisis dokumen kes undang-undang.
Jumlah keseluruhan mencapai 53 kes telah dipelajari, di mana hanya 11 berkaitan
dengan pemungkiran kontrak. Penemuan-penemuan menunjukkan terdapat 7 jenis
pemungkiran wujud dalam industri pembinaan dalam tiga puluh tahun yang lepas.
Kebanyakan kes kemungkiran berlaku disebabkan “pembuangan kerja”. Sebaliknya,
3 isu perundangan yang berkait rapat dengan kerosakan dikemukakan dalam
penyelidikan ini. Natijahnya, penemuan-penemuan penyelidikan ini mungkin
membantu pihak tertentu dalam mengemukakan dan mengatasi masalah-masalah
berkaitan pemunkiran kontrak dan mewujudkan situasi menang-menang untuk
semua pihak dalam industri pembinaan di Malaysia.
vii
TABLE OF CONTENTS
CHAPTER
TITLE
`
PAGE
DECLARATION OF THESIS
SUPERVISOR’S DECLARATION
TITLE
i
DECLARATION
ii
DEDICATION
iii
ACKNOWLEDGEMENT
iv
ABSTRACT
v
ABSTRAK
vi
TABLE OF CONTENTS
vii
LIST OF TABLES
xi
LIST OF FIGURES
xii
LIST OF ABBRIEVATIONS
xiii
LIST OF CASES
LIST OF APPENDIXES
1
xv
xxi
INTRODUCTION
1
1.1
Background of Study
1
1.2
Problem Statements
5
1.3
Objective of Study
7
1.4
Scope of Study
7
1.5
Significance of the Study
8
viii
1.6
2
Research Methodology
8
1.6.1 Identify Research Issue
8
1.6.2 Literature Review
9
1.6.3 Data Collection
9
1.6.4 Data Analysis
10
1.6.5 Conclusion and Recommendations
10
BREACH OF CONTRACT
11
2.1
Introduction
11
2.2
Statutory Provisions
13
2.3
Repudiation
14
2.3.1 Repudiation by Words or Conduct
14
2.3.2 Proof of Repudiation
15
2.3.3 Consequences of Repudiation
17
2.3.4 Anticipatory Breach
18
Fundamental Breach
19
2.4.1 General Principles
20
2.4.2
22
2.4
2.5
Rule of Construction
2.4.3 Onus of Proof
24
Breach of Fundamental Terms
25
2.5.1 By Statutory Implication
26
2.5.1.1 Because the Parties
26
Have Explicitly Made it So
2.5.1.2 Because the Court so Construe it
2.6
26
Breach by the Employer
28
2.6.1 Failure to Give Possession of the Site
31
2.6.1.1 State of the Site
33
2.6.1.2 Extent and Time of Possession
35
2.6.2 Failure to Supply Plans
37
2.7
Breach by the Contractor
40
2.8
Conclusion
41
ix
3
DAMAGES
43
3.1
Introduction
43
3.2
General Principles
44
3.3
Types of Damages
45
3.3.1 General Damages
45
3.3.2 Special Damages
45
3.3.3 Nominal Damages
45
3.3.4 Substantial Damages
46
3.3.5 Exemplary Damages
46
3.3.6 Unliquidated Damages
46
3.3.7 Liquidated Damages
47
Remoteness of Damages
47
3.4.1 The Rule in Hadley v. Baxendale
48
3.5
Measure of Damages
51
3.6
Mitigation of Damages
52
3.7
Proof of Damages
54
3.8
Conclusion
55
3.4
4
ANALYSIS OF CASE LAWS
57
4.1
Introduction
57
4.2
Statistical Analysis and Study of Law Reports
58
4.2.1 Law Reports in Relation with
58
Construction Contract in MLJ
4.2.2 Court Cases in Relation with
59
Breaches of Contract
4.3
4.2.2.1 The Parties Engaged in the Cases
60
4.2.2.2 Types of Project Involved in Breaches
61
4.2.2.3 Party that Committed the Breach
62
4.2.2.4 Types of Breaches
63
4.2.2.5 Relief Sought
65
Findings of Legal Issues in Relation to Damages
67
4.3.1 Proof of Actual Loss
67
x
4.3.1.1 Letrik Bandar Hup Heng Sdn Bhd v.
67
Wong Sai Hong
4.3.1.2 Hock Huat Iron Foundry v.
68
Naga Tembaga Sdn Bhd
4.3.2 Standard of Proof
4.3.2.1 Nirwana Construction Sdn Bhd v.
70
70
Pengarah Jabatan Kerja Raya Negeri
Sembilan Darul Khusus & Anor
4.3.3 Cross Claims
72
4.3.3.1 L’Grande Development Sdn. Bhd v.
73
Bukit Cerakah Development Sdn. Bhd
4.4
5
Conclusion
74
CONCLUSION AND RECOMMENDATIONS
75
5.1
Introduction
75
5.2
Summary of Research Findings
75
5.2.1 Objective I:
76
To illustrate the
Types of Breaches of Contract that are
Currently Fashionable in Malaysian
Construction Industry
5.2.2 Objective II: To Address the Legal
79
Issues in Relation to Damages
5.3
Problems Encountered during Research
80
5.3.1 Time Constraint
80
5.3.2 Lack of Comprehensive Data
80
5.4
Future Researches
80
5.5
Conclusion
81
REFERENCES AND BIBLIOGRAPHY
82
APPENDIX A
85
xi
LIST OF TABLES
TABLE NO.
TITLE
PAGE
4.1
Types of Breaches
63
4.2
Relief Sought
65
5.1
Types of Breaches that are Currently Fashionable
76
5.2
Legal Issues in Relation to Damages
79
xii
LIST OF FIGURES
FIGURE NO.
TITLE
PAGE
4.1
Court Cases in Relation with Construction Contract
59
4.2
The Parties Engaged in the Cases
60
4.3
Types of Project
61
4.4
Party that Committed the Breach
62
xiii
LIST OF ABBRIEVATIONS
AC
Law Reports Appeal Cases
All ER
All England Law Reports
ALJ
Australian Law Journal
ALR
Australian Law Reports
ALJR
Australian Law Journal Reports
App Cas
Appeal Cases
B
Beavan
B&S
Best and Smith’s Reports
Build LR
Building Law Reports
CA
Court of Appeal
CB
Common Bench Reports
Ch
Chancery
Ch App
Chancery Appeal
Ch D
The Law Reports, Chancery Division
CIDB
Construction Industry Development Board
CLD
Construction Law Digest
DC
Divisional Court, England
Const LJ
Construction Law Journal
Const LR
Construction Law Reports
CP
Law Reports, Common Pleas
CPD
Law Reports, Common Pleas Division
DLR
Dominion Law Reports
Exch
Exchequer Reports
Eq
Equity Case
EWHC
High Court of England and Wales Decisions
xiv
FC
Federal Court
F&F
Foster & Finlayson’s Reports
H&N
Hurlstone & Norman’s Exchequer Reports
HGCRA
Housing Grants, Construction and Regeneration Act
HL
House of Lords
HKC
Hong Kong Cases
HKLR
Hong Kong Law Reports
IR
Irish Reports
KB
King Bench
LGR
Local Government Reports
LJKB (QB)
Law Journal Reports, King’s (Queen’s) Bench
Lloyd’s Rep
Lloyd’s List Reports
LR
Law Reports
LT
Law Times Reports
JP
Justice of the Peace / Justice of the Peace Reports
MLJ
Malayan Law Journal
NS
Nova Scotia
NZLR
New Zealand Law Reports
PAM
Pertubuhan Arkitek Malaysia
PWD
Public Work Department
PD
Probate, Divorce and Admiralty Division of High
Court
QB
Queen Bench
TCC
Technology and Construction Court
SLR
Singapore Law Reports
Stark
Starkie’s Nisi Prius Reports
WLR
Weekly Law Reports
WR
Weekly Reports
xv
LIST OF CASES
CASES
PAGE
AA Valibhoy &Sons Pte Ltd v. Banque Nationale de Paris
[1994] 2 SLR 772
23
Ahmad Ismail v. Malaya Motor Company & Anor [1973] 2 MLJ 66
19
Arvind Coal and Construction Co v. Damodar Vally Corporation
AIR 1991 Pat 14
43
Bath and North East Somerset District Council v. Mowlem Plc
[2004] EWCA Civ 115
Bunge Corporation v. Tradax [1981] 1 WLR 711
17
26, 27, 28
Cehave N.V. v. Bremer m.b.H. [1976] 1 QB 44
28
Compagnie General Maritime v. Diakan Spirit [1982] 2 Lloyd’s Rep 574
26
Davidson v. Gioyne (1810) 12 East 381
21
Dennis v Sennyah [1963] MLJ 95
47
Décor-Wall International SA v. Practitioners in Marketing Ltd
xvi
[1971] 2 All ER 216
22
Federal Commerce & Navigation Ltd v. Molena Alpha Inc & Ors
[1979] 1 All ER 307
17, 28
Frank & Collingwood Ltd v. Gates [1983] 1 Con LR 21
46
Freeman v. Hensler (1900) 64 JP 260 CA
37
Freeth & Snor v. Burr (1874) LR 9 CP 208
16
Frost v. Knight (1872) LR 7 Exch 111
29
Gaze (WH) & Sons v. Port Talbot Corporation (1929) 93 JP 89.
41
Hadley v. Baxendale (1854) 9 Exch 341
50
Hochster v. De la Tour (1853) 2 El & Bl 678
15, 29
Hock Huat Iron Foundry v. Naga Tembaga Sdn Bhd
[1999] 1 MLJ 65
67
Hong Kong Fir Shipping v. Kawasaki Kison Kaisha
[1962] 2 QB 26 (CA)
22, 26
Hong Leong Co Ltd V. Pearlson Enterprises Ltd (No 2)
[1968] 1 MLJ 262
47
Hosking v. Pahang Corporation (1891) 8 TLR 125
41
Hunter Engineering Inc v. Syncrude Canada Ltd
(1989) 57 DLR (4d) 321
23
xvii
Hunt and Winterbotham Ltd v. BRS (Parcels) Ltd
[1962] 1 QB 617.
Ibmac v. Marshall (1968) 208 EG 851
25
4, 34
Industrial & Agricultural Distribution Sdn Bhd v.
Golden Sands Construction Sdn Bhd [1993] 3 MLJ 433 at 447
Johnstone v. Milling (1886) 16 QBD 460, 470
17
14, 29
Joo Leong Timber Merchant v. Dr Jaswant Singh a/l Jagat Singh
55
Joseph Thorley Ltd v. Orchis Steamship Co [1907] 1 KB 660
22
Karsales (Harrow) Ltd. v. Wallis [1956] 2 All ER 866
20
Lawson v. Wallasley Local Board (1882) 11 QBD 229
4, 31
LEC Contractors (M) Sdn Bhd v. Castle Inn Sdn Bhd
[2001] 5 MLJ 510
6
Letrik Bandar Hup Heng Sdn Bhd v. Wong Sai Hong
[2002] 5 MLJ 247
66
Levison v. Patent Steam Carpet Cleaning Co. Ltd
[1978] QB 69
25
Lim Sew Lan v. Pembangunan Hysham Sdn Bhd
[1995] 5 MLJ 670
23
Lilley v. Doubleday [1907] 1 KB 669
22
Lombard v. Butterworth [1987] QB527
27
xviii
Lovelock v. Franklyn (1846) 8 QBD 371; 115 ER 916
15, 31
Low Kon Fatt v. Port Klang Golf Resort (M) Sdn Bhd
[1998] 6 MLJ 448
23
L’Grande Development Sdn. Bhd v.
Bukit Cerakah Development Sdn. Bhd [2007] 4 MLJ 518
72
Mersey Steel & Iron Co v. Naylor, Benzon & Co
(1884) 9 App Cas 434 CA
41
Monarch Steamship Co Ltd V. KarlsHamns Oljefabriker
[1949] AC 196
49
Muralidhar Chatterjee v. International Film Co Ltd 1943
AIR 30 PC 34; [1942] LR 70 IA 35, PC
13
Nirwana Construction Sdn Bhd v.
Pengarah Jabatan Kerja Raya Negeri Sembilan
Darul Khusus & Anor [2008] 4 MLJ 157
69
North West Metropolitan Regional Hospital Board v.
TA Bickerton & Sons Ltd [1970] 1 WLR 607
4
Parker Distributors (Singapore) Pte Ltd v. Svenborg
[1983] 2 MLJ 26 (CA)
23
Photo Production Ltd v. Securicor Transport Ltd
[1980] AC 827
24
Pontifex v. Wilkinson (1845) 1 CB 75
30
Raja Lope & Anor v. Malayan Flour Mills Bhd
[2000] 6 CLJ Supp 194
55
xix
Reg Glass Pty Ltd v. Rivers Locking Systems Pty Ltd
(1968) 120 CLR 516
49
Rhymney Rail Co v. Brtecon and Merthyr Tydfil Junction Rail Co
(1900) 69 LJ Ch 813 CA
30
Robinson v Harman (1848) 1 Ex 850
52
Robert v. Bury Comissioners (1870) LR 5 CP 310
4
Ross T Smyth & Co Ltd v. TD Bailey, Son & Co [1940] 3 All ER 60
16
Russel v. Sa da Bandeira (1862) 13 CB (NS) 149
31
Schuler (L.) A.G.v. Wickman Machine Tool Sales
[1974] AC 235 (HL)
28
SEA Housing Corporation Sdn. Bhd. v Lee Poh Choo
[1982] 1 MLJ 324
55
Seaton Brick and Tile Co Ltd v. Mitchell
(1900) 2 F (Ct of Sess) 550
42
Short v. Stone (1846) 15 LJQB 143
31
Societie Generale de Paris v. Milders (1853) 49 LT 55
30
State Trading Corporation of India v. Golodetz
[1989] 2 Lloyds’s Rep. 277 (CA)
28
Suisse Atlantique v. N.V. Rotterdamsche Kolen Centrale
[1967] 1 AC 361
22
xx
Syed Jaafar bin Syed Ibrahim vMaju Mehar Singh
Travel & Tours Sdn. Bhd. [1999] 4 MLJ 413
56
Sze Hai Tong Bank v. Rambler Cycle Co
[1959] AC 576; [1959] 3 All ER 182 (PC)
23
Tan Sri Khoo Teik Puat v. Plenitude Holdings Sdn Bhd
[1994] 3 MLJ 777
47
Tham Cheow Toh v. Associated Metal Smelters Ltd
[1972] 1 MLJ 171
51
The Mersey Steel and Iron Co Ltd v.
Naylor, Benzon & Co (1884) 9 App Cas 434
16
Toeh Kee Keong v. Tambun Mining Co Ltd [1968] 1 MLJ 39
51
Tramways Advertising Pty Ltd. v.
Luna Park (NSW) Ltd. (1938) 38 SR (NSW) 632
21
Trollope & Sons and Colls & Sons Ltd v. Singer (1913)
31
UGS Finance v. National Mortgage Bank of Greece
[1964] 1 Lloyd’s Rep. 446
23
Universal Cargo Carriers Corp v. Citati [1957] 2 All ER 70
19
Vitoria Laundry (Windsor) Ltd v. Newman Industries Ltd
[1949] 2 KB 528
51
Wells v. Army & Navy Co-operative Society (1902) 86 IT 764
38
Wright v. Dean [1948] 2 All ER 415
29
xxi
LIST OF APPENDIXES
APPENDIX NO.
TITLE
A
List of Cases Examined
PAGE
85
CHAPTER 1
INTRODUCTION
1.1
Background of Study
The doctrine of freedom to contract, as the cornerstone of contract law in the
common law countries (Malaysia inclusive) has consequently generated an
extensive array of contracts of various characteristics and varieties. Coupled with an
explosion of contractual dealings arising out of the globalization and liberalization
process the practical ramifications are a multitude of contracts in all fields of human
endeavour; the construction industry not being expected. It is a tall order to deal
with the entire spectrum of such contracts.1
Basically, a contract is an agreement enforceable by law. 2 In other words, a
contract is an agreement which is legally binding between the parties.
The
agreement between two or more parties is constituted by an offer and an acceptance
of it. 3 The Housing Grants, Construction and Regeneration Act 1996 of England
1
Harbans Singh, K. S. (2004). Engineering and Construction Contracts Management: Law &
Principles. Selangor: Malayan Law Journal Sdn Bhd., pp.235
2
Section 2(h) of Contract Act 1950.
3
Vohrah, B. and Wu, Min Aun. (2000). The Commercial Law of Malaysia. Second Edition. Petaling
Jaya: Pearson Malaysia Sdn. Bhd., pp.8
2
defined construction contract as an agreement for carrying out construction
operations, including sub-contracted work and architectural design or surveying
work or advice on building, engineering, decoration or landscape. 4
In Malaysia, there are two basic components in the contract documents used
for the contracting of most construction work. The first of these contains a list of
legally crafted terms and conditions and is usually referred to as the “Contract
Conditions”. The second component consists of a set of technical specifications and
drawings which together define the scope, standards and other technical
requirements of the project. 5
Where the employer is a government authority, the contract conditions
frequently take after a standard contract form used by the contracting authority (for
example, the Public Works Department Standard Form 203A). Alternatively, it may
consist of one of the standard contract forms issued by professional and trade bodies
such as the Pertubuhan Akitek Malaysia 6 (PAM) or the Construction Industry
Development Board (CIDB). References in this work will be made to some of the
major provisions contained in the more common standard forms. In practice, these
standard conditions may be modified, sometimes substantially, and legal liabilities
and rights or the parties to the contract would be fashioned accordingly. 7
Consequently, once a party enters into a contract, the party must perform his
obligations exactingly according to the terms of the contract. 8 The contracting
parties are liable to answer for any of the obligations which they have failed to
discharge and it is no defence to an action for incomplete performance that the
parties have done everything that can be reasonably undertaken if the end result falls
4
Section 104 & 105 of Housing Grants, Construction and Regeneration Act 1996 of England.
Chow, Kok Fong. (1988). An Outline of the Law & Practice of Construction Contract Claims.
Singapore: Longman Singapore Publishers Pte. Ltd., pp.4
6
Malaysian Institute of Architects
7
Chow, Kok Fong. (1988). op. cit., pp.5
8
Ibid, pp.27
5
3
short of that required by the contract. 9 However, breach of contract happens, when a
party, without lawful reason, wrongs or fails to perform the terms and obligations of
the contract as agreed. 10
The Contract Act 1950, vide Section 40 proffers the following provision for
breach of contract:11
“When a party to a contract has refused to perform, or
disabled himself from performing, his promise in its entirety, the
promise may put an end to the contract, unless he has signified, by
words or conduct, his acquiescence in its continuance.”
Examples of a breach of contract in relation to sale of goods include nondelivery altogether, delivery of wrong quantities or of defective goods, or delay in
the delivery. Similarly, in construction contract, there may be non-performance,
defective or delayed performance of construction works. 12 Thus, every breach of
contract carries with it the potential for dispute. In addition, whether the breach is
serious or not, it will give the innocent party a right to claim for damages from the
other party for any loss or damage sustained by the breach. However, only certain
types of serious breaches will entitle an innocent party not only to a claim for
damages but also to be discharged from all future obligations. 13
As a general principle, where an employer is guilty of a breach of a contract,
the contractor is entitled to damages under two headings. The first is damages for
any actual loss that has been suffered, and the second is damages for any profit of
9
Paradine v. Jane (1647) Aleyn 26.
Cheong, May Fong. (2007). Civil Remedies in Malaysia. Malaysia: Sweet & Maxwell Asia., pp.9
11
Section 40 of Contract Act 1950.
12
Cheong, May Fong. loc. cit.
13
Eggleston, B. (2008). Liquidated Damages and Extension of Time. Third Edition. Oxford:
Blackwell Science., pp.1
10
4
which the contractor has been deprived. 14 The following are examples of common
breach situations in construction contracts which do not usually afford a sufficient
premise for the contractor to bring the contract to an end and for which the primary
recourse for the contractor is an action in damages: 15
i.
An employer fails to afford the contractor unfettered site
possession within a reasonable time from the signing of the
contract. 16
ii.
The employer is in breach of an express obligation to supply
instructions relating to the execution of the works. 17
iii.
The employer failed to nominate specialist subcontractors and
specialists in a timely manner and as a consequence of which
the critical path of the project is adversely affected. 18
iv.
Disruptions have been caused by other contractors engaged
separately by the employer to work alongside the main
contractor.
Hence, damages are granted to the contractor as compensation for the
damage or loss he has suffered through a breach of contract caused by the employer.
14
Murdoch, J. and Hughes, W. (2008). Construction Contracts: Law and Management. Fourth
Edition. Oxon: Taylor & Francis Group., pp.308
15
Chow, Kok Fong. (1988). An Outline of the Law & Practice of Construction Contract Claims.
Singapore: Longman Singapore Publishers Pte. Ltd., pp.34
16
Lawson v. Wallasley Local Board (1882) 11 QBD 229; Ibmac v. Marshall (1968) 208 EG 851;
Robert v. Bury Comissioners (1870) LR 5 CP 310.
17
Robert v. Bury Comissioners (1870) LR 5 CP 310; Trollope & Colls v. Singer (1913) 1.
18
North West Metropolitan Regional Hospital Board v. TA Bickerton & Sons Ltd [1970] 1 WLR 607.
5
1.2
Problem Statements
In the construction industry, breaches of contract are commonplace to the
point of being routine. 19 In some contracts certain breaches by the employer, such
as failure to make payment on an interim certificate, entitle the contractor to
determine his employment under the contract but such remedies are few and as a
general rule the contractor’s remedy for employer’s breach is the recovery of
general or unliquidated damages. That is to say, damages which are assessed after
the breach. 20
Unlike the equitable remedies of specific performance and injunctions,
damages are awarded to the innocent party as of right, subject only to exceptions
such as mitigation and remoteness of damage. 21 Section 74 (1) of the Contracts Act
1950 sets out the provision for such compensation. The said section reads:
Compensation for loss or damage caused by the breach of contract.
“When a contract has been broken, the party who suffers by the
breach is entitled to receive, from the party who has broken the
contract, compensation for any loss or damage caused to him thereby,
which naturally arose in the usual course of things from the breach, or
which the parties knew, when they made the contract, to be likely to
result from the breach of it.”
19
Eggleston, B. (2008). Liquidated Damages and Extension of Time. Third Edition. Oxford:
Blackwell Science., pp.1
20
Ibid
21
Phang, Andrew Boon Leong et al. (1998). Cheshire, Fifoot and Furmston's Law of Contract. 2nd
Singapore and Malaysian Edition., pp.636-637
6
Furthermore, Dato’ Justice Kadir Musa in the Castle Inn 22 case went on to
the state that:
“What would be most probably justifiable for the plaintiff, if it
can be so proved, is to claim compensation for damages for the
defendant’s non-fulfillment of their ‘obligation’ under the contract by
virtue of section 76 of the Contract Act 1950.”
However, under the complicated provisions of many construction contracts
the possible breaches of contract either by contractor or employer are numerous, and
in each case the general principles must be applied in order to determine what, if
any, damage is recoverable for the breach in question. 23
In brief, whether any types of breach becoming the “trend” of the
construction industry, or how can a claimant realize the legal issues of damages that
arise in the industry? Therefore, it is crucial for the claimants to identify the types
of breaches might occur and the legal issues associated with damages as to clear
obstacles for claiming damages that are entitled to them.
22
LEC Contractors (M) Sdn Bhd v. Castle Inn Sdn Bhd [2001] 5 MLJ 510
Wallace, D. (1970). Hudson’s Building and Engineering Contracts. Tenth Edition. London: Sweet
& Maxwell Ltd., pp. 579
23
7
1.3
Objective of Study
The objectives of this study are:
♦
To illustrate the types of breaches of contract that are currently
fashionable in Malaysian construction industry.
♦
1.4
To address the legal issues in relation to damages.
Scope of Study
This following are the scopes of this study:♦
Only construction cases will be discussed in the study.
♦
The study only examines the contracts between employers and
contractors as well as contracts of contractors and subcontractors.
♦
Examine court cases related to the issue, particularly Malaysian cases
in the past thirty (1978-2008) years. Reference is also made to cases
in other countries such as United Kingdom, Singapore, Australia, and
Hong Kong.
8
1.5
Significance of the Study
The significance of this study is to give an insight of current scenario of
breaches of contract in Malaysian construction industry and also to bring up to date
of the legal issues in relation to damages. The study may help the parties to the
construction contract to have a more complete understanding on the exact situation
happening in the industry. In addition, the findings of the study could be used as
guidance to the parties to avoid themselves from committing any breaches.
1.6
Research Methodology
Research methodology proposes an arrangement of research procedures.
Therefore, research methodology is one of the crucial parts to ensure the research
can be carried out methodically to achieve the proposed objective of this research. It
is a systematic technique to use in the data collection process. The methodology for
this research is divided into five main stages: Identify Research Issue, Literature
Review, Data Collection, Data Analysis and Preparation of Full Research Report.
1.6.1 Identify Research Issue
Identifying the research issue is the initial stage of the whole research. To
identify the issue, firstly, it involves reading on variety sources of published
materials such as seminar papers, journals, articles, previous research report,
newspapers, magazines and electronic resources as well through the World Wide
9
Web and online databases from library of Universiti Teknologi Malaysia, PSZ’s
website.
1.6.2 Literature Review
Literature review is the stage which the research title is further explained and
discusses with the aim of various types of data and information that are gathered
through books, articles, magazines, journals, newspapers that obtained from library
and World Wide Web. Besides this, reported court cases from different sources
such as Malayan Law Journal, Construction Law Report, and Building Law Report
will be referred too. This phase is vital to support and strengthen the research before
proceed to other stages.
1.6.3 Data Collection
Collection of relevant data and information can be started in this stage. Data
will be collected mainly through documentary analysis.
information are recorded systematically.
All collected data and
Data collected to analyse are from
Malayan Law Journal and other law journals as mentioned before. It is collected
through the LexisNexis legal database. All the cases relating to research topic will
be sort out from the databases. Important cases will be collected and used for the
analysis at the later stage.
10
1.6.4 Data Analysis
In this stage, all the data, information, ideas, opinions and comments
collected are arranged, analysed and interpreted. Different types of analysis will be
carried out according to the requirements of the research objective. This procedure
is to process and convert the data collected into information that are useful for the
research. It is important in conducting case study in the way to identify the trends
and developments in the issue that is to be studied.
1.6.5 Conclusion and Recommendations
Conclusion and recommendations is the final stage of the research. In this
stage, the findings would be able to show the result of the research. Conclusion
need to be drawn in-line with the objectives of the research. At the same time, some
appropriate recommendations related to the problems may be made for a better
solution in relation to the said problem, or for further research purposes.
CHAPTER 2
BREACH OF CONTRACT
2.1
Introduction
A claim for damages may be based on a breach of contract or a tort or a
statute. Sometimes the same incident may give an entitlement to damages under all
three categories. For example, take a representation by an employer that a site is
free of asbestos. Assume that the site is not free of asbestos. If the representation is
in the contract, the contractor could claim damages for breach of contract. The
employer may also have been negligent in making the representation and the
contractor may have a claim in tort based on the employer’s negligent
misrepresentation. 24
The employer’s position is, therefore, significantly different from the
contractor’s. Whereas the contractor has a financial remedy for numerous and
various breaches, the employer has his for only one breach of common occurrence –
failure by the contractor to complete on time. And whereas the financial effects of
the employer’s breach on the contractor can rarely be estimated in advance of the
24
Davenport, P. (2006). Construction Claims. Second Edition. Sydney: The Federation Press., pp.23
12
breach, not least because of the involvement of the sub-contractors, the financial
effects of the contractor’s late completion can usually be estimated with some
certainty. 25
Consequently most standard forms of construction contract are drafted to
permit the parties to fix in advance the damages payable for late completion, where
these damages are rightly be termed as liquidated damages. In short, liquidated
damages are fixed in advance of the breach, whereas general or unliquidated
damages are proven damages assessed after the breach. 26
On the other hand, most standard forms of contract do not mention damages
for breach of contract, except for liquidated damages for breach of contract. It is
assumed that the parties know that if either fails to perform a contractual obligation
or to perform it within the time stipulated in the contract, the other party can pursue
a claim for whatever damages are thereby caused to the claimant.
They are two basic types of breach of contract. The first is a simple breach.
Such a breach only gives the innocent party a right to damages. The innocent must
continue to perform the contract. The second type of breach is given various titles.
They include “repudiatory breach” and “fundamental breach”. Under common
law, such a breach gives the innocent party a right of election. The election is
between continuing to perform the contract or terminating the contract. Whichever
course the innocent party elects to adopt, the innocent party can claim damages.
However, the damages maybe different depending upon the innocent party’s
election.
25
Eggleston, B. (2008). Liquidated Damages and Extension of Time. Third Edition. Oxford:
Blackwell Science., pp.2
26
Ibid
13
In short, this chapter addresses the types of breach that will give the innocent
party to claim for damages from the other party for any loss or damages sustained
by the breach.
2.2
Statutory Provisions
In Malaysia, the general provision on breach of contract is found in Section
40 of the Contracts Act 1950. Besides this provision, Section 56 which provides for
the effect of a failure to perform at or before a specified time will also be dealt
with. 27 As mentioned in the previous chapter, Section 40 of Contracts Act provides
that when a party to a contract has refused to perform or disabled himself from
performing his promise in its entirety, the innocent party may put an end to the
contract.
In Muralidhar Chatterjee v. International Film Co Ltd, 28 on appeal from
India, Sir George Rankin in dealing with the scope of Section 39 of the Indian
Contract Act, which is similar to Section 40 of the Malaysian Contracts Act,
observed:
In a case within Section 39 [Section 40 of the Malaysian Contracts
Act], the party who rightly ‘puts an end to’ or ‘rescinds’ (Section 75)
[Section 76 of the Malaysian Act] the contract is entitled to damages
for the defaulting party’s breach. In this sense, the contract has not
ceased to be ‘enforceable by law’. On the other hand, neither party is
any longer bound to perform his promise – indeed an offer to do so, if
27
Dato’ Seri Visu Sinnadurai. (2003). Law of Contract. Volume One. Kuala Lumpur: Malayan Law
Journal Sdn Bhd., pp.665
28
1943 AIR 30 PC 34; [1942] LR 70 IA 35, PC.
14
made by either party, could properly be rejected by the other. The
election of the party rescinding, as Cotton LJ once put it, ‘relieves the
other party from any further obligation under the contract and enables
both parties to make arrangements for the future on the footing that the
contract has been once for all broken and is at an end’: Johnstone v.
Milling (1886) 16 QBD 460, 470.29
2.3
Repudiation
Repudiation may occur where a party has breached a condition of the
contract or, in certain circumstances, an ‘intermediate’ term. ‘Condition’ is used in
a special sense in this context. It is a term of the contract that, if breached, allows
the other party to treat the contract as repudiated because (a) statute so provides, (b)
the parties have agreed that the breach should have that effect, or (c) the courts
regard the term as being of the quality to have such an effect because it goes “so
directly to the substance of the contract”. 30 Therefore, in this following part will
consider (a) repudiation by words or conduct, (b) the proof of repudiation and (c)
anticipatory breach.
2.3.1 Repudiation by Words or Conduct
Basically repudiation occurs when one of the parties, intimates through
words or conduct, that he has no intention to perform his obligation when the
29
1943 AIR 30 PC 34 at 38.
Critchlow, J. (2007). “Remedies for Breach”, in Practical Construction Guides: Construction Law
and Management. Edited by Pickavance, K. London: Informa Law., pp.415-416
30
15
obligation falls due in future.
This act can be evinced expressly through an
unqualified statement to the effect. In Hochster v. De la Tour 31, the plaintiff was
engaged on April 12, 1852 as a courier and to accompany the defendant
commencing on June 1, 1852. Three weeks before the commencement date, the
defendant wrote to the plaintiff that his service was not required any more. The
plaintiff commenced action immediately.
The court held that the plaintiff was
entitled to do so although the time for performance was not yet due. Here the
defendant’s written statement clearly amounted to repudiation. The principle in
Hochster v. De la Tour where the party repudiated before the scheduled time of
performance has been applied to cases where the performance was contingent upon
an event.
Moreover, repudiation can also be implied from the conduct of the
defaulting party that he has no intention to carry on with the contract. This can be
illustrated in a sale of goods at a future date, sells and delivers the same to another
prior to the due date 32 .
Similarly, in a case of sale of land, in Lovelock v.
Franklyn 33, one Dell agreed to sell a piece of land to Lovelock at a certain price,
provided the price was paid over seven years. Before payment was made, and well
within the seven years, Dell sold the land to another. The court found that by Dell’s
conduct, he had impliedly repudiated his agreement with Lovelock.
2.3.2 Proof of Repudiation
Repudiation, whether explicitly by words or implicitly by conduct, must be
clearly established.
31
It must be shown that the defaulting party has made his
(1853) 2 El & Bl 678; 118 ER 922.
“if a man contracts to sell and deliver specific goods on a future day, and before the day he sells
and delivers them to another, he is immediately liable to an action at the suit of the person with whom
he first contracted”, per Lord Campbell in Hochster v. De la Tour (1853) 2 El & Bl 678 at 688.
33
(1846) 8 QBD 371; 115 ER 916.
32
16
intention clear that he no longer intends to perform his contractual obligations. It
has been said that repudiation of contract is “a serious matter not to be lightly found
or inferred”. 34 The relevant factors were considered by the Earl of Selborne LC as
follows:
…you must look at the actual circumstances of the case in order to see
whether the one party to the contract is relieved from its future
performance by the conduct of the other; you must examine what the
conduct is, so as to see whether it amounts to a renunciation, to an
absolute refusal to perform the contract, such as would amount to a
rescission if he had the power to rescind, and whether the other party
may accept it as a reason for not performing his part;… 35
Thus, a mere refusal to perform is insufficient but there must be “an absolute
refusal to perform the contract”. 36 A mere refusal or omission to carry on the
contract is insufficient especially if the party had honestly misapprehended the
situation and this was capable of correction. 37 However, the difficulty is in deciding
how far a party’s honest misconstruction of the agreement should release him of the
charge of an absolute refusal to perform. 38 Difficult as it may, it is important to
ensure that a party (A) purporting to terminate a contract on the ground of the other
party’s (B) purported breach, has sufficiently proved the purported repudiation.
Otherwise if the court decides that B did not repudiate the contract, then A’s
termination will be unjustified and A will be guilty of wrongful repudiation. The
34
Ross T Smyth & Co Ltd v. TD Bailey, Son & Co [1940] 3 All ER 60 at 71. HL, per Lord Wright.
The Mersey Steel and Iron Co Ltd v. Naylor, Benzon & Co (1884) 9 App Cas 434 at 438-439, HL.
36
See also Keating J in Freeth & Snor v. Burr (1874) LR 9 CP 208 where the buyer failed to pay one
installment of several deliveries of iron as he thought that he could set off the sum due for damages
for non-delivery of an earlier installment of delivery of the iron. The court held that the mere refusal
to pay one installment in the circumstances did not warrant the defendant to treat the contract as
abandoned. Keating J stated at p 214: “It is not a mere refusal or omission of one of the contracting
parties to do something which he ought to do, that will justify the other in repudiating the contract;
but there must be an absolute refusal to perform his part of the contract.”
37
“[A] mere honest misapprehension, especially if open to correction, will not justify a charge of
repudiation”, per Lord Wright in Ross T Smyth & Co Ltd v. TD Bailey, Son & Co [1940] 3 All ER 60
at 72.
38
Federal Commerce & Navigation Ltd v. Molena Alpha Inc & Ors [1979] 1 All ER 307. In
Malaysian context, see Industrial & Agricultural Distribution Sdn Bhd v. Golden Sands Construction
Sdn Bhd [1993] 3 MLJ 433 at 447.
35
17
result will be that A becomes liable to B, instead of A’s earlier claim of a cause of
action against B and yet fail to entitle any damages.
2.3.3 Consequences of Repudiation
As pointed out earlier, the innocent party is not bound to accept that a
repudiatory breach terminates the parties’ respective further obligations: he may
instead affirm the contract, in which case, whilst he will still have the right to
recover damages resulting from the breach, the parties’ obligations for future
performance will continue. However, the right to affirm will, in reality, be illusory
where, for example, an employer has dismissed a contractor from the site, or a
contractor has deserted the site. 39 In this regard it should be noted that, usually, a
contractor cannot compel an employer to continue allow him access to the site even
where the employer is in repudiatory breach. 40
In the case of repudiation by the contractor, the employer will generally have
an entitlement to recover all his losses resulting from the contractor’s leaving site
such as any additional cost of having the works completed (beyond what it would
have cost to complete in any event) and losses resulting from any delay to
completion. 41
In the case of repudiation by the employer, the contractor will generally be
entitled to his loss of profit on the works that remain incomplete. Both parties will
retain all the rights they had accrued up to the date of repudiation. Whilst both
39
Critchlow, J. (2007). “Remedies for Breach”, in Practical Construction Guides: Construction Law
and Management. Edited by Pickavance, K. London: Informa Law., pp.416
40
Bath and North East Somerset District Council v. Mowlem Plc [2004] EWCA Civ 115.
41
Ibid
18
parties will be discharged from further performance, any arbitration clause or right
to adjudicate will survive in most cases. 42
2.3.4 Anticipatory Breach
Where an anticipatory breach occurs, repudiation takes place before the time
for performance is due, that is, before either party is entitled to demand performance
by the other party. 43 This was what happened in Frost v. Knight 44. The defendant
had promised to marry the plaintiff once his father had died. He later broke off the
engagement while his father was still alive, and when his ex-fiancée sued him for
breach of promise (which was a valid claim in those days, though not any longer),
he argued that she had no claim as the time for performance had not yet arrived.
This argument was rejected and the plaintiff’s claim succeeded.
A modern exposition on anticipatory breach is found in the judgment of
Devlin J in Universal Cargo Carriers Corp v. Citati 45 as follows:
The two forms of anticipatory breach have a common characteristic
that is essential to the concept, namely, that the innocent party is
allowed to anticipate an inevitable breach. If a man renounces his
right to perform and is held to his renunciation, the breach will be
legally inevitable; if a man puts it out of his power to perform, the
breach will be inevitable in fact – or practically inevitable, for the law
never requires absolute certainty and does not take account of bare
42
Ibid
Elliot, C. and Quinn, F. (2007). Contract Law. 6th Edition. Harlow: Pearson Education Limited.,
pp.287
44
(1870) LR 5 Ex 322 at 326-327.
45
[1957] 2 All ER 70. See also Ahmad Ismail v. Malaya Motor Company & Anor [1973] 2 MLJ 66.
43
19
possibilities. So anticipatory breach means simply that a party is in
breach from the moment that his actual breach becomes inevitable.
Since the reason for the rule is that a party is allowed to anticipate an
inevitable event and is not obliged to wait till it happens, it must follow
that the breach which he anticipates is of just the same character as
the breach which would actually have occurred if he had waited. 46
Applying the above principles, upon an anticipatory breach, the innocent
party has the immediate right to commence action, and he does not need to wait
until the time for performance becomes due.
This rule has been justified on
efficiency grounds. By allowing the innocent party to accelerate his claim for
damages, it gives him the incentive to terminate the contract immediately and move
on, rather than keep himself ready to perform a contract which will be inevitably
breached (which is likely to increase his loss) when the time for performance
arrives. In long term contracts with periodic performances, the innocent party need
not wait for each performance to fall due in order to sue.
Further, allowing
immediate recovery of advance payments enables the innocent party to make a
substitution contract. 47
2.4
Fundamental Breach
A fundamental breach is one which has disastrous consequences for the
innocent party. In other words, this means that when the performance promised is
compared with actual performance, they were deprived of all, or substantially all,
they had bargained for. 48 The key to fundamental breach lay on two alternative
46
Ibid at 85.
Cheong, May Fong. (2007). Civil Remedies in Malaysia. Malaysia: Sweet & Maxwell Asia., pp.15
48
Mulcahy, L. and Tillotson, J. (2004). Contract Law in Perspective. 4th Edition. London: Routledge
Cavendish., pp.225-226
47
20
approaches, first, the importance attached by the parties to the term which has been
broken and secondly, the consequences of the breach of the term. 49
2.4.1 General Principles
An aggrieved party is entitled to treat the contract as coming to an end is
where the defaulting party, either explicitly or implicitly, commits a fundamental
breach of contract. 50 The characteristic situation envisaged is that as exemplified by
Karsales (Harrow) Ltd. v. Wallis 51. In that case, the seller of a car had sought to
deliver an empty car body, relying on an exemption clause purporting to exclude any
warranty of road worthiness or fitness of purpose. The English Court of Appeal
found for the buyer because it held that what was actually delivered was not the
object contracted for. The exemption clause could not operate as there was a
fundamental breach of the contract. 52
Undoubtedly, the fact in the Karsales case represents an extreme situation.
As a general principle, in deciding whether a fundamental breach has been
committed, the authorities appear to have regard to both the importance that the
parties are presumed to have attached to the particular term of the contract which has
been breached and the gravity of the consequences arising from that breach.
Furthermore, both the importance of the term breached and the gravity of the
consequences must be quite apparent to the party who is held to account for the
performance of the contract.
49
A common expression used in the judgments to
Cheong, May Fong. (2007). Civil Remedies in Malaysia. Malaysia: Sweet & Maxwell Asia., pp.15
Chow, Kok Fong. (2004). Law and Practice of Construction Contracts. Third Edition. Singapore:
Sweet & Maxwell Asia., pp.564
51
[1956] 2 All ER 866.
52
Chow, Kok Fong. loc. cit.
50
21
describe this approach is whether the breach “goes to the root of the contract”. 53
The test was perhaps most clearly enunciated by Jordan CJ in the leading Australian
case of Tramways Advertising Pty Ltd. v. Luna Park (NSW) Ltd.:54
“The test… is whether it appears from the general nature of the
contract considered as a whole, or from some particular term or terms,
that the promise is of such importance to the promise that he would not
have entered into the contract unless he had been assured of a strict or
substantial performance of the promise, as the case may be, and that
this ought to have been apparent to the promisor.”
The concept of fundamental breach is perhaps most frequently encountered
in contracts for the carriage of goods and particularly, to deviations of shipping
voyages. In Joseph Thorley Ltd v. Orchis Steamship Co 55, a cargo was contracted
for shipment on a vessel “bound for London”. However, instead of proceeding
straight for London, the ship called at ports in Asia Minor, Palestine and Malta. On
reaching London, the cargo was damaged through the negligence of stevedores. It
was held that although the deviation was not the direct cause of the damage, it was
nonetheless so serious a breach as to change the character of the contemplated
voyage.
Accordingly, the ship owners had in the circumstances committed a
fundamental breach of contract. Similarly, in Lilley v. Doubleday 56 , where the
defendant had agreed under a contract to store the plaintiff’s goods in a repository,
but in fact stored them in warehouse, where they were subsequently destroyed by
fire, the court has no difficulty in holding that the defendant had “stepped out of his
contract” and thereby committed a fundamental breach. 57
53
This metaphor was first used by Lord Ellenborough in Davidson v. Gioyne (1810) 12 East 381. A
recent judgment which resorted to his metaphor is that of Sachs LJ in Décor-Wall International SA v.
Practitioners in Marketing Ltd [1971] 2 All ER 216.
54
(1938) 38 SR (NSW) 632.
55
[1907] 1 KB 660.
56
[1907] 1 KB 669.
57
Chow, Kok Fong. (2004). Law and Practice of Construction Contracts. Third Edition. Singapore:
Sweet & Maxwell Asia., pp.565
22
Other tests have been to ask whether the breach is total or fundamental or
whether the effect of the breach is such that it would be unfair to leave the injured
party to a remedy in damages. 58 In commercial contracts, in particular those relating
to shipping, a prime test seems to be whether the commercial purpose of the
enterprise is frustrated.59 It is submitted that, in relation to building contracts, to ask
whether the breach goes to the root of the contract is often more helpful. The
deliberate character of a breach makes it easier for, but does not compel the court to
find that it was fundamental. 60
2.4.2
Rule of Construction
It is now settled in both England and Singapore that the concept of a
fundamental breach is not a rule of law, but a rule of construction. 61 The rule is
raised primarily to justify rescission as well as to defeat an exemption clause. In
Suisse Atlantique Societe d’Armement Maritime SA v. NV Rotterdamsche Kolen
Centrale 62, the plaintiff ship owners chartered to the defendants a ship for two years
to transport coal between Europe and the United States. The defendant agreed to
load and unload cargoes at specified rates and to pay demurrage for any delay in so
doing. As it turned out, delays in loading and unloading in fact occurred. Instead of
restricting their claims to the demurrage, the plaintiff argued that the defendants’
delays were such as to amount to a repudiation of the contract and that the
demurrage clause was thus inoperative. The House of Lords rejected the plaintiffs’
arguments and held that on the facts there was no fundamental breach which would
have rendered the demurrage clause inoperative. In the course of their judgment,
58
Décor-Wall International SA v. Practitioners in Marketing Ltd [1971] 2 All ER 216.
Hong Kong Fir Shipping v. Kawasaki Kison Kaisha [1962] 2 QB 26 (CA).
60
Suisse Atlantique v. N.V. Rotterdamsche Kolen Centrale [1967] 1 AC 361
61
The position in Malaysia is not clear at present. There are some Malaysian authorities suggesting
that fundamental breach should operate as a rule of law. These include the comparatively recent
decisions of the Malaysian High Court in Low Kon Fatt v. Port Klang Golf Resort (M) Sdn Bhd
[1998] 6 MLJ 448 and Lim Sew Lan v. Pembangunan Hysham Sdn Bhd [1995] 5 MLJ 670.
62
[1967] 1 A.C. 361; [1967] 2 All ER. 61.
59
23
their Lordships approved the following statement of law by Pearson LJ in UGS
Finance v. National Mortgage Bank of Greece 63:
“… I think there is a rule of construction that normally an exception or
exclusive provision or similar provision in a contract should be
construed as not applying to a situation created by a fundamental
breach of contract. This is not an independent rule of law imposed by
the courts on the parties willy-nilly in disregard of their contractual
intention. On the contrary, it is a rule of construction based on the
presumed intention of the parties.”
This proposition was reaffirmed by the House more recently in Photo
Production Ltd v. Securicor Transport Ltd 64. In his judgment in that case, Lord
Wilberforce noted65:
“I have no second thoughts as to the main proposition that the
question whether, and to what extent, exclusion clause is to be applied
to a fundamental breach, or a breach of a fundamental term, or indeed
to any breach of contract, is a matter of construction of the contract.”
This approach was adopted by Dickson CJC of the Canadian Supreme Court
in Hunter Engineering Inc v. Syncrude Canada Ltd 66. It must also be taken to be the
present position in Singapore. This is notwithstanding the Privy Council decision in
Sze Hai Tong Bank v. Rambler Cycle Co67, which adopted the rule of law approach.
In more recent years, the courts here have cited and applied the principles in Photo
Production.
63
These cases include the Court of Appeal decision in Parker
[1964] 1 Lloyd’s Rep. 446.
[1980] AC 827.
65
Chow, Kok Fong. (2004). Law and Practice of Construction Contracts. Third Edition. Singapore:
Sweet & Maxwell Asia., pp.566
66
(1989) 57 DLR (4d) 321.
67
[1959] AC 576; [1959] 3 All ER 182 (PC).
64
24
Distributors (Singapore) Pte Ltd v. Svenborg 68 and the High Court decision in AA
Valibhoy &Sons Pte Ltd v. Banque Nationale de Paris 69.
2.4.3 Onus of Proof
A difficulty which may surface on this subject concerns the party who should
shoulder the onus of proof. 70 It would have been thought that the onus should fall
on the party alleging fundamental breach. In Hunt and Winterbotham Ltd v. BRS
(Parcels) Ltd 71, the defendants contracted to deliver fifteen parcels of woolen goods
to Machester, but only managed to deliver twelve. The court held that the onus was
on the plaintiffs to prove that the defendants had committed a fundamental breach of
contract and that until this was accomplished, the defendants were entitled to rely on
an exemption clause limiting liability for loss.
However, a different result was reached in Levison v. Patent Steam Carpet
Cleaning Co. Ltd72. In that case, the defendants were entrusted with the cleaning of
a carpet. The carpet disappeared in circumstances which could not be explained by
the defendants. The Court of Appeal ruled that the onus lies on the defendants to
prove that the loss of the carpet arose from some cause which did not constitute a
fundamental breach.
68
[1983] 2 MLJ 26 (CA).
[1994] 2 SLR 772.
70
Chow, Kok Fong. (2004). Law and Practice of Construction Contracts. Third Edition. Singapore:
Sweet & Maxwell Asia., pp.567
71
[1962] 1 QB 617.
72
[1978] QB 69; [1977] 3 All ER 498.
69
25
2.5
Breach of Fundamental Terms
Where there has been a breach of a fundamental term, that is, a term which
the parties have agreed expressly or by implication to be so important that its breach
should entitle the innocent party to treat himself as discharged from further
performance. 73
Where the parties indicate expressly by the contractual language that a single
breach of a particular contractual obligation is to have the same consequences as a
fundamental breach entitling the innocent party to rescind the contract, even though
it would not otherwise be treated as a fundamental breach justifying immediate
termination. This is frequently brought about by “legal jargon” involving the use of
express words such as “condition” or “condition precedent” or “of the essence” in
regard to a particular contract obligation. However, the mere use of these
expressions, and particularly the simple word “condition”, will not by itself be
conclusive. The contract as a whole will be examined to see that it is consistent with
this intention. 74
Contractual terms can be classified as “conditions”, “warranties” and
“intermediate or innominate” terms. 75 A condition in this context is a contractual
term breach of which entitles the other party to operate the election referred to above
irrespective of the nature or seriousness of the breach. 76 Whether a contractual term
is a condition is a question of construction. A term may be a condition:
73
Chow, Kok Fong. loc. cit.
Wallace, D. (1995). Hudson’s Building and Engineering Contracts. Eleventh Edition. London:
Sweet & Maxwell., pp.617
75
Hong Kong Fir Shipping v. Kawasaki Kison Kaisha [1962] 2 QB 26 (CA); Bunge Corporation v.
Tradax [1981] 1 WLR 711; Compagnie General Maritime v. Diakan Spirit [1982] 2 Lloyd’s Rep
574.
76
Suisse Atlantique v. N.V. Rotterdamsche Kolen Centrale [1967] 1 AC 361.
74
26
2.5.1 By Statutory Implication
2.5.1.1 Because the Parties Have Explicitly Made it So
It is open to the parties to agree that, as regards any particular obligation, any
breach shall entitle the party not in default to treat the contract as repudiated 77, i.e. to
make the term a condition, even if it would not be so in the absence of such a
provision. 78 The parties may use language which explicitly says that a contractual
term is to be so regarded. The actual use of the word “condition” is not required.
“Any term or terms of the contract, which, fairly read, have the effect indicated are
sufficient”. 79 A common instance is where it is stipulated that “time is of the
essence”. 80
2.5.1.2 Because the Court so Construe it
Although the parties may not have explicitly agreed that a contractual term is
a condition, the court may find that it is. 81 If the parties have not expressly ascribed
a degree of importance to the consequences of breach, the court asks what
consequences ought to be attached to it having regard to the contract as a whole. 82
This must inevitably involve a value judgment about the commercial significance of
the term in question. 83 The court does not here consider the breach actually
committed since parties to commercial transactions should be entitled to know their
77
Bunge Corporation v. Tradax [1981] 1 WLR 711; Scandinavian Trading v. Flota Ecuatoriana
[1983] 2 AC 694.
78
Lombard v. Butterworth [1987] QB527.
79
Bunge Corporation v. Tradax [1981] 1 WLR 711
80
Scandinavian Trading v. Flota Ecuatoriana [1983] 2 AC
81
Furst, S. and Ramsey, V. (1991). Keating on Building Contracts. Fifth Edition. London:
Sweet & Maxwell., pp.148
82
Bunge Corporation v. Tradax [1981] 1 WLR 711
83
State Trading Corporation of India v. Golodetz [1989] 2 Lloyds’s Rep. 277 (CA).
27
rights at once and should not, when possible, be required to wait upon event before
those rights can be determined. 84 The court will not be over ready, unless required
by statute or previous authority, to construe a term in a contract as a condition 85, and
will be unlikely to do so where the effect of some breaches of the term is trivial 86.
“Warranties” are terms whose breach sounds in damages but does not
terminate or entitle the other party to terminate the contract. The use of the word
“warranty” to describe a term is not conclusive that that term is not a condition. In
insurance law, breach of warranty is treated as breach of condition and it may well
be that in a building contract the parties intend an express “warranty” of
performance or as to the result or use of the works to have the effect of a
condition. 87
Whereas, intermediate terms are terms capable of operating as conditions or
warranties according to the gravity of the breach 88 and it is thought that, in building
contracts, most terms which are not conditions are intermediate. There is thus
fundamental breach when the gravity of the breach of an intermediate term has the
effect of depriving the other party of substantially the whole benefit which it was the
intention of the parties that he should obtain from the contract. To amount to
repudiation a breach must go on to the root of the contract. 89
84
Bunge Corporation v. Tradax [1981] 1 WLR 711
Cehave N.V. v. Bremer m.b.H. [1976] 1 QB 44.
86
Cehave N.V. v. Bremer m.b.H. [1976] 1 QB 44; Hong Kong Fir Shipping v. Kawasaki Kison
Kaisha [1962] 2 QB 26 (CA); Schuler (L.) A.G.v. Wickman Machine Tool Sales [1974] AC 235 (HL).
87
Furst, S. and Ramsey, V. (1991). Keating on Building Contracts. Fifth Edition. London:
Sweet & Maxwell., pp.148
88
Cehave N.V. v. Bremer m.b.H. [1976] 1 QB 44; Hong Kong Fir Shipping v. Kawasaki Kison
Kaisha [1962] 2 QB 26 (CA).
89
Federal Commerce and Navigation Co. Ltd. v. Molena Alpha Inc. (1979) A.C. 757; Cehave N.V. v.
Bremer m.b.H. [1976] 1 QB 44.
85
28
2.6
Breach by the Employer
If the employer does not provide the site at the appointed time, or does not
appoint an architect, or otherwise does not observe some condition precedent to the
contractor’s liability to commence the work, the contractor can at once throw up the
contract and bring an action for damages for breach by the employer. 90 If, however,
the contractor elects to proceed with the work, he may, according to circumstances,
be relieved from stipulation in the contract as to completion to time, liquidated
damages, etc, and still have an action for damages.
It is now well-settled that if a promisor under a contract, even before the time
for performance has arrived, declares an intention not to perform it, the promise may
immediately treat this as a breach and elect, if he so chooses, to bring action. This is
upon the grounds of general convenience. 91
A party to an executor agreement may, before the time for executing it, break
the agreement either by disabling himself from fulfilling it, or by renouncing the
contract, and an action will lie for such breach before the time for fulfillment of the
agreement. If a party communicates his intention to break the contract to the other
party, of which intention he might subsequently repent, the other party can act on
such renunciation communicated to him and thus maintain his action for damages,
etc against the first party. 92
A claim for wrongful repudiation of a contract can only succeed where the
language used by the repudiating party amounts to a declaration of intention of non
performance, or is such that the other party is justified in his inference of such
90
Gajria, K. (2000). G T Gajria’s Law Relating to Building and Engineering Contracts in India.
Fourth Edition. New Delhi: Butterworths India., pp.788
91
Johnstone v. Milling (1886) 16 QBD 460 CA; Frost v. Knight (1872) LR 7 Exch 111; and see
Wright v. Dean [1948] 2 All ER 415.
92
Hochester v. De La Tour (1853) 2 E & B 678.
29
intention;
93
and the language used must be construed together with the
circumstances of the case to see whether there is renunciation. 94 When the contract
remains unperformed, or is not performed by the day fixed, it is a question of fact
‘which party was in fault in occasioning the contract not to be carried into effect’. 95
The employers’ breaches are of two kinds from the point of view of
damages, depending upon whether on the one hand they have the effect of bringing
the work to an end, or preventing its starting, in which case the builder will be
deprived of the right to his profits upon work never actually carried out, or whether
on the other hand they merely reduce his profits upon (or increase the cost of) work
done by him. Such a conduct will amount to prevention either total or partial. 96
In the case of prevention, that is to say, where the employer has wrongfully
terminated the contract, or has committed a fundamental breach justifying the
contractor in treating the contract as at an end, and the latter accordingly ceases
work, the measure of damages will be loss of profit which he would otherwise have
earned. In the more usual case, where the work is partly carried out at the time
when the contract is repudiated, the contractor will normally be entitled to the value
of the work done, assessed at the contract rates, plus his profit on the remaining
work. 97
In the case of partial prevention, i.e., where the breach by the employer is not
fundamental and does not entitle the contractor t cease work, or, being fundamental,
is not treated as a repudiation by the contractor, the measure of damage is the loss of
profit arising from the reduced profitability or added expense of the work carried out
and completed by the contractor. It is, of course, quite possible for a continuing
93
Societie Generale de Paris v. Milders (1853) 49 LT 55; Rhymney Rail Co v. Brtecon and Merthyr
Tydfil Junction Rail Co (1900) 69 LJ Ch 813 CA.
94
Pontifex v. Wilkinson (1845) 1 CB 75.
95
Ibid
96
Wallace, D. (1970). Hudson’s Building and Engineering Contracts. Tenth Edition. London: Sweet
& Maxwell Ltd., pp. 596
97
Ibid
30
fundamental breach by the employer to first affect the profitability of work carried
out, since the contractor may not immediately elect to treat the contract as at an end,
and then give rise to claim for loss of profit on the uncompleted work when he does
so. 98
Reduced profitability or partial prevention can arise from many possible
breaches of contract by the employer, such as failure to give uninterrupted or prompt
possession of the site, 99 or drawings, details and other necessary information, 100 on
interference by other contracts, and so on.
A party who by his own act, disable himself from fulfilling the contract,
makes himself liable for a breach of it, and dispenses with the necessity of any
request that he will perform it by the party with whom the contract is made. 101
Clear language, in the certificate of an architect, is required before the same
is extended to cover breaches of contract by the employer, 102 so that in the absence
of such words, if an architect gives a certificate for payment and the contractor has
been put to loss and expense by the employer’s breach of contract, such as delay or
interference, the certificate is not conclusive upon the contractor’s claim for
damages, unless it is an award upon a proper reference of the dispute. However, the
contractor may waive his rights to object to the certificate by expressly seeking the
architect’s decision on the matter.103
98
Wallace, D. (1970). Hudson’s Building and Engineering Contracts. Tenth Edition. London: Sweet
& Maxwell Ltd., pp. 596-597
99
Lawson v. Wallasey Local Board (1882) 11 QBD 229.
100
Trollope & Sons and Colls & Sons Ltd v. Singer (1913)
101
Lovelock v. Franklyn (1847) 15 LJQB 146; Caines v. Smith (1846) 15 M & W 189; Short v. Stone
(1846) 15 LJQB 143; Ogdens v. Nelson [1904] 2 KB 410.
102
Russel v. Sa da Bandeira (1862) 13 CB (NS) 149; Roberts v. Bury Commissioners (1870) LR 5 CP
310; Lawson v. Wallasay Local Board (1883) 48 LT 507 (CA.)
103
Gajria, K. (2000). G T Gajria’s Law Relating to Building and Engineering Contracts in India.
Fourth Edition. New Delhi: Butterworths India., pp.789
31
If there is a repudiation of the contract by the employer before any work is
carried out, the damages recoverable are the amount of profit which the parties
knew, or assume, the contractor would have made, if he had been permitted to
complete in an ordinary way.
Further, damages resulting from unusual
circumstances are recoverable according to the employer’s knowledge of those
circumstances. 104
2.6.1 Failure to Give Possession of the Site
It is an obligation of the employer to give possession of the site to the
contractor. The degree of possession or access which must be afforded by an
employer must obviously vary with the nature of the work (which might, for
instance, in an extreme case, be for repairs or reinstatement of existing premises
while still occupied) or other circumstances such as in sub-contracts when the work
often must take place alongside and subject to interference by other traces or the
main contractor will normally be entitled to exclusive possession of the entire site in
the absence of express stipulation to the contrary. 105 The following observations of
Collins LJ in Freeman v. Hensler are pertinent: 106
I think the contract clearly involves that the building owner shall be in
a position to hand over the whole site to the contractor, immediately
upon making of the contract.
I think that there is an implied
undertaking on the part of the building owner, who has contracted for
the building to be place by the plaintiff on his land, that he will hand
over the land for the purpose of allowing the plaintiff to do that which
he has bound himself to do.
104
Koufos v. Czarnikow Ltd [1969] 1 AC 350 (HL); Victoria Laundry Ltd v. Newman Ltd [1949] 2
KB 528 (CA); Ranger v. GW Railway (1854) 5 HLC 72 (HL.)
105
Gajria, K. op. cit., pp.790
106
(1900) 64 JP 260.
32
Since a sufficient degree of possession of the site is clearly a necessary
precondition of the contractor’s performance of his obligations, there must be an
implied term that the site will be handed over to the contractor within a reasonable
time of signing the contract,
107
and, in most cases a sufficient degree of
uninterrupted and exclusive possession to permit the contract to carry out his work
unimpeded and in the manner of his choice. This must particularly be so when a
date for completion is specified in the contract documents. 108
If in the contract, one finds the time limited within which the contractor is to
do the work, that means, not only that he is to do it within that time, but it means
also that he is to have that time within which to do it. 109
Where a contract stipulates that possession is to be given to the contractor,
the employer has no general right to come on the premises after possession has been
given; 110 but ‘possession’ in such a context would be construed as exclusive
possession, subject to an implied right of access for the owner or his architect or
engineer or other person, who by the contract, is to supervise the work for the
purpose of inspecting the work only. Where nothing is said regarding possession,
the implication would not necessarily be that exclusive possession should be given,
but the contractor must be clearly allowed such use of the site, as he requires for the
purpose of carrying out the work in the way which he thinks best. Further, the
contractor is prima facie entitled to possession of the site until completion or
practical completion and the employer is not, in the absence of an express right,
entitled to take possession of parts of the works before the completion of the
whole. 111
107
Roberts v. Bury Commissioners (1870) LR 5 CP 310.
Gajria, K. (2000). G T Gajria’s Law Relating to Building and Engineering Contracts in India.
Fourth Edition. New Delhi: Butterworths India., pp.789
109
Per Vaughan Williams LJ in Wells v. Army & Navy Co-operative Society (1902) 86 LT 764.
110
Per Du Parcy LJ in Nabarro v. Frederick Cope & Co [1938] 4 All ER 565.
111
Wallace, D. (1970). Hudson’s Building and Engineering Contracts. Tenth Edition. London: Sweet
& Maxwell Ltd., pp. 319-320
108
33
2.6.1.1 State of the Site
The only duty that the employer will owe to a contractor in this regard will
ne to have the site ready for the contractor or subcontractor to start the work, unless
there are any express stipulation in the contract to the contrary.
In general, therefore, the employer owes no duty to the contractor to do work
to render the site easier to work upon 112 or to conduct surveys or sink boreholes or
make other investigations, notwithstanding that the reality of the situation may be
that, on engineering contracts in particular, a lengthy survey may in fact be
necessary before the project can be properly designed or its cost estimated, and
notwithstanding that the system of tendering may only permit tendering contractors
a very short period in which to price and tender. 113
However, the position would be different where certain information has been
given in the tender documents by the employer or his architects in regard to the
nature of the sub-soil, on which the tenderer has based his tender. An example of
this is where the employer attaches to his tender documents, a being chart of the
strate where excavation has to be done by the contractor, who quotes his rates on
such basis, which during the actual execution is found to be inaccurate. In such a
case, it is submitted, that the employer will be liable to the contractor for the extra
cost involved in the actual execution of the work.114
It is very important to determine whether the employer and the engineer ate
responsible for unanticipated extra costs or whether they should be blamed upon the
112
IBMAC v. Marshall (1968) 208 EG 851.
Wallace, D. op. cit., pp.316
114
Gajria, K. (2000). G T Gajria’s Law Relating to Building and Engineering Contracts in India.
Fourth Edition. New Delhi: Butterworths India., pp.791
113
34
contractor, as a result of the information given in the tender documents being found
to be inaccurate.115
Undoubtedly, the employer is obliged to pay when the information given by
the contract documents is inadequate to enable the contractor to determine in
advance what work he will apparently have to do. The employer is also obliged to
pay: (i) when the data given by the engineer to the tenderers are inaccurate; (ii)
when the extra develop because of improper design and plans in the first place; and
(iii) when the engineer makes serious changes after the contract is signed. 116
If the contractor performs the work as required by the contract but
unforeseen conditions arise for no fault of his, that necessitate modifications of the
design, and if these modifications are approved or ordered by the engineer, then the
extra costs involved are properly to be paid for the employer. For example, in one
case, a contractor was to build a 150 ft brick stack at an incinerator. No borings had
been taken at the site, and the engineer had designed the footing and the stack, as
though it were to be supported upon firm ground at the specified elevation.
However, under the stack there was deep clay overlain by a few feet of sand and
gravel. The contractor was afraid that the complication of the clay might cause
harmful settlement of the stack. Finally, the engineer made an investigation of the
required considerable extra construction. This was obviously to be paid for by the
employer as an extra change. 117
115
Ibid
Ibid
117
Gajria, K. (2000). G T Gajria’s Law Relating to Building and Engineering Contracts in India.
Fourth Edition. New Delhi: Butterworths India., pp.792
116
35
2.6.1.2 Extent and Time of Possession
The degree of possession or access which must be afforded by an employer
must obviously vary with the nature of the work (which might, for instance, in an
extreme case be for repairs or reinstatement of the existing premises while still
occupied) or other circumstances (as in sub-contracts, when the work often must
take place alongside and subject to interference by other trades or the main
contractor’s own work). But in the case of a new project, the main contractor will
normally be entitled to exclusive possession of the entire site, in the absence of
express stipulation to the contrary.
One common express exception is to be found in the terms normally found
permitting the presence on the site of other contractors employed by the employer,
another is a provision commonly found permitting the employer to engage other
contractors to do a part of the contract work, if the contractor refuses to comply with
any relevant instructions of the architect.118
The following observations of Collin LJ in Freeman v. Hensler, 119 in this
connection are relevant:
I think the contract clearly involves that the employer shall be in a
position to hand over the whole site to the contractor, immediately
upon the making of the contract. I think that there is an implied
undertaking on the part of the employer, who has contracted for the
buildings to be placed by the plaintiff on his land, that he will hand
over the land for the purpose of allowing the plaintiff to do that which
he has bound himself to do.
118
Wallace, D. (1970). Hudson’s Building and Engineering Contracts. Tenth Edition. London: Sweet
& Maxwell Ltd., pp. 317
119
(1900) 64 JP 260 CA.
36
Since a sufficient degree of possession of the site is clearly a necessary
precondition of the contractor’s performance of his obligations, there must be an
implied term that the site will be handed over to the contractor within a reasonable
time of signing the contract. 120 In most cases, it is submitted that it is an implied
obligation of the employer to give the contractor a sufficient degree of uninterrupted
possession, to permit him to carry out his work unimpeded and in the manner of his
choice. This must particularly be so when a date for completion is specified in the
contract documents.
In Wells v. Army & Navy Co-operative Society, 121 it was observed by
Vaughan Williams LJ that ‘if in the contract one finds the time limited within which
the contractor is to do the work, that means, not only that he is to do it within that
time, but it means also that he is to have that time within which to do it’.
Further, it is obligation of the landlord to give to the contractor uninterrupted
possession of the site. Where a contract stipulated that possession is to be given to
the contractor, Du Parcq LJ was of the opinion that the employer has no general
right to come upon the premises after possession has been given, but ‘possession’ in
such cases must be construed as subject to an implied right of access for the
employer or persons authorized by him, for purposes of inspection and also, of
course, for the architect or engineer or authorized consultants for all purposes of
necessary supervision and administration of the contract. Where nothing is said
about possession, the implication is certainly not necessarily that exclusive
possession should be given, but the contractor must be clearly allowed such use of
the site as he requires for the purpose of carrying out the work in the way in which
he thinks best. 122
120
Gajria, K. (2000). G T Gajria’s Law Relating to Building and Engineering Contracts in India.
Fourth Edition. New Delhi: Butterworths India., pp.793
121
(1902) 86 IT 764
122
Gajria, K. (2000). G T Gajria’s Law Relating to Building and Engineering Contracts in India.
Fourth Edition. New Delhi: Butterworths India., pp.793
37
The common express obligation of the main contractor to assume
responsibility for the safety of the works during construction requires a high degree
of effective control of the site, and the very important limits, often not sufficiently
appreciated by lawyers, on the architect’s or engineer’s control over methods of
working, reinforce this view. If therefore, it is intended that the premises should
remain occupied by the employer, his servants or agents, or that other contractors
should have access for special works, the contract should make express provisions
for these contingencies. Further, the contractor is prima facie entitled to possession
of the whole of the site until completion or practical completion and the employer is
not, in the absence of an express right, entitled to take possession of the parts of the
works before the completion of the whole. 123
2.6.2 Failure to Supply Plans
An employer, who either expressly or impliedly has contracted to supply
drawings, without which the work cannot be completed, prevents the performance if
he or his architect does not do so within a reasonable time. What is reasonable time
is a question of fact, but usually plans and instructions should be furnished promptly
upon request, because it is necessary for the contractor to make provision for supply
and preparation of the materials, and the plans are therefore required before and
often long before the date at which the work itself will actually be put into the
building or works. The contractor, within reasonable limits, is entitled to say when
it is necessary for him to have such plans and instructions, for he is entitled to carry
out the work to the best advantage to himself. 124
123
Wallace, D. (1970). Hudson’s Building and Engineering Contracts. Tenth Edition. London: Sweet
& Maxwell Ltd., pp. 319-320
124
Gajria, K. (2000). G T Gajria’s Law Relating to Building and Engineering Contracts in India.
Fourth Edition. New Delhi: Butterworths India., pp.793-794
38
In case of default in supplying plans by the employer, the contractor will be
justified in repudiating the contract. It should be noted that the plans and the
detailed instructions which are necessary for commencing the work should be
furnished to the contractor by the employer sometime in advance of the date fixed
for the commencement of the work, to enable the contractor to arrange for the start
of the work and subsequently the plans should be supplied to him as and when
required by him. 125
If, initially the employer does not supply the plans to the contractor, the
latter can repudiate the contract and hold the employer liable in damages. If during
the progress of the work, there is any delay on the part of the employer in supplying
the plans and other necessary instructions, the contractor will be entitled to claim
damages from the employer, caused by such delay; and if the employer persist in
causing delay in supplying them, the contractor will be justified in repudiating the
contract and also can claim damages from the employer. It is, therefore, very
essential that every employer should keep himself ready with all the plans requires
for the completion of the work, in order to avoid any complaint of delay from the
contractor and also claim of damages from him. 126
It has been observed in several works that detailed plans are not made
available to the contractor when they are required by him and as such delay is
caused in the completion of the work. In such cases, it is submitted, the employers
will make themselves liable to a claim for damages for delay by the contractors. 127
In some of the government departments, the delay in supply of plans has
become a regular feature.
The result is that the government has to face the
contractors’ claims for damages in different forms. In some of the government
departments, all the plans are made available before the tenders are invited. This
125
Wells v. Army & Navy Co-operative Society Lt (1902) 86 LT 764.
Gajria, K. (2000). G T Gajria’s Law Relating to Building and Engineering Contracts in India.
Fourth Edition. New Delhi: Butterworths India., pp.794
127
Ibid
126
39
removes the main cause of delay and consequent claim of damages from the
contractors. It is not understood why a uniform practice of making all the plans
required for the execution and completion of the work, is not followed in all the
departments of the government. 128
In case of delay in giving plans, the contractor is entitled to proceed with the
work and also claim compensation for such delay from the employer.
If the
employer himself prevents performance, or unreasonably delays to perform his
obligations (e.g. to provide the site at the stipulated date), or delays the supply of
necessary drawings, information or materials, he is liable in damages to the
contractor for any extra cost resulting to the latter from these causes. The contractor
must be able to prove, however, before he can recover, that the employer is under an
express or implied obligation to perform the act by omission of which he was
suffered loss. 129
In all cases, where the employer’s breach goes to the root of the contract, the
contractor can abandon the contract and at once bring an action for damages. If the
breach does not go to the root of the contract, the contractor should first complete
and then sue for damages in addition. If the breach does go to the root of the
contract he may, however, state that he treats it as a partial breach, carry out the
work, and after completing, sue for damages. 130
128
Ibid
Gaze (WH) & Sons v. Port Talbot Corporation (1929) 93 JP 89.
130
Hosking v. Pahang Corporation (1891) 8 TLR 125.
129
40
2.7
Breach by the Contractor
The entire abandonment of the work by the contractor will justify the
employer in treating the contract as having been rescinded by the contractor. 131 The
same considerations apply in the case of breach of particular stipulations by the
contractor, as in the case of similar breach by the employer.
Where the contract provides that the contractor shall observe particular
stipulations of the contract, such as a prescribed rate of progress, completion to
time, etc, under penalty of forfeiture of the contract, the breach of such a stipulation
by the contractor may entitle the employer to exercise his powers or forfeiture. 132
It is a breach of contract, if the contractor omits to comply with bye-laws
and regulations, etc, if his contract impliedly or expressly provides that he is to do
so. If the contractor has agreed to execute the works according to bye-laws and
regulations of the local body and does not do so, he can be compelled to conform to
such bye-laws and rules as are applicable, failing which he will be held liable for the
breach of the contract and consequently for damages resulting out of such breach. 133
Should a contractor, without lawful excuse, fail or refuse to perform his
contract, or abandon the work before completion, he becomes liable for damages for
breach of contract at the suit of the employer. The fact that he made his offer, or
signed the contract, under an error of judgment, will not of itself exonerate him.
Neither will it be a good defence if he pleads that, in his opinion, the enterprise was
unlawful; he must prove that it was, in fact, unlawful. 134
131
Mersey Steel & Iron Co v. Naylor, Benzon & Co (1884) 9 App Cas 434 CA.
Gajria, K. (2000). G T Gajria’s Law Relating to Building and Engineering Contracts in India.
Fourth Edition. New Delhi: Butterworths India., pp.811
133
Ibid
134
Seaton Brick and Tile Co Ltd v. Mitchell (1900) 2 F (Ct of Sess) 550.
132
41
If he subsequently finds that the contract is impossible of executing, by the
nature of it, he may still be liable for breach, having contracted to carry it out; but
his remedy against the employer’s endeavour to force performance is an application
to the court for revision.
Where in respect of work contracts for loading coal, 135 the tenderer by
sending a letter cleared that it would accept the work order only if a term relating to
the revision of rates is incorporated in the agreement, i.e. in the event of unforeseen
circumstances, it was held that the parties have not arrived at a concluded contract.
Therefore, the corporation cannot claim damages on the ground that it was entitled
to forfeit the amount of security deposited with them by the tenderer, as they were
put to loss by virtue of breach of contract on the part of the tenderer. As no
concluded contract had been arrived at between the tenderer and the corporation, the
question of damages did not arise.
2.8
Conclusion
In conclusion, a breach of contract is essentially a non performance of a
contractual obligation under conditions for which no legal excuse for non
performance exists. 136 This same principle is applicable to cases of construction
contracts. Events may occur which hold up completion of the construction works.
Such delays inevitably increase the costs of the innocent party in the contract.
However, such breach does not, in itself, effect a discharge. It only justifies
the innocent party to regard itself as absolved or discharged from further
135
Arvind Coal and Construction Co v. Damodar Vally Corporation AIR 1991 Pat 14.
Chow, Kok Fong. (1988). An Outline of the Law & Practice of Construction Contract Claims.
Singapore: Longman Singapore Publishers Pte. Ltd., pp.28
136
42
performance of the contract.137 Under such situation, the innocent party is entitled
the right to claim damages for losses that arise from the breach.
137
Gajria, K. (2000). G T Gajria’s Law Relating to Building and Engineering Contracts in India.
Fourth Edition. New Delhi: Butterworths India., pp.786
CHAPTER 3
DAMAGES
3.1
Introduction
Whenever a party (the defendant) breaches a contract, the other party (the
plaintiff) will be entitled to an award of damages as monetary compensation for the
breach. 138 Damages are normally awarded based on a basis of placing the innocent
party in the same financial position as if the contract had been properly
performed. 139 In addition, whether rightly or wrongly, under the English law,
damages for breach of contract are designed to compensate the innocent party for
the breach, to make good the actual loss, within certain parameters rather than to
punish the guilty party.
138
nd
Paterson, J. et.al. (2005). Principles of Contract Law. 2 Edition. Sydney: Lawbook Co., pp.411
139
Duxbury, R. (1991). Contract in A Nutshell. London: Sweet & Maxwell., pp.102
44
3.2
General Principles
Damages represent the most common head of remedies claimed by an
innocent party for breach of contract. Unlike the equitable remedies of specific
performance and injunctions, damages are awarded to an innocent party as of right,
subject only to exceptions such as mitigation and remoteness of damage. Prima
facie, damages are granted to the innocent party for the damage or loss he has
suffered for a breach of contract.140 Two further points need to be considered in
relation to the general approach to this subject. These are: 141
I.
If the parties have expressly agreed and stipulated in their contract or
agreement a particular remedy for the breach complained of , due effect
will be given to this means of redress provided, it is not repugnant to
the law; and
II.
Once the innocent party has selected a particular remedy to pursue and
has manifested his choice to the defaulting party; who in reliance upon
the manifestation has taken any action, the choice is binding and will
bar recourse to any other alternative.
140
Harbans Singh, K. S. (2004). Engineering and Construction Contracts Management: Law &
Principles. Selangor: Malayan Law Journal Sdn Bhd., pp.200
141
Ibid
45
3.3
Types of Damages
Damages can be classified into a few types as following: 142
3.3.1 General Damages
These are damages, which the law presumes to have resulted from the act of
the defaulting party (defendant) and which need not be specially pleaded. They are
recoverable as compensation for such loss as the parties may reasonably foresee as a
natural consequence of the breach or act complained of. Examples include damages
for pain, inconvenience, disappointment, etc: Frank & Collingwood Ltd v. Gates. 143
3.3.2 Special Damages
Special damages are damages of a kind which the law will not presume in
the innocent party’s (plaintiff’s) favour, but which must be specially pleaded and
proved at the trial or arbitration hearing, e.g. loss of profit, interest on money, etc.
3.3.3 Nominal Damages
Nominal damages are damages awarded where, although there is a technical
breach resulting in the contravention of a right but it results in no real loss to the
142
Harbans Singh, K. S. (2004). Engineering and Construction Contracts Management: Law &
Principles. Selangor: Malayan Law Journal Sdn Bhd., pp.209
143
[1983] 1 Con LR 21.
46
innocent party. Examples include trespass, failure of claimant to mitigate loss, 144 or
where the plaintiff is better off as a result of the breach. 145
3.3.4 Substantial Damages
Substantial damages represent compensation that is given for loss actually
sustained by the aggrieved party. These are in essence, pecuniary compensation
intended to put the aggrieved party (plaintiff) in the position he would have enjoyed
had the contract been performed. These represent the classic example of damages
based on the ‘compensatory’ principle.
3.3.5 Exemplary Damages
Exemplary damages are vindictive or punitive and are awarded so as to
punish a defaulting party (defendant).
Exemplary damages consist of a sum
awarded which is far greater than the pecuniary loss suffered by the innocent party.
These damages are awarded only in exceptional circumstances, eg. defamation,
breach of promise to marry etc: Dennis v Sennyah.146
3.3.6 Unliquidated Damages
Unliquidated damages are unascertained damages that need to be proved.
These damages are dependent on the circumstances of the case.
144
Hong Leong Co Ltd V. Pearlson Enterprises Ltd (No 2) [1968] 1 MLJ 262.
Tan Sri Khoo Teik Puat v. Plenitude Holdings Sdn Bhd [1994] 3 MLJ 777.
146
[1963] MLJ 95.
145
47
3.3.7 Liquidated Damages
These are damages agreed between the parties at the time of contracting and
stated in the contract as the damages payable in the event of a specified breach,
usually that is of late completion. The sum must be a genuine pre-estimate of loss
likely to be caused by the breach or lesser sum. Liquidated damages cannot be
recovered simpliciter: Wearne Brothers (M) Ltd. v Jackson. 147 These damages are
covered comprehensively by the provisions of Section 75 of the Contracts Act 1950.
3.4
Remoteness of Damages
A party who breaches a contract is required to compensate an innocent party
for the loss suffered as a result of the breach. However, this principle must be read
together with the principle that a defendant cannot be pinned with liability for every
single loss suffered by the plaintiff. To this end, the courts have had regard to the
requirements of causation and remoteness which act as a limiting factor.148
In relation to causation, an innocent party seeking to obtain damages must
show that the breach of contract was the underlying cause of his loss. In other
words, the breach of contract must be the “effective” cause of loss. Causation refers
to the connection between the breach and the loss suffered and the onus is on the
plaintiff to establish that “but for” the defendant’s breach, the loss or damage in
question would not have arisen. This principle is best elucidated by Reg Glass Pty
Ltd v. Rivers Locking Systems Pty Ltd.149 In this case, the defendants in breach of
contract supplied and installed a door that was not burglar-proof. Burglars later
147
Act 137.
Cheong, May Fong. (2007). Civil Remedies in Malaysia. Malaysia: Sweet & Maxwell Asia.,
pp.78-79
149
(1968) 120 CLR 516.
148
48
managed to break through the door and stole stock from plaintiff’s premises. The
plaintiffs succeeded in proving that but for the non-burglar-proof door, their goods
would not have been stolen, and thus recovered damages from the defendants. 150
Seen in these terms, the issue of causation is very much an open-and-shut
situation. However it is when more than once act has caused the loss that difficult
questions arise. Such is the situation when the plaintiff’s loss cannot be solely
attributed to the defendant’s breach but also to other factors. Where these factors
are concurrent, the question that often arises is whether the defendant’s act is the
dominant cause of the plaintiff’s loss. 151 This test, when applied, would see the
court drawing a line between cases where each of the acts is itself a sufficient cause
and those where the acts operate together to cause a loss.
Even in cases where the test of causation has been satisfied, it does not mean
that the defendant has to assume liability for all losses suffered by the plaintiff as a
result of his breach of contract. As the purpose of damages is to place the plaintiff
in the same position insofar as money can do, as if the contract had been performed,
damages is awarded only to the plaintiff for the loss actually suffered by reason of
the defendant’s breach. Thus, the defendant cannot be held liable for losses, though
flowing from his breach of contract, that are too remote. 152
3.4.1 The Rule in Hadley v. Baxendale 153
The law on remoteness has been laid down by the dicta of Alderson B in the
century old case of Hadley v. Baxendale. In this case, the plaintiffs’ mill suffered
150
Cheong, May Fong. (2007). Civil Remedies in Malaysia. Malaysia: Sweet & Maxwell Asia., pp.79
Monarch Steamship Co Ltd V. KarlsHamns Oljefabriker [1949] AC 196.
152
Cheong, May Fong. loc. cit.
153
(1854) 9 Exch 341.
151
49
from the crankshaft breakage, and the defendants were hired as carriers to send the
crankshaft to the makers in Greenwich. The defendants were informed “that the
article to be carried was the broken shaft of a mill, and that the plaintiffs were the
millers of the mill”. As a result of the delayed delivery, the plaintiffs’ mill was
inoperable for much longer than it would have been without the delay.
The
plaintiffs claimed for loss of profits. The court held that the loss of profits was too
remote and thus the defendants were not liable for it. Alderson B laid down the test
of remoteness in two limbs ad follows:
Where two parties have made a contract which one of them has
broken, the damages which the other party ought to receive in respect
of such breach of contract, should be such as may fairly and
reasonably be considered either arising naturally, i.e. according to the
usual course of things from such breach of contract itself, or such as
may reasonably be supposed to have been in the contemplation of both
parties, at the time they made the contract, as the probable result of
the breach of it.154
In summary, the rule in Hadley v. Baxendale comprises of two main limbs,
i.e.:
155
I.
First limb – damages arising naturally, i.e. according to the usual
course of things from such breach of contract itself (also called
‘direct damages’); and
II.
Second limb – damages as mat reasonable be supposed to have been
in the contemplation of both parties at the time they made the
154
Ibid at 354
Harbans Singh, K. S. (2004). Engineering and Construction Contracts Management: Law &
Principles. Selangor: Malayan Law Journal Sdn Bhd., pp.204-205
155
50
contract, as the probable result of the breach of it (commonly
referred to as ‘consequential’ losses).
The Contracts Act 1950 has codified the common law rule in Hadley v.
Baxendale in the form of Section 74(1). This fact has been expressly acknowledged
by the local courts in a string of cases, notable of which are: Tham Cheow Toh v.
Associated Metal Smelters Ltd156 and Toeh Kee Keong v. Tambun Mining Co Ltd.157
Hence, under Section 74(1) an aggrieved party is entitled to:
I.
The so called ‘ direct damages’, i.e. damages arising naturally, that
is, according to the usual course of things resulting from the breach;
and
II.
‘Consequential’ losses (or special damages for any loss sustained)
only if he can show that they are such that the other party knew at the
time of making the contract that ‘consequential’ (or special) loss was
likely to result from the breach: Vitoria Laundry (Windsor) Ltd v.
Newman Industries Ltd. 158
In short, the loss recoverable is subjected to the provision that such
compensation is not to be given for any remote and indirect loss or damage
sustained as a result from the breach.
156
[1972] 1 MLJ 171.
[1968] 1 MLJ 39.
158
[1949] 2 KB 528
157
51
3.5
Measure of Damages
The measure of damages in contract is the principle involved in the
assessment of the actual monetary compensation that needs to be paid to the
innocent party for the damage sustained as a result of the breach of contract. 159
Under the common law, damages may be claimed under two established principles,
namely:
I.
Principle in Robinson v Harman 160
The quantum of damage is assessed in the dictum that provided the damages
suffered is not too remote, the innocent party is entitled to be placed, so far
as money can do it, to the position he would have been, had the contract
been performed (or that the particular damage had not occurred), i.e. there
must be restitution in integrum.
II.
Principle under the Rule in Hadley v Baxendale 161
The quantum of damage is assessed on the premise that provided the damage
suffered is not too remote, the innocent party is entitled to receive damages
which are fairly and reasonable considered to be either arising naturally, i.e.
according to the usual course of things from such breach of contract itself or
such as may reasonably be supposed to have been in the contemplation of
both parties at the time they made the contract, as the probable result of the
breach of it.
Of the two principles adverted to above, the second principles as codified in
Section 74 of the Contract Act 1950 is commonly employed locally.
159
Harbans Singh, K. S. (2004). Engineering and Construction Contracts Management: Law &
Principles. Selangor: Malayan Law Journal Sdn Bhd., pp.206
160
(1848) 1 Ex 850.
161
(1854) 9 Exch 341.
52
3.6
Mitigation of Damages
The central principle in damages is that a plaintiff who claims for
compensation arising from a breach of contract is limited by the rules of
remoteness. An ancillary principle is that of mitigation. Although the innocent
party is entitled to be compensated for his losses when the other party breaches the
contract, he is required to take necessary action to reduce his loss. 162 This is best
captured in the words of Viscount Haldane in British Westinghosue Electric and
Manufacturing Co Ltd v. Underground Electric Railways Co of London Ltd163 who
stated two main principles:
The first is that, as far as possible, he who has proved a breach of a
bargain to supply what he contracted to get is to placed, as far as
money can do it, in as good a situation as if the contract had been
performed.
The fundamental basis is thus compensation for pecuniary loss
naturally flowing from the breach; but this first principle is qualified
by a second, which imposes on a plaintiff the duty of taking all
reasonable steps to mitigate the loss consequent on the breach, and
debars him from claiming any part of the damage which is due to his
neglect to take such steps.
The rationale underlying the issue of mitigation of loss is one of policy that
encourages the plaintiff to be self-reliant when a wrong has occurred. Framed in
economic terms, it is the desirability of avoiding wastage, to be efficient as opposed
to pinning all losses on the defendant. 164
162
Cheong, May Fong. (2007). Civil Remedies in Malaysia. Malaysia: Sweet & Maxwell Asia., pp.97
[1912] AC 673
164
Cheong, May Fong. (2007). Civil Remedies in Malaysia. Malaysia: Sweet & Maxwell Asia., pp.97
163
53
Mitigation of loss has often been referred to as “the duty to mitigate”.
However, this terminology is said to be inaccurate since the plaintiff bears no such
positive duty, but is free to act in the best of his interests, albeit reasonably. Failure
by the plaintiff to comply with this so-called duty does not open him up to legal
action, rather the consequence of such failure only reduces the damages payable to
him. 165
Whether a plaintiff who claims for damages has failed to mitigate the loss or
not is a question of fact and this depends on the circumstances of each case. Even if
the plaintiff has the duty to mitigate his loss, the standard required of the plaintiff
“is not a high one, since the defendant is a wrongdoer”. After all, the plaintiff in his
haste to “repair” the wrong caused by the defendant may err in his judgment and
any criticism of this by the defendant, is one of hindsight. 166
The burden of proof that the plaintiff has failed to mitigate is on the
defendant. There appears to be differing views whether a defendant needs to plead
the issue of mitigation. In Raja Lope & Anor v. Malayan Flour Mills Bhd, 167 the
High Court held that a defendant who wishes to rely on the defence that claimant
has failed to mitigate hiss loss must plead the issue of mitigation. However, in Joo
Leong Timber Merchant v. Dr Jaswant Singh a/l Jagat Singh, 168 it was held that in
Malaysia there is no legal authority which states that the failure to mitigate must be
pleaded.
165
Burrows, A. (2004). Remedies for Torts and Breach of Contract. Third Edition. New York:
Oxford University Press Inc., pp.122
166
Cheong, May Fong. op. cit.,pp.98
167
[2000] 6 CLJ Supp 194.
168
[2003] 5 MLJ 116.
54
3.7
Proof of Damages
A plaintiff claiming damages for breach of contract must produce evidence
in court of the loss that he has suffered because of the breach. 169 In the absence of
documentary evidence, the court can make a reasonable evaluation of the loss
incurred. However, the plaintiff must lead at least sufficient or satisfactory evidence
to enable the court to make a fair and reasonable assumption of loss. 170
A local case in relation to construction contracts, SEA Housing Corporation
Sdn. Bhd. v Lee Poh Choo,171 the developer delayed in completing the house and the
owner claimed for her loss of use and enjoyment of the house at a monthly rate at
RM 2,500.
Her evidence was that she called the developer’s office and was
informed that the rental would be at that monthly rate, without witness or document
to sustain her claim. The Judge, Mohamed Dzaiddin held that the house owner
could not recover his loss as she failed to prove her loss of her house and occupation
of the said building by was of rental. Therefore, party who claim for damages they
will have the duty to prove their damages.
In recovery of special damages, plaintiff must have to plead and prove to his
claim. In another local case, Syed Jaafar bin Syed Ibrahim v Maju Mehar Singh
Travel & Tours Sdn. Bhd. 172, whereby a performance of Haj by 151 persons was
cancelled due to the defendant not obtain the visas and the plaintiff claimed for his
expenses to putting the passenger for certain duration in Kuala Lumpur. The
plaintiff had spent for RM 27,810 for the cost of bringing the passengers from Kota
Bahru to Kuala Lumpur and expenses for putting the passengers in Kuala Lumpur
from 11 May 1992 to 5 June 1992. The defendant denied the plaintiff’s claim.
169
nd
Syed Ahmad Alsagoff. (2003). The Principles of the Law of Contract in Malaysia. 2
Edition.,pp.387
170
Ibid
171
[1982] 1 MLJ 324
172
[1999] 4 MLJ 413
55
The court refused the plaintiffs claim for RM 27,810 because there was no
evidence produced by plaintiff to sustain his claim. According to the Judge, the
plaintiff should produced either the receipts from hotels and restaurants or by at least
called the hotel and restaurant proprietors to show the nexus of his loss that he had
collected the sum from the 151 passengers. As a result, this case held that the
plaintiff must both specifically plead and prove his damages.
In a nutshell, it can be concluded that the innocent party who claiming for
damages should bear in mind that he/ she has the burden of proof for their actual
damages/ losses by showing the evidence of suffering and must be pleaded.
3.8
Conclusion
In brief, damages represent the most common head of remedies claimed by
an innocent party for breach of contract. In Malaysia, such remedy of breach is
covered under the provisions of Contract Act 1950. The general rule is that where
two parties have made a contract which one of them has broken, the damages which
the other party ought to receive in respect of such breach of contract should be
either such as may fairly and reasonably be considered arising naturally i.e.
according to the usual course of things, from such breach of contract itself, or such
as may reasonably be supposed to have been in the contemplation of both parties at
the time they made the contract as the probable result of the breach of it. 173
However, a party culpable of breaching a contract is not generally liable for
all the damage which ensues from his breach of contract. Some damages are said to
173
Gajria, K. (2000). G T Gajria’s Law Relating to Building and Engineering Contracts in India.
Fourth Edition. New Delhi: Butterworths India., pp.835
56
be too remote and therefore irrecoverable. 174 And yet the innocent party has to
pursue closely to the some other rules such as measure and mitigation of damages in
order to succeed in claiming the damages.
174
Harbans Singh, K. S. (2004). Engineering and Construction Contracts Management: Law &
Principles. Selangor: Malayan Law Journal Sdn Bhd., pp.204
CHAPTER 4
ANALYSIS OF CASE LAWS
4.1
Introduction
The previous two chapters discussed in detail about the topic of breach of
contract and damages. Accordingly, this chapter will be focused on the achievement
of each objective that had been set up in the first chapter. In other words, this
chapter is the analysis of case laws which provide clues to the objectives of this
research, which is illustrate the types of breaches of contract that are currently
fashionable in Malaysian construction industry and address the legal issues in
relation to damages.
To achieve these objectives, this research is done mainly through
documentary analysis of law journals and law reports. The relevant law reports are
limited to those reported in Malayan Law Journal (MLJ) which is available in the
database of LexisNexis legal search engine.
58
4.2
Statistical Analysis and Study of Law Reports
The primary purpose of this research work is to illustrate the common types
of breaches of contract in Malaysia construction industry. Therefore, it is aims to
generate the data as shown below.
4.2.1 Law Reports in Relation with Construction Contract in MLJ
In order to illustrate the types of breaches, data such as law reports from
construction contract disputes resolved by Malaysian litigation system were used.
Through LexisNexis electronic database, 53 law reports in relation with construction
contract from the past thirty years (1978-2008) were identified in Malayan Law
Journal by browsing the keywords of “breach of contract, building contract, and
damages under building contract”.
On the other hand, it must be noted that the actual number of relevant
construction contract court cases are expected to be more as some of the cases may
not retrieved from the LexisNexis database and some of them may not be reported in
law report of MLJ too. Moreover, most of the construction disputes are usually
resolved privately, either by arbitration or other dispute resolution. Therefore, cases
in relation with construction contract were in average number for the past thirty
years in comparison to non-construction contract cases.
59
4.2.2 Court Cases in Relation with Breaches of Contract
In order to find out how many how many court cases are related to breaches
of construction contract, all the 53 law reports were examined thoroughly.
Consequently, the result is as shown in Figure 4.1.
Breaches of Contract
Non Breaches of Contract
21%
79%
Figure 4.1: Court Cases in Relation with Construction Contract
In Figure 4.1, out of 53 law reports retrieved from MLJ, only 21% or 11 of
the court cases gave illustration types of breaches of contract while 79% of the cases
were related to the issues of payment, termination, procurement, performance bond,
arbitration clause and etc. All 11 cases of breaches of contract will be further
discussed in detail in the following part of this chapter, in order to achieve the
objective of research.
60
4.2.2.1 The Parties Engaged in the Cases
Figure 4.2 shows the pattern of parties involved in the 11 cases of breaches
of contract. 9 out of 11 cases were disputes between employer and main contractor
and only two cases involved main contractor and subcontractor.
Employer v. Main Contractor
Main Contractor v. Subcontractor
18%
82%
Figure 4.2: The Parties Engaged in the Cases
This analysis shows that in the past thirty years, subcontractors seldom
referred their dispute between main contractors to the court as it involves high
litigation cost and unwilling to influence the business relationships among
themselves.
Whereas, employers and main contractors were more frequent to
implement their rights to resolve the dispute through litigation.
61
4.2.2.2 Types of Project Involved in Breaches
Construction projects can be divided into two main categories. These two
are public project and private project. Each type of projects has the possibilities to
be involved in the dispute – breach of contract. Figure 4.3 shows the types of
project in eleven cases that have been examined in this research.
Public
Private
18%
82%
Figure 4.3: Types of Project
Through Figure 4.3, it shows 82% or nine cases out of eleven were private
projects that related to the issue of breach of contract. While only two public
projects that went for litigation to solve the dispute of breach. From this research, it
shows that public projects were rarely being brought to the court. This might be due
to the arbitration provision that stated in the PWD contract form and all disputes will
be resolved through arbitration to achieve the mutual agreed solutions.
62
4.2.2.3 Party that Committed the Breach
In construction industry, there are possibilities that disputes can be triggered
by any parties. In this research, parties that committed to the breach in those eleven
cases have been identified. Figure 4.3 shows the statistical data of which party that
committed to the breaches of contract.
Employer
Main Contractor
Subcontractor
9%
46%
45%
Figure 4.4: Party that Committed the Breach
Based on Figure 4.3, in the past thirty years the courts had held that five
employers were liable in the breaches. Whereas five main contractors committed to
the breaches in five other cases. In the eleven cases examined in this research, only
one subcontractor being sued for breach of contract.
63
4.2.2.4 Types of Breaches
Under construction contracts the possible breaches of contract are various.
This research has identified seven fashionable types of breaches in Malaysian
construction industry that brought to the court in the past thirty years. The data is
illustrated in Table 4.1 as shown below.
Table 4.1: Types of Breaches
Cases
Types of Breaches
-Haji Abu Kassim v. Tegap
Construction Sdn Bhd [1981] 2
MLJ 149
Failure to Honour the
Architect/SO’s Certificate
-L’Grande Development Sdn Bhd
v. Bukit Cerakah Development
Sdn Bhd [2007] 4 MLJ 518
-Tan Hock Chan v. Kho Teck
Failure to Give Effective
Seng [1980] 1 MLJ 308
Possession
Frequency
2
1
-Vistanet (M) Sdn Bhd v. Pilecon
Civil Works Sdn Bhd [2005] 6
MLJ 664
-Usaha Damai Sdn Bhd v.
Setiausaha Kerajaan Selangor
[1997] 5 MLJ 601
-Nirwana Construction Sdn Bhd
v. Pengarah Jabatan Kerja Raya
Negeri Sembilan Darul Khusus &
Anor [2008] 4 MLJ 157
Abandonment of Work & Delay
Completion Period
-Hock Huat Iron Foundry v. Naga
Tembaga Sdn Bhd [1999] 1 MLJ
65
-Tan Ah Chim & Sons Sdn Bhd v. Serious Defective Work and
Ooi Bee Tat & Anor [1993] 3
Failure to Remedial Work as
MLJ 633
Required
-Letrik Bandar Hup Heng Sdn
Bhd v. Wong Sai Hong [2002] 5
MLJ 247
Took Over Contract Work
4
1
1
64
Cases
-Pembinaan LCL Sdn Bhd v. SK
Styrofoam (M) Sdn Bhd [2007] 4
MLJ 113
Types of Breaches
Frequency
Failure to issue Termination
Notice Based on an Operative
1
Time Frame
-Highceed Corp Sdn Bhd v.
Warisan Harta Sabah Sdn Bhd &
Anor [2000] 5 MLJ 337
Unclear Stop Work Order
1
Total
11
Apparently, abandonment of work was the type that constituted to four cases
of breach. While other types of breaches only appeared once or twice in the court
cases for the past thirty years. Therefore, it can be shown that “Abandonment of
Work and Delay Completion Period” is the type of breach that most currently
fashionable in Malaysian construction industry.
65
4.2.2.5 Relief Sought
Relief sought is what the claimant wants and what the law allows. 175
Although the claim must be legally recognized, there are instances when
construction industry claims are categorized without regard to the legal basis. 176
Table 4.2 shows the relief sought by the claimant due to the breach of contract
occurred.
Table 4.2: Relief Sought
Cases
-Pembinaan LCL Sdn Bhd v. SK Styrofoam
(M) Sdn Bhd [2007] 4 MLJ 113
-Highceed Corp Sdn Bhd v. Warisan Harta
Sabah Sdn Bhd & Anor [2000] 5 MLJ 337
-Tan Hock Chan v. Kho Teck Seng [1980] 1
MLJ 308
Relief Sought
Frequency
Termination
2
Quantum Meruit
2
Damages
5
-Usaha Damai Sdn Bhd v. Setiausaha
Kerajaan Selangor [1997] 5 MLJ 601
-Tan Ah Chim & Sons Sdn Bhd v. Ooi Bee Tat
& Anor [1993] 3 MLJ 633
-Letrik Bandar Hup Heng Sdn Bhd v. Wong
Sai Hong [2002] 5 MLJ 247
-Nirwana Construction Sdn Bhd v. Pengarah
Jabatan Kerja Raya Negeri Sembilan Darul
Khusus & Anor [2008] 4 MLJ 157
-Hock Huat Iron Foundry v. Naga Tembaga
Sdn Bhd [1999] 1 MLJ 65
-L’Grande Development Sdn Bhd v. Bukit
Cerakah Development Sdn Bhd [2007] 4 MLJ
518
175
Norazam Othamn. (1997). Management of Variation in Construction Contracts. Cambridge:
ARCOM 97 – 13th Annual Conference and Annual General Meeting, Conference Proceedings Vol.
1., pp.389.
176
Davenport, P. (1995). Construction Claims. Sydney: The Federation Press.
66
Cases
Relief Sought
-Tan Ah Chim & Sons Sdn Bhd v. Ooi Bee Tat
& Anor [1993] 3 MLJ 633
Specific
-Vistanet (M) Sdn Bhd v. Pilecon Civil Works
Sdn Bhd [2005] 6 MLJ 664
-Tan Hock Chan v. Kho Teck Seng [1980] 1
Injunction
MLJ 308
Work and
Frequency
1
Performance
1
Payment for Extra
1
Materials
-Haji Abu Kassim v. Tegap Construction Sdn
Bhd [1981] 2 MLJ 149
Payment for Work
Done
Total
1
13
The reliefs sought in some cases were more than one, total frequency of
relief sought (13) is more than the total case (11) examined.
After breaches
happened, the claimants were sought for damages for loss of profit, quantum meruit
and termination of the construction contract. However, majority of them were
claimed for damages as the remedy of the breach.
67
4.3
Findings of Legal Issues in Relation to Damages
According to the eleven case laws retrieved from MLJ, few legal issues in
relation to damages in Malaysia construction industry have been identified. These
issues should be able to assist the parties involved in the construction industry such
as employers and contractors to clarify the current scenario of damages in the
country. Furthermore, they help to develop a better understanding of their rights and
requirements for claiming such damages.
4.3.1 Proof of Actual Loss
Whenever there is a breach of contract by the defendant, plaintiff is generally
entitled to claim for damages. However, how defendant could prevent the innocent
party (plaintiff) to violate their right in over claiming the damages? And how
plaintiff could entitle the damages without any proof of loss?
4.3.1.1 Letrik Bandar Hup Heng Sdn Bhd v. Wong Sai Hong 177
In the case of Letrik v. Wong, the appellant was the main contractor in
respect of the electrical works a construction project. The respondent was the
appellant’s subcontractor doing the actual electrical works.
By the subcontract
agreement, the appellant obtained 12.5% of the contract sum as its profit. A few
days after signing the subcontract, the appellant took over the contract works from
177
[2002] 5 MLJ 247
68
the respondent because the appellant was not satisfied with the respondent’s
performance.
The respondent argued that the appellant’s action was wrongful and in
breach of the subcontract and that he was entitled to the profit he would have made
had he been allowed to continue with the subcontract works. Since the appellant
obtained a profit of 12.5% under the subcontract, the respondent submitted it was
only fair and reasonable that the respondent must be entitled to a profit at 12.5% of
the subcontract price as the claim arose naturally from the breach.
The learned judge agreed with the respondent’s submission and allowed the
award. The appellant appealed against the sessions court judge’s decision. The court
allowed the appeal and held that there is a crucial distinction between a claim for
payment of a debt and a claim for damages for breach. In this case, the respondent’s
claim is a claim for damages, therefore, respondent must prove the actual loss or
damages, which it failed to do. Since the respondent failed to prove its damages, its
claim failed. The High Court judge accordingly awarded the nominal damages to
respondent.
4.3.1.2 Hock Huat Iron Foundry v. Naga Tembaga Sdn Bhd 178
The plaintiff, main contractor (the appellant in the first appeal and the
respondent in the second appeal) had sued the defendant, employer (the respondent
in the first appeal and the appellant in the second appeal) pursuant to an agreement
for the construction of an office and a factory. Plaintiff failed to complete the work
178
[1999] 1 MLJ 65
69
within the stipulated time and defendant claimed that the plaintiff was liable to pay
liquidated damages.
The plaintiff pleaded in its statement of claim that it had carried out
additional works based on various variation orders from defendant. The defendant
insisted that the plaintiff was not entitled to the principal amount claimed as it had
failed to complete the construction of the office and factory premises within the
stipulated time. The defendant counterclaimed for liquidated damages and loss of
interest on project investment and loss of income from investment by virtue of the
plaintiff's delay in completing the works only after the specified contractual dates.
The trial judge gave judgment for the plaintiff but also allowed part of the
defendant’s counterclaim. He concluded that from the evidence and the surrounding
circumstances of the case, the times of completion specified in the contract were of
the essence of the contract. However, the plaintiff pleaded that even though time is
of the essence of the contract, the defendant had allowed the completion dates to
pass and acquiesced in the works continuing under the agreement. The trial judge
also concluded that the defendant's loss had not been sufficiently proven and gave
judgment for RM10 as nominal damages for the loss of interest on project
investment and loss of income on investment.
Subsequently, plaintiff and defendant appealed. The court was allowing the
first and second appeal but dismissing the cross-appeal on nominal damages. The
judges in Court of Appeal were agreed with the decision of the trial judge in
concluding that the damages that had not been proved sufficiently by the defendant
and was right in giving judgment for RM10 as nominal damages of defendant.
In short, these two cases show that nominal damages may be awarded to the
innocent party when he can show a breach of contract but cannot prove any
70
sustained loss. 179 Its function is merely to declare that the defendant has committed
a breach against the plaintiff and hence that the plaintiff’s rights have been
infringed. 180
4.3.2 Standard of Proof
In proving loss one is concerned with future events or with hypothetical
actions of third parties, the standard of proof is required. Instead full damages are
only awarded if the claimant can prove its loss with reasonable certainty. 181 As
mentioned in cases of Letrik v.Wong 182 and Hock Huat v. Naga183, if the aggrieved
party failed to prove the actual loss, nominal damages may be awarded to them.
4.3.2.1 Nirwana Construction Sdn Bhd v. Pengarah Jabatan Kerja Raya Negeri
Sembilan Darul Khusus & Anor184
In this case, the appellant/plaintiff, a building contractor entered into a
contract using the Standard PWD form with the respondent/defendant to build a
school. It was not in dispute that the appellant failed to complete the building of the
school within the time stipulated. The respondent was granted an extension of time
179
Ashworth, A. (2006). Contractual Procedures in the Construction Industry. Fifth Edition. Harlow:
Pearson Education Limited., pp.32
180
Burrows, A. (2004). Remedies for Torts and Breach of Contract. Third Edition. New York:
Oxford University Press Inc., pp.589
181
Ibid., pp.53
182
[2002] 5 MLJ 247
183
[1999] 1 MLJ 65
184
[2008] 4 MLJ 157
71
for nine weeks. This was the first of several extensions. Finally, the respondent
issued a notice of intention to terminate the contract.
However, the appellant had not been able to execute the contract
satisfactorily. Thus, notice to terminate the contract was issued to the appellant.
However, despite various notices, the respondent allowed the appellant, upon its
request, to continue to complete the construction of the school. The construction of
the school was duly completed and officially accepted by the Ministry of Education
later.
The appellant accordingly contended that the Ministry accepted the
construction of the school.
But the respondent's position was that despite this, the appellant had failed to
complete the construction of the school due to the non-compliance of the terms of
contract. The respondent further reiterated that the construction was in fact not
completed within the period allowed to the appellant. Consequently the respondent
by letter revived the former notice of termination and informed the appellant that the
contract was now terminated in accordance with the said notice.
The appellant claimed that the respondent owed the appellant a balance of
RM501.817.66 and the appellant also claimed the sum of RM2.8m for loss of future
contract as a result of this dispute, since it jeopardised its status in that the appellant
was blacklisted by PWD. The respondent contended that the amount claimed by the
appellant in the sum of the RM501,817.66 was not paid by them to the appellant,
since this amount was taken and considered as a set off payment towards the
liquidated ascertained damages imposed, due to the appellant's failure and delay in
completing the contract.
In Court of Appeal, judges allowed the appeal. The judge mentioned that
there was no doubt that the blacklisting of a contractor by the PWD can have serious
financial ramifications for plaintiff. It follows that the plaintiff must have suffered
72
some damage from the blacklisting. It was difficult to assess the damages but that is
no reason for refusing to make an award in plaintiff’s favour. It is an established
principle that breach of contract is actionable per se. In other words, damages, that
is to say, injuria, need not to be separately established as an ingredient of the wrong.
Neither is a plaintiff in an action for breach of contract required in law to
prove that the defendant acted intentionally or negligently in committing the breach.
Once a breach of contract is established a plaintiff is entitled to recover damages.
What follows is an exercise in the assessment of those damages. If at that stage he or
she is unable to evidentially establish the measure of damage suffered, nominal
damages will be awarded. Therefore, standard of proof only demands that evidence
from which the existence of damages can be reasonably inferred, which provides
adequate data for calculating its amount.
4.3.3 Cross Claims
It is evident from society in general that individuals are becoming more
claims conscious, even in construction industry this is true.185 Damages arise where
employer breach the contract that entitled contractor to claim for such remedy.
Under certain circumstances, the employer may cross claims against contractor or
vice versa.
185
Ashworth, A. (2006). Contractual Procedures in the Construction Industry. Fifth Edition. Harlow:
Pearson Education Limited., pp.37
73
4.3.3.1 L’Grande Development Sdn. Bhd v. Bukit Cerakah Development Sdn.
Bhd 186
In this particular case, the plaintiff's claim against the defendant was in
respect of a claim for work done for the defendant in the construction project. The
parties had adopted the standard PWD contract. Meanwhile the parties had also
entered into a Phase 2 contract to construct double storey terrace houses adopting
the same standard PWD contract.
The defendant had not settled the interim certificates in full as they fell due.
In this suit the defendant raised the defence that this sum ought to be deducted from
the sums that it was claiming the damages against the plaintiff in the Phase 2
contract which was pending before the Kuala Lumpur High Court Civil 3 by virtue
of the fact that it is entitled to do so under cl 50 of the standard PWD contract.
The court held that the plaintiff should be able to receive payment in full of
sums stated in the interim certificates without having to wait for any contra
payments that the defendant may be entitled to make against the plaintiff in the
future. A failure on the part of the plaintiff to pay in full the amount stipulated on
the certificates constitutes a breach of an essential term of the contract upon which
the plaintiff may sue to recover as it had done in this case.
To be brief, it is not open to the defendant to plead as a defence that it is not
liable to pay on the ground that it has a claim of a much larger sum against the
plaintiff which has yet to be decided in another civil suit. The defendant cannot
therefore in law make the interim certificate the basis of the defendant's cross claim
of damages in the suit pending in another court respecting the other contract.
186
[2007] 4 MLJ 518
74
4.4
Conclusion
In conclusion, this research has achieved its objectives as it aimed to
illustrate the types of breaches of contract that are currently fashionable in Malaysia
construction industry. The findings of this research show that “Abandonment of
Work & Delay Completion Period” is the main type of breach. All these were
caused by the contractors that abandoned their works during the contract period. On
other hand, three main legal issues have been addressed in this research too. These
issues are proof of loss during claiming damages, standard of proof of damages and
cross claim of damages.
CHAPTER 5
CONCLUSION AND RECOMMENDATIONS
5.1
Introduction
This particular chapter attempts to summarise the research’s findings based
on the literature review, case laws and analysis. In brief, it consists of the research’s
final findings, research’s constraints, recommendations for future studies and
conclusion to the whole of this study.
5.2
Summary of Research Findings
On the whole, the objectives of this research had been achieved through the
documentary analysis of 11 cases centered on the issue of breaches of contract in
Malaysian construction industry.
subtopics.
The findings are summarised into following
76
5.2.1 Objective I: To illustrate the Types of Breaches of Contract that are Currently Fashionable in Malaysian Construction
Industry
In the end of this research, it is found that there are seven types of breaches of contract that are currently fashionable in Malaysian
construction industry. In Table 5.1, it shows the findings for this objective.
Table 5.1: Types of Breaches that are Currently Fashionable
No.
1.
2.
Cases
Haji Abu Kassim v. Tegap
Construction Sdn Bhd
[1981] 2 MLJ 149
Pembinaan LCL Sdn Bhd v. SK
Styrofoam (M) Sdn Bhd
[2007] 4 MLJ 113
Types of Breach
Relief Sought
Contractual
Relationship
Failure to Honour the Architect/SO’s
Certificate
-Payment for work
done
Employer & Main
Contractor
Failure to issue Termination Notice
Based on an Operative Time Frame
-Termination
Employer & Main
Contractor
Failure to Give Effective Possession
-Quantum meruit
-Payment for extra
work and materials
Employer & Main
Contractor
-Damages
-Specific performance
Employer & Main
Contractor
3.
Tan Hock Chan v. Kho Teck Seng
[1980] 1 MLJ 308
4.
Tan Ah Chim & Sons Sdn Bhd v. Ooi
Serious Defective Work and Failure to
Bee Tat & Anor
Remedial Work as Required
[1993] 3 MLJ 633
77
No.
5.
6.
7.
8.
9.
10.
11.
Cases
Vistanet (M) Sdn Bhd v. Pilecon
Civil Works Sdn Bhd
[2005] 6 MLJ 664
Highceed Corp Sdn Bhd v. Warisan
Harta Sabah Sdn Bhd & Anor
[2000] 5 MLJ 337
Letrik Bandar Hup Heng Sdn Bhd v.
Wong Sai Hong
[2002] 5 MLJ 247
Usaha Damai Sdn Bhd v. Setiausaha
Kerajaan Selangor
[1997] 5 MLJ 601
Nirwana Construction Sdn Bhd v.
Pengarah Jabatan Kerja Raya
Negeri Sembilan Darul Khusus &
Anor
[2008] 4 MLJ 157
Hock Huat Iron Foundry v. Naga
Tembaga Sdn Bhd.
[1999] 1 MLJ 65
L’Grande Development Sdn Bhd v.
Bukit Cerakah Development Sdn
Bhd
[2007] 4 MLJ 518
Types of Breach
Relief Sought
Contractual
Relationship
Abandonment of Work & Delay
Completion Period
-Injunction
Main Contractor &
Subcontractor
Unclear Stop Work Order
-Termination
Employer & Main
Contractor
Took Over Contract Work
-Damages
Main Contractor &
Subcontractor
Abandonment of Work & Delay
Completion Period
-Quantum meruit
Employer & Main
Contractor
Abandonment of Work & Delay
Completion Period
-Damages
Employer & Main
Contractor
Abandonment of Work & Delay
Completion Period
-Damages
Employer & Main
Contractor
Failure to Honour the Architect/SO’s
Certificate
-Damages
Employer & Main
Contractor
78
The summary in Table 5.1 shows the types of breaches of contract in
Malaysian construction industry. The findings are found to be parallel with the
literature review in Chapter 3 and 4. From the summary, it is not hard to be
discovered that only seven types of breaches existed in the court cases in the past
thirty years and most the cases were breached due to the reason of “abandonment of
work and delay completion period” either by the main contractor or subcontractor.
Therefore, the contractors are not advised to stop work at the site without
sensible reason but to progress the works steadily towards completion in accordance
with the contractual requirement as to time, sequence, programme of works and
quality of works, or he himself would be guilty of a breach of contract in failing to
maintain regular and diligent progress.
Moreover, most of the reliefs sought by the claimants were related to
monetary claims such as damages, quantum meruit and payment. It can be shown
that construction industry is a monetary orientated industry, where every single
dispute can be started by the monetary problem and also solve through monetary.
79
5.2.2 Objective II: To Address the Legal Issues in Relation to Damages
The second objective of this research was to address the legal issues
associated with damages. Throughout the analysis in Chapter 4, three main legal
issues have been spotted. All these three legal issues are shown in Table 5.2 as
below:
Table 5.2: Legal Issues in Relation to Damages
No.
1.
2.
3.
Legal Issues
Proof of Actual
Loss
Cases
Letrik Bandar Hup Heng Sdn
Bhd v. Wong Sai Hong
[2002] 5 MLJ 247
Hock Huat Iron Foundry v.
Naga Tembaga Sdn Bhd
[1999] 1 MLJ 65
Standard of
Proof
Nirwana Construction Sdn
Bhd v. Pengarah Jabatan
Kerja Raya Negeri Sembilan
Darul Khusus & Anor
[2008] 4 MLJ 157
Cross Claims
L’Grande Development Sdn.
Bhd v. Bukit Cerakah
Development Sdn. Bhd
[2007] 4 MLJ 518
Court Decisions
Failure to prove the
actual damages that
suffered only entitled the
innocent party to be
awarded nominal
damages.
Neither is a plaintiff in an
action for breach of
contract required in law
to prove that the
defendant acted
intentionally or
negligently in committing
the breach. Once a
breach of contract is
established a plaintiff is
entitled to recover
damages. Therefore,
standard of proof only
demands that evidence
from which the existence
of damages can be
reasonably inferred,
which provides adequate
data for calculating its
amount.
Cross claim of damages
in the suit pending in
another court respecting
the other contract is not
allowed for the claimant.
80
5.3
Problems Encountered during Research
There are a few problems that encountered during the process research being
carried out:
5.3.1 Time Constraint
The major problem in writing up this project report is the time constraint.
There was only eight weeks’ time provided for this research. Everything has to be
done in a very fast manner, especially during the data collection process. Besides, it
is lack of time to go through more sources of literature review and documentary
analysis.
5.3.2 Lack of Comprehensive Data
For the case law selection process, limitation of decided court cases in
relation to breaches of contract in construction industry also caused the difficulty in
getting a comprehensive finding.
5.4
Future Researches
The followings are some recommendations for future researches: I.
The procedural for the innocent parties to claim their remedy that
arise from breaches of contract under the Contract Act 1950.
81
II.
Legal issues associated with other remedies such as injunction and
specific performance.
III.
To examine circumstances that do not entitle the innocent party to
claim damages even there is a breach of contract term.
5.5
Conclusion
As a conclusion for all, adversarial nature of construction industry has
constituted to enormous cases of disputes between the parties in the construction
contracts.
Such disputes may include the breaches of contracts which further
leading to loss of profit or damages to the innocent parties in the contract. In
Hudson’s Building and Engineering Contracts, 187 Duncan Wallace had addressed an
issue that under the complicated provisions of many building contracts the possible
of breaches of contract are numerous.
Such situation occurs in Malaysian construction industry too.
In this
research, the current fashionable types of breaches of contract in Malaysia have been
identified. Throughout the analysis of case laws, it has been found that in the past
thirty years the most fashionable type of breach is that abandonment of work by the
contractor. According to the building contracts in Malaysia such as PAM, PWD 203
A, CIDB Standard Form and etc, there is a provision that the contractors must carry
out the construction works regularly and diligently and yet they are not allowed to
abandon the works without any reasonable reason. In turn this may entitle the
innocent party to claim for the damages arise from the breaches. Through this
research, hopes it can provide a guidance to any party in construction industry to
handle the issues relating to breaches of contract and damages.
187
Wallace, D. (1970). Hudson’s Building and Engineering Contracts. Tenth Edition. London: Sweet
& Maxwell Ltd., pp. 579
82
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85
APPENDIX A
LIST OF CASES EXAMINED
1
Haji Abu Kassim v. Tegap Construction Sdn Bhd [1981] 2 MLJ 149
2
Pembinaan LCL Sdn Bhd v. SK Styrofoam (M) Sdn Bhd [2007] 4 MLJ
113
3
Tan Hock Chan v. Kho Teck Seng [1980] 1 MLJ 308
4
Tan Ah Chim & Sons Sdn Bhd v. Ooi Bee Tat & Anor [1993] 3 MLJ 633
5
Vistanet (M) Sdn Bhd v. Pilecon Civil Works Sdn Bhd [2005] 6 MLJ 664
6
Highceed Corp Sdn Bhd v. Warisan Harta Sabah Sdn Bhd & Anor
[2000] 5 MLJ 337
7
Letrik Bandar Hup Heng Sdn Bhd v. Wong Sai Hong [2002] 5 MLJ 247
8
Usaha Damai Sdn Bhd v. Setiausaha Kerajaan Selangor [1997] 5 MLJ
601
9
Nirwana Construction Sdn Bhd v. Pengarah Jabatan Kerja Raya Negeri
Sembilan Darul Khusus & Anor [2008] 4 MLJ 157
10
Hock Huat Iron Foundry v. Naga Tembaga Sdn Bhd. [1999] 1 MLJ 65
11
L’Grande Development Sdn Bhd v. Bukit Cerakah Development Sdn Bhd
[2007] 4 MLJ 518