Law381 All Topics

CONSTRUCTION LAW

TABLE OF CONTENTS1.0 INTRODUCTION TO LAW381..................................................................................................................... 1

2.0 FUNDAMENTAL OF CONSTRUCTION LAW.............................................................................................................2

3.0 OVERVIEW OF THE MALAYSIAN LEGAL SYSTEM................................................................................................5

4.0 THE MALAYSIAN JUDICIAL SYSTEM..........................................................................................................................9

5.0 THE LAW OF CONTRACT I............................................................................................................................................10

6.0 THE LAW OF CONTRACT II..........................................................................................................................................16

7.0 THE LAW OF CONTRACT III........................................................................................................................................23

8.0 THE LAW OF TORT I....................................................................................................................................................... 28

9.0 THE LAW OF TORT II......................................................................................................................................................33

10.0 THE LAW OF TORT III..................................................................................................................................................41

11.0 LAND LAW I......................................................................................................................................................................48

12.0 LAND LAW II....................................................................................................................................................................54

1.0 INTRODUCTION TO LAW381

SYNOPSIS To introduce what is LAW381 all about To inform the expectations of the lecturer towards the whole semester To aware the students on the process of teaching and learning

PROPOSITION 10% - coursework and presentation 10% - 20% tutorial (every week) 10% - attendance and participation in class 60% - 70% - examination Passing marks 50% Percentage of failures 20% - 30%

REQUIREMENTS FOR LAW381 General principle of Malaysian law by Lee Mei Pheng (Chapter 1 – 6) Contracts Act 1950 (Act 136) Law dictionary National Land Code 1965 Past year examination papers Motivation and spirit to learn Come early to my class – if you come later than me you are considered ‘late’

ZULHABRI IsmailDepartment of Building Page 1

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2.0 FUNDAMENTAL OF CONSTRUCTION LAW

SYNOPSIS To provide an introduction and overview on construction law.

CONSTRUCTION LAW“Construction law is neither a legal term of art not technical one. It is used to cover the whole field of law which, in one way or another, affects the construction industry...” Prof John Uff (2001).

“The term “construction law” is now universally understood to cover the whole field of law which directly affects the construction industry and the legal instruments through which it operates. But Construction law extends…well beyond…Construction law is…inter-active subject in which both lawyers and construction professionals…have an essential part to play. Construction law…embraces all construction contracts…Prof John Uff (2002).

CATEGORIES OF LAWSources of Construction Law can be categorized into the following:-

Written: Legal source of law refers to all that law that has been reduced to, or is present in the written form (Harbans Singh, 2005).

Unwritten: Constitutes that part of the local law that is not recognised as “written law”.

Section 3 of the Interpretation Acts 1948 and 1967 (Act 388) defines “written law” to mean:

The federal Constitution and the Constitutions of the States and subsidiary legislation…; Acts of Parliament and subsidiary legislation…; and Ordinances and Enactments (including any federal or state law styling itself an Ordinance or Enactment) and subsidiary legislation…; and any other legislative enactments or legislative instruments (including Acts of Parliament of the United Kingdom of Great Britain and Northern Ireland and Orders in Council and other subsidiary legislation made thereunder) which are in force in Malaysia or any part thereof.

WRITTEN LAWLegislation - Acts of parliament / statutesExample of Statutes/Acts Apply To Construction 1. Arbitration Act 2005.2. Architects Act 1967 (Revised 1973) Act 117.3. Companies Act 1965 (Revised 1973 – Reprint 1988) Act 125.4. Contracts Act 1950 (Revised 1974 – Reprint 1997) Act 563 & (Amendment) 1976 Act

136.5. Convention on the Recognition and Enforcement of Foreign Arbitral Awards Act 1985

Act 320 Act A329. 6. Drainage Works Act 1954 (Revised 1988) Act 354.7. Environment Quality Act 1974 Act 127.


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8. Factories and Machinery Act 1967 (Revised 1974 – Reprint 1997) Act 139.9. Fire Services Act 1988 Act 341. 10. Government Contracts Act 1949 (Revised 1973) Act 120.11. Housing Developers (Control and Licensing) Act 1966 (Revised 1973 – Reprint 1982)

Act 118.12. Limitation Act 1953 (Revised 1981) Act 254.13. National Land Code 1965 Act 56/1965.14. Occupational Safety and Health Act 1994 Act 514.15. Sale of Goods Act 1957 (Revised 1989) Act 382.16. Strata Titles Act 1985 Act 318.17. Street, Drainage and Building Act 1974 Act 133.18. Town and Country Planning Act 1976 Act 172.

Subsidiary / delegated legislation – may be made by minister, specific body or person.1. Uniform Building By Laws [UBBL] under section 133 of the Street, Drainage and

Building Act 1974 (Act 133).2. Registration of Engineers Regulations 1990 under section 26 of the Registration of

Engineers Act 1967.

Why subsidiary / Delegated Legislation? – Due to time, technicality, subject to modification, action in administrative.

ACT 254 LIMITATION ACT 1953 (REVISED - 1981)

Limitation of legal action can be seen under section 6 of the Limitation Act as follows:-

Section 6. Limitation of actions of contract and tort and certain other actions.(1) Save as hereinafter provided the following actions shall not be brought after the expiration of six years from the date on which the cause of action accrued, that is to say - (a) actions founded on a contract or on tort; (b) actions to enforce a recognisance; (c) actions to enforce an award; (d) actions to recover any sum recoverable by virtue of any written law other than a penalty or forfeiture or of a sum by way of penalty or forfeiture. (2) An action for an account shall not be brought in respect of any matter which arose more than six years before the commencement of the action.(3) An action upon any judgment shall not be brought after the expiration of twelve years from the date on which the judgment became enforceable and no arrears of interest in respect of any judgment debt shall be recovered after the expiration of six years from the date on which the interest became due.

UNWRITTEN1. Judicial decisions2. Local case law.


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3. Doctrine of ‘Stare Decisis’ / judicial precedent.4. Applicable English law

a. Common lawi. Common law principles.

b. Case laws.c. Equitable principles

i. The principle of ‘fairness’. d. Statutes e. Statutes of General Application.

5. Trade custom / usagea. Particular to the construction industry.b. Implication / interpretation of terms.

6. Use of Foreign Cases HOW TO READ CASE LAWS?Sia Siew Hong & Ors v Lim Gim Chian & Anor [1996] 3 AMR 3651; (1996) 3 CLJ 3651 (Court of Appeal).


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3.0 OVERVIEW OF THE MALAYSIAN LEGAL SYSTEM

SYNOPSISThe purpose of this lecture is to discuss the overall principles underpinned the Malaysian law.

CONTENT1. The Concept of Law in Malaysia2. Purpose of law3. Composition of law4. Federal v State constitution5. Sources of Malaysian Law6. Judicial Precedent

THE CONCEPT OF LAW IN MALAYSIA What is law?The term ‘law’ is defined as both by Article 160(2) of the Federal Constitution 1957 and Item (43C) of Section 2(1) of the Interpretation and General Clauses Ordinance 1948 to include:

a. the written law;b. common law in so far it is in operation in the federation or any part thereof;

andc. any custom or usage having the force of law in the federation or any part thereof.

PURPOSE OF LAW1. To attain justice in society.2. Encourage the doing of what is right or just in a particular set of circumstances.

COMPOSITION OF LAW 1. The parliament – written law.2. Federal court – unwritten law.3. Federal and State constitution 4. The written constitution in Malaysia – Federal Constitution.

Article 4(1) of the Federal Constitution – “This constitution is the supreme law of the Federation and any law passed after Merdeka Day which is inconsistent with this Constitution shall, to the extent of the inconsistency be void”.

R. Rethana v The Government of Malaysia & Anor (1988) The plaintiff – s.31 and 42 of the Employees’ Social Security Act 1969 (Socso) were ultra vires the Federal Constitution for not provided equal protection of the law to all persons.

Held – Case dismissed on the grounds that it was fair and reasonable.


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SOURCES OF MALAYSIAN LAW Written law Written Legal source of law refers to all that law that has been reduced to, or is present in

the written form (Harbans Singh, 2005).

WRITTEN LAWSection 3 of the Interpretation Acts 1948 and 1967 (Act 388) defines “written law” to mean:1. The federal Constitution and the Constitutions of the States and subsidiary legislation…;2. Acts of Parliament and subsidiary legislation…; and 3. Ordinances and Enactments (including any federal or state law styling itself an

Ordinance or Enactment) and subsidiary legislation…; and4. Any other legislative enactments or legislative instruments (including Acts of

Parliament of the United Kingdom of Great Britain and Northern Ireland and Orders in Council and other subsidiary legislation made thereunder) which are in force in Malaysia or any part thereof.

Inconsistency between federal laws v state laws“If any state law is inconsistent with a federal law, the federal law shall prevail and the State law shall, to the extent of the inconsistency, be void.” Federal Constitution, Article 75. Any inconsistency with the superior Act - Ultra Vires.

Acts A federal laws that post Malayan Union (September 1959).

Ordinance A federal laws that are enacted by parliament between the period of the Malayan

Union (1946-10 September 1959). The laws in Sarawak are called Ordinances.

Enactments Laws made by the State Legislative Assemblies (except in Sarawak). A law made by the Legislature of a State.

Legislation Acts of Parliament – Statutes, subsidiary/delegated legislation. State laws – Ordinance & enactments. Legislation - Acts of parliament Statutes

UNWRITTEN LAW1. Judicial decisions


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2. Local case law.3. Doctrine of ‘Stare Decisis’ / judicial precedent.4. Applicable English law

a. Common lawi. Common law principles.

b. Case laws.c. Equitable principles

i. The principle of “fairness”. d. Statutes e. Statutes of General Application.

5. Trade custom / usagea. Particular to the construction industry.b. Implication / interpretation of terms.

6. Use of Foreign Cases

JUDICIAL PRECEDENTSources of law where past decisions of the judges create law for future judges to follow. Also known as case law, which is one of the primary sources of English law and Malaysian law.

Doctrine of Judicial Precedent1. The English Law has given highest priority and authoritative power to the binding

judgement of the higher courts, so that the courts are bound to follow the same principles of law from the decision of an earlier courts of the same or higher level; doctrine of stare decisis.

2. Its create certainty of outcome for future case and scope for the common law to be modified and updated.

3. For the system of precedent to work, it must be selectively but accurately reported and accessible. For the English cases there are:-

a. International Construction Law Review [ICLR]b. Weekly Law Reports [WLR]c. Butterworths’ All England Reports [All ER] d. Building Law Reports [BLR]

4. For Malaysia there area. Malaysia Law Journal [MLJ]b. Current law Journal [CLJ]c. All Malaysia Reports [AMR]

5. Advantage of Judicial Precedent - Cases should be treated in a similar fashion by the courts to ensure justice.

Doctrine of stare decisisTwo way operation:1. Vertical – bound by the prior decisions of a higher court.


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2. Horizontal – bound by their own prior decisions and prior decisions of a court of the same level.

Public Prosecutor v Datuk Tan Cheng Swee (1980)“It is however necessary to reaffirm the doctrine of stare decisis which the Federal Court accepts unreservedly and which it expects the High Court and other inferior courts in a common law system…to follow similarly…Clearly the principle of stare decisis requires more than lip-service”. Chang Min Tat F.J.

Kumpulan Perangsang Selangor v Zaid Bin Haji Mohd Noh (1997)…“certainty through precedent”. Its main object is to enable members of the public to organise their affairs in accordance with law and for legal advisers to advise their client…and to avoid wasteful and unnecessary litigation…” Gopal Sri Ram J.C.A.

Ratio decidendi and obiter dicta Ration decidendi creates precedent. In a judgment, the judge is likely to give a

summary of the facts, review the arguments and explain the principles of law he is using to come to the decision, which creates a precedent.

Obiter dicta refer to the reminder of the judgement. Judges in future cases do not have to follow it. It’s referred to speculation on what his decision would have been if the facts of the case had been different.

Types of precedent and related principlesBinding precedent Is a judgement from previous case which must be followed even if the judge in the later

case does not agree with the legal principle. It is only created when the facts of the second case are similar to the original case and

the decision was made by a court which is higher to (or same level) in the later case. Judicial Precedent

Persuasive precedent Not binding, but the judge way considers it and decides that it is a correct principle to

follow; secondary sources. Normally comes from lower courts judgment; decision of the judicial committee of the

Privy Council; obiter dicta; dissenting judgment or judgment of courts in other countries.

Distinguishing Judge finds that the facts of the case he is deciding are different for him to draw

distinction between the present case and the previous precedent. He is not bound by the previous case.

In Trenberth v NWB (1980) Walton J said that the decision in Woollerton & Wilson v Costain ( 1970) was incorrect and cannot be relied upon.

Overruling


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Referring to the situation of the court in later case states that the legal rule decided in an earlier case is wrong. Its may occur when a higher court overrules a decision made in an earlier case by a lower court.

In Murphy v Brentwood ( 1989) House of Lord overruled lower court decision in Dutton v Bognor (1972) and CA decision in Anns v Merton (1978) on Local Authority liability towards building defects.In Beufort v Gilbert Ash (1999) House of Lord overruled the decision of the CA in Health Authority v Crouch on special power of Arbitrator.

The House of Lords uses its power under the practice statement to overrule a past decision of its own; in Pepper v Hart (1993) the HL overruled the earlier decision in Davis v Johnson (1979). Judicial Precedent

ReversingThe higher court overturns the decision of a lower court on appeal in the same case. For instance, the CA may disagree with the legal ruling of the high court and come to a different view of law and reverse the decision made; Aldersons v Beetham ( 2003).

4.0 THE MALAYSIAN JUDICIAL SYSTEM

SYNOPSISThe purpose of this lecture is to discuss the legal principles underpinned the Malaysian courts.

HISTORICAL BACK GROUND1. Prior to 1st January 1985 the superior courts system in Malaysia was the following:-

a. The Privy Councilb. The Supreme Courtc. The High Court Malaya and the High Court Borneo.

2. After 1985 - the abolishment of appeals to the Privy Council.3. Resulted in a change from the three-tiered system to a two-tiered system (Supreme

Court and the two (2) High Courts). 4. In 1994 the Court of Appeal was established. The Supreme Court was renamed the

Federal Court. As a consequence, the three-tiered system of the superior courts was restored.

STRUCTURE OF THE COURT JUDGMENTCombination of the following:-

1. Written law.2. Unwritten law.3. Expert witnesses.


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4. Articles, books and write up by the experts and academics.

HIRARCHY OF COURTS

5.0 THE LAW OF CONTRACT I

SYNOPSISThe purpose of this lecture is to discuss the following:-

1. The elements of valid and enforceable construction contracts2. The important of legally binding construction contracts.

WHY CONTRACT LAW IS CRUCIAL?Contract law is important as it is a way of regulating relationships.We can safely make arrangements with other people if we know those agreements have the force of law.

SOURCES OF CONTRACT LAWWritten Law

Legislation– Contracts Act 1950 (Act 136)– Civil Law Act 1956 (Act 67)– Sale of Goods Act 1957 (Act 382)– Specific Relief Act 1950 (137)


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– Insurance Act 1996 (Act 553)– Hire Purchase Act 1967 (Act 212)

Unwritten Judicial decisions i.e. case law & judicial precedent Applicable English law

– Common law– Equitable principles– Statutes

Customary law– Trade usage – construction norm example?

ELEMENTS OF VALID & ENFORCEABLE CONTRACT1. Firm offer / proposal2. Unqualified acceptance3. Consideration4. Free consent5. Intention to create legal relation6. Lawful object & consideration7. Certainty of terms8. Physical / legal possibility9. Legal capacity to contract10. Formality [written form?]

Formation of Contract under the Contracts Act 1950.1. There must be a valid offer and an unqualified acceptance [s.2].2. There must be an intention to create legal relation.3. There must be a valuable consideration, except in the case of contract under seal [s.2d]. 4. There must be a genuine consent by the parties, for example, there must be no duress

involved [s.10, s.14].5. The contract must be lawful [s.10(1)].6. The parties must have legal capacity to contract [s.11].7. The terms of the contract must be sufficiently certain [s.30].

Sri Kajang Rock Products Sdn Bhd v Mayban Finance Bhd (1992)VC George J stated that to constitute a valid contract, there must be:-

1. Separate and define parties thereto; those parties must be in agreement,2. that there is consensus ad idem; 3. Those parties must intend to create legal relations in the sense that the promises of

each side are to be enforceable simply because they are contractual promises;4. And the promises of each party must be supported by consideration.

TYPES OF CONTRACTContractual relationships arise in three ways:-

1. Through the agreement between the parties (consensual contract).


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2. Through one party performing some act in reliance upon a promise, often implied, by the other (a unilateral contract).

3. Though the execution of a deed (previously called a specialty contract) containing the promise, e.g. purchasing a house.

4. Consensual and unilateral contracts are called simple contracts.5. A deed [specialty] is a contract “under seal”.

OFFERThe nature of offers A person making an offer is called an offeror. The person to whom the offer is made, and who thus can accept it is called the offeree. The offer is a statement of intent by the offeror to be legally bound by the terms of the

offer if it is accepted, and the contract exists once acceptance has taken place.

Rules of offer To one or a number of persons. Must be communicated [s.4 (1)]. All terms must be brought to notice of offeree. May specify conditions to be followed [s.7 (b)] i.e. may be in any form. May be revoked (cancelled) or may lapse (due to time) [s.5 (1)].

Taylor v Laird (1856)Taylor gave up the captaincy of a ship and then worked his passage back to Britain as an ordinary crew member. His claim for wages failed. The ship owner had received no communication of Taylor’s offer to work in that capacity.

Felthouse v Bindley (an auctioneer) (1862)An uncle and nephew had negotiated over the sale of the nephew’s horse. The uncle had said “If I hear no more from you I shall consider the horse mine at £30.15”. The nephew did not reply but wishing to sell the horse to his uncle, he told the defendant (an auctioneer) who was selling farm stock for him not to sell the horse but an auctioneer inadvertently sold it. The uncle tried to sue the auctioneer in tort but failed. It was held that the uncle could not prove that the horse was his. The nephew had not actually accepted the offer to buy although the nephew intended to sell the horse to his uncle; he had not communicated that intention. Thus, no contract between the parties (uncle and nephew) and the property in the horse was not vested in the claimant. Therefore, the leading silence does not amount to acceptance.

Carlil v Carbolic Smoke Ball Co. Ltd. (1893)The company advertised a patent medicine, the smoke ball, with the promise that if a purchaser used it correctly and still got flu, then the company would pay them £100. Mrs Carlil did get flu after using the smoke ball in the correct way. The court enforced her claim for £100 on the ground that the promise was an offer that could be accepted by anyone who used the smoke ball correctly and still got flu.


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Yates v Pulleyn (1975)An option to purchase land was required to be exercised by notice in writing ‘sent by registered or recorded delivery post’. When the option was sent by ordinary post only, it was invalid.

Lapse of offer If not accepted within the time stated [s.6 (b)]. If no time stated, not accepted within reasonable time. If counter offer made [s.7]. Death before acceptance [s.6]. Invitation to Treat is not an Offer.

Invitation to treat is not an offer Goods displayed on shelves in a self-service shop. Goods on display in a shop window. Goods or services advertised in a newspaper or magazine.

Pharmaceutical Society of Great Britain v Boots Cash Chemist Ltd (1953)Boot altered one of their shops to self-service. Under the UK Pharmacy and Poisons Act 1933, a registered pharmacist was required to present at the sale of certain drugs and poisons and had authority to prevent customers from taking goods out of the shop if he thought fit. There was an allegation that the defendant infringed the Act. The display of goods did not constitute an offer. The contract of sale was not made when a customer selected goods from the shelves, but when the company’s employee at the cash desk accepted the offer to buy what had been chosen. There was, therefore supervision in the sense required by the Act at the appropriate time.

Fisher v Bell (1961)The defendant was a shop keeper, who had displayed a flick knife marked with a price in his shop window; he had not actually sold any. He was charged under the Restriction of Offensive Weapons Act 1959 for selling an “offensive/prohibited weapon”. The court had to decide whether he was guilty of offering the knife for sale. It was decided that the shopkeeper displaying a flick knife in the window was not offering it for sale. It was merely invitation to treat.

Partridge v Crittenden (1968)A prosecution for “offering for sale” a wild bird under the Protection of Birds Act 1954 failed. The advertisement (“Bremblefinch cocks, bramblefinch hens, 25s each”) was not an offer but an invitation to treat.

Gibson v Manchester City Council (1979)Gibson returned his completed application form when receiving an invitation to buy his house from the council. When there was a change of policy by the council, Gibson’s action for breach of contract failed. His completed application was an offer to buy, not an acceptance of any offer by the council.


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ACCEPTANCERules of acceptance Must be communicated to offeror [s.2(a)]. Must be unconditional [s.7(a)]. Must be made in the method described [s.7(b)]. Can only be made by party to whom the offer was made. Must be made within prescribed time – before lapsed, revoked or rejected. Cannot be revoked without consent of the offeror [s.5(2)].

Problems Associated with Offer and AcceptanceDavies & Co. Ltd v William Old (1969)Shop fitters, following their successful tender, contracted with the architects in a building contract to sub-contract to the builders. The builders, under instruction from the architects, issued an order for work to the shop fitters. They did this on their own standard form that included a clause that they would not pay for work until they themselves had been paid [pay when paid]. The shop fitters later sued for payment.

It was held that the shop fitter’s action failed. The builders’ standard form / [pay when paid clause] was a counter-offer that the shop fitters had accepted by carrying on with the work.

British Steel Corporation v Cleveland Bridge and Engineering Co. (1984)CBE were sub-contracted to build the steel framework of a bank in Saudi Arabia. The work required four steel nodes that they asked BSC to manufacture. BSC wanted a disclaimer of liability for any loss caused by late delivery. The parties were never able to agree on this and so no written agreement was ever made. BSC, however, did make and deliver three nodes, but the last was delayed because of a strike. CBE refused to pay for the three nodes and claimed that BSC was in breach of contract for late delivery of the fourth.

It was held that because there was a total disagreement over a major term, the judge in the case found it impossible to recognise that a contract existed. He did order that BSC be paid for what they had supplied based on quantum meruit.

OTHER ELEMENTS FOR FORMATION, VALID & ENFORCEABLE CONTRACT Consideration [s.2(d)]. Essential in every simple contract [s.26]. Must have some value , but court not concerned as to its adequacy. Part payment may discharge an obligation [s.64]. Must not be illegal or unlawful [s.10(1)]. May be future, present or past. Need not move from the promisee [s.2(d)].

Macon Works & Trading Sdn Bhd v Phang Hon Chin & Anor (1976)The defendants were owners of a piece of land. The agreement to sell the land to the plaintiff was unsuccessful and subsequently an option was given to purchase the land to A.


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The option was an open dated, exercisable only after the plaintiff showed no more interest in the land. The plaintiffs claimed for specific performance of the agreement.

The court held that the option was void for lack of consideration. Since no time was fixed, the offer would lapse after the expiration of a reasonable time. An offer lapses after a reasonable time not because this must be implied in the offer but because failure to accept within a reasonable time implies rejection by the offeree.

Intention to create legal relations Contracts Act 1950 silent on the intention to create legal relations. Cases/common law shows seriousness of this element as one of the requirements of a

valid contract. But not for family arrangements or concessions were made in the course of business

negotiations such as where there was a subject to contract clause in the agreement.

Carlil v Carbolic Smoke Ball Co. Ltd. (1893)In this instance, when someone deposits money in the bank against possible claims, the court is likely to hold that legal relations were contemplated.

Gould v Gould (1969)A contractual intention was negative where a husband on leaving his wife undertook to pay her £15 per week “so long as I can manage it”. The uncertainty of this term ruled out a legally binding agreement. Certainty [s.30]Terms that are certain or capable of being made certain.

Gutching v Lynn (1831)When a horse was purchased a promise to pay £5 more “if the horse is lucky” could not be an offer. It was too vague.

Capacity [s.11]Legal capacity

Must be age of majority, sound mind and not barred by law. Void if made by minors, drunkards and mental incapacity.

Legality [s.24]Void contract if object of agreement is:

Forbidden by the law. Such that it defeats any law. Such that it involves injury to person or property. Immoral or opposed to public policy. Legality [s.24] In restraint of marriage [s.27]. In restraint of trade [s.28].


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In restraint of legal proceedings [s.29].

Consent [s.10, 14]Genuine consent affected by [s.14]:

Coercion [s.15]. Undue influence [s.16]. Fraud [s.17]. Misrepresentation [s.18].

NB – if any of the above exist, contract is voidable at the option of injured party. Mistake (s.21,22 and 23)

o Mistake of law will not affect on contract (implied)o Mistake of fact: renders

Contract is void if the following exists:- Mistake as to nature of the contract. Existence of fact at root of contract. Mutual mistake. Mistake of intention of one party known to other.

6.0 THE LAW OF CONTRACT II

SYNOPSISThe purpose of this lecture is to discuss the following:-

1. Privity of contract.2. Conditions and warranties.3. Standard contracts and exemption clauses.4. Vitiating factors - voidable contracts.

PRIVITY OF CONTRACTDefinition “As a general rule, contractual rights and liabilities affect only the parties to the contract and a person who is not party can neither sue nor be sued on the contract.” (Ainah, 2005).

Dunlop Pneumatic Tyre Co. Ltd. V Selfridge & Co. Ltd. (1914) In the contract Dew & Co., wholesalers, agreed to buy tyres from Dunlop. They did so on the express undertaking that they would not sale below certain fixed prices. They also undertook to obtain the same price-fixing agreements from their clients. Dew sold tyres on to Selfridge on these terms but Selfridge broke the agreement and sold tyres at discount prices. Dunlop sought an injunction.

It was held that Dunlop application for injunction was failed for lack of Privity. In the House of Lords Lord Haldane said:-


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“Only a person who is a party to a contract can sue on it . Our law knows nothing of a jus quaesitum tertio arising by way of contract. Such a right may be conferred by way of property, as, for example, under a trust, but it cannot be conferred on a stranger to a contract as a right to enforce the contract in personam.”

Jus quaesitum tertioA contract cannot confer rights on a third party and only a party to a contract can sue on it. But rights may be conferred on third parties by way of trust, if so intended.

The Doctrine of Privity of Contract A contract cannot usually give rights or impose obligations on anyone who is not a party to the contract (Bone, 2001).

Only binds the parties to a contract. A person not a party to a contract cannot:- Recover benefits under the contract even though the contract expressly confers

that benefits: Tweddale v Atkinson (1861). Have obligation imposed on him by the contact, even if he aware of it: McGruther

v Pitcher [1904]; Adler v Dickson (1954).

Price v Easton (1833)Easton had agreed with a third party that if that third party did specified work for him he would pay £19 to Price. While the work was completed by the third party, Easton failed to pay Price who then sued. Price’s claim was unsuccessful. He had given no consideration for the arrangement and was not therefore a party to the contract.

Tweddale v Atkinson (1861) Fathers of a young couple who intended to marry agreed in writing each to settle a sum of money [£200] on the couple. The young woman ‘s father died before giving over the money and the young man then sued the executors to the estate when they refused to hand over the money.

It was held that even though he was named in the agreement, he failed because he had given no consideration for the agreement himself.

AA Valibhoy & Sons v Habib Bank Ltd (1984)The plaintiffs brought an action against the defendants in their claim for damages for breach of contract. The claim was based on the alleged breach by the defendants of their duties as collecting bankers. Rajah J held that there was no privity of contract between the parties, the plaintiffs cannot sue the defendants who were the sub agents.

TERMS OF A CONTRACTContents of a ContractContents of a contract are made up of terms either expressed or expressly stated; and / or Implied


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Terms impliedTerms implied by fact

Implied by custom or habit. Implied by trade or professional custom. Implied to give sense and meaning to the agreement. Implied to give business efficacy to a commercial contract; The Moorcock. Implied because of the prior conduct of the contracting parties; Hillas v Arcos

Terms implied by law By the court. By statute.

Pasuma Pharmacal Corporation v McAlister & Co. Ltd (1965)The Federal Court in Pasuma explained the process by which the courts may imply terms into a contract:-To give efficacy to the transaction. That is, terms may be implied from the presumed intention of the parties and upon reason so that there will not be a failure of consideration – The Moorcock.

By applying the “officious bystander” test or what is commonly known as the ‘Oh, of course! Test. That is, if at the time the contract was negotiated, someone had said to the parties, ‘What will happen in such a case? The parties would both have replied, “Of course, such and such will happen. We did not trouble to say that, it is too clear.” – Reigate v Union Manufacturing Co. Ltd. [1918] and Shirlaw v Southern Foundries [1939] 2 KB 206.

Moorcock (The) (1889)The defendants owned a wharf with a jetty on the Thames. They made an agreement with the claimant for him to dock his ship and unload cargoes at the wharf. Both parties were aware at the time of contracting that this could involve the vessel being at the jetty at low tide. The ship became grounded at the jetty and broke up on a ridge of rock. The defendants argued that they had given no undertaking as to the safety of the ship.

The court held that there was an implied undertaking that the ship would not be damaged. Bowen LJ explained that:-“In business what the transactions such as this, what the law desires to effect by the implication is to give such business efficacy…as must have been intended at all events by both parties who are businessmen.”

Hillas & Co Ltd v Arcos Ltd (1932)In a 1931 contract between the two parties for supply of standard-sized lengths of timber there was included an option clause allowing the claimants to buy a further 100,000 during 1932. The agreement was otherwise quite vague as to the type of timber, the terms of shipment and other features. Despite this the contract was completed and the timber supplied. In 1932 the claimants then wanted the further 100,000 lengths of timber but the defendants refused to deliver them. Their argument was that since the 1931 agreement


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was vague in many major aspects and was therefore no more than a basis for further negotiations.

The House of Lords held that, while the option clause lacked specific detail, nevertheless it was un the same terms as the contract of sale that had been completed. It was therefore implicit in the original contract that the option be carried out in the same terms if the claimant wished to exercise it.

Conditions and WarrantiesConditions“A condition is a stipulation essential to the main purpose of the contract, the breach of which gives rise to a right to treat the contract as repudiated” Sale of Goods Act 1957 (Act 382), Section 12(2).A condition is a term of a contract which is so important to the contract that a failure to perform the condition would render the contract meaningless and destroy its purpose and go to the root of a contract. The court allows the claimant who has suffered a breach of the term the fullest range of remedies.

When a condition is unfulfilled the claimant / plaintiff will be able to:- Sue for damages and repudiate his obligations.

Warranty“…is a stipulation collateral to the main purpose of the contract, the breach of which gives rise to a claim for damages but not a right to reject the goods and treat the contract as repudiated” Sale of Goods Act 1957 (Act 382), Section 12(3).

Warranties are regarded as minor terms of the contract or those where in general the contract might continue despite their breach.Any other term in a contract that does not go to the root of the contract.

Residual category of terms dealing with obligations that are ancillary or secondary to the major purpose of the contract. As a result, the remedy for a breach of warranty is merely an action for damages. There is no right to repudiate for breach of a warranty.

Conditions and Warranties?Whether a particular provision in a contract is a condition or a warranty depends on the intention of the parties and the construction of the contract [SGA, s.12(4)]. The stipulation may be a condition, though called a warranty in the contract [SGA, s.12(4)]. Simply labelling of a term as a condition or warranty is not conclusive; Associated Metal Smelters Ltd v Tham Cheow Toh (1971).


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Associated Metal Smelters Ltd v Tham Cheow Toh (1971)The plaintiffs claimed damages for breach of warranty of a metal furnace. The defendants had agreed to sell furnace to the plaintiff and had given an undertaking that the melting furnace would have a temperature not lower than 2600 °F. The furnace supplied by the defendants did not in fact reach the required temperature.

It was held that the failure on the part of the defendants to supply a furnace which would meet the required temperature constitute a breach of the condition of the contract entitling the plaintiffs to treat such breach as a breach of warranty. Judgment was given for the plaintiffs

STANDARD CONTRACTS AND EXCLUSION / EXEMPTION CLAUSESStandard ContractsConstruction Industry

PAM Private Edition With or Without Quantities Edition 1998; PAM NSC 98. PWD FORM 203A (Rev. 10/83); 203N, DB/T (2000 Edition). CIDB Standard Form of Contract for Building Works 2000 Edition. IEM.CE 1/89; IEM.CES 1/90.

Other industries Banking – standard formats of contracts Insurance Air travel

Exclusion / exemption Clauses (disclaimer) Definition A clause in a contract excluding or limiting the liability of one or other of the

parties (disclaimer). Such clause must be expressly incorporated in the relationship between the

parties from the outset; Thornton v Shoe Lane Parking Ltd (1971). Although exemption / exclusion clauses are permissible, both the courts and

parliament [UK] have been reluctant to allow these clauses to operate successfully where they have been imposed on a weaker party i.e. ordinary customer by a stronger party, such a person or corporation in business to supply goods or services.

Sze Hai Tong Bank Ltd v Rambler Cycle Co Ltd (1959)It was held that “a fundamental breach of obligations of a contract cannot be allowed to pass unnoticed under the cloak of a general exemption clause”.

VITIATING FACTORS Definition“Vitiate” means “to spoil or reduce the effect” (Oxford, 2003).


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If a vitiating element is present, it renders the contract void or voidable at the option of the aggrieved party [voidable contracts] or the courts may choose not to enforce it [void contracts].

Turner (2003) provides:- Factors present at the time of the formation of the contract, possible unknown to

one or either party. The contract lacks the essential characteristic of voluntarines, is based on

misinformation or is of a type frowned on by the law. As a result, the role of the law is to provide a remedy to the party who may not

wished to enter the contract given full knowledge of the vitiating factor at the time of formation.

Effects of vitiating factors: void or voidable.

VoidableContracts Act 1950Section 10 of the Contracts Act provides “All agreements are contracts if they are made by the free consent of the parties competent to contract”. Section 14 states that “Consent is said to be free when it is not caused by”:-

Coercion [s.15] Undue influence [s.16, 20 ] Fraud [s.17] Misrepresentation [s.18] Mistake [s.21, 22 and 23]

Coercion [s.15] Defined as “committing, or threatening to commit any act forbidden by the Panel Code…”“Coercion” in section 15 is limited to an unlawful act done “with the intention of causing the person to enter into an agreement” (Kanhaya Lal v National Bank of India Ltd (1913).

Kesarmal s/o Letchman Das v Valippa Chettier (1954)A transfer executed under the orders of the Sultan, issued in the ominous presence of two Japanese officers during the Japanese Occupation of Malaya was invalid. The court held that consent was not freely given and the agreement as voidable at the will or option of the party whose consent was so caused.

Coercion Under common law, the principle is slightly differ, it is based on duress [including economic duress], meaning the contract has resulted from “actual or threatened violence”.

Lord Denning in Lloyds Bank Ltd v Bundy (1975) suggested two doctrines: Economic duress and inequality of bargaining power.


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Pao On v Lau Yin Long (1979)Lord Scarman concluded that “there is nothing contrary to principle in recognising economic duress as a factor which may render a contract voidable, provided always that the basis of such recognition is that it must always amount to coercion of will, which vitiates consent.”

D.C. Builders v Rees (1965) R forced the small firm of Builders [DCB] to accept a cheque of £300 in full satisfaction of the actual bill of £462 or take nothing. They had no choice in the circumstances but to accept. Lord Denning considered the issue of inequality bargaining strength and felt that coercion in such circumstances justified avoidance of the agreement.

Undue influence [s.16, 20 ] Section 16 Section 20

Equitable doctrine concerning contracts that have been following improper coercion and the innocent party can avoid the contract.

Fraud [s.17] Section 17

Misrepresentation [s.18] Section 18

Spice Girls Ltd v Aprilia World Service BV (2000)The company agreed to a contract for the Spice Girls to make a video promoting its goods on the basis that there were five Spice Girls and logos and other material showed the five members of the band. In fact, Geri Halliwell had already disclosed her intention to leave the band, but this was not mentioned.

The court held that the company was awarded damages under section 2(1) of the Misrepresentation Act 1967. The Spice Girls had no reasonable grounds to believe that there would be five of them to perform the contract.

Mistake [s.21, 22 and 23] Section 21 Section 22 Section 23

Contracts Act 1950Section 19(1) states that “When consent to an agreement is caused by coercion, fraud, or misrepresentation, the agreement is a contract voidable at the option of the party whose consent was so caused”.


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Furthermore, section 19(2) provides “A party to a contract, whose consent was caused by fraud or misrepresentation, may, if he thinks fit, insist that the contract shall be performed, and that he shall be put in the position in which he would have been if the representations made had been true”.

Void ContractsDefinition The contract does not exist / nullity. Contract having no validity. Not enforceable in law (s.2(g); 24). Incapable of confirmation.

Characteristics of Void ContractsVoid contracts under Contracts Act:-Unlawful contracts (s.24)

Forbidden by law (s.24(a)) Defeat any law (s.24(b)) Fraudulent (s.24(c)) Involve injury to person & property (s.24(d)) Immoral & apposed public policy (s.24(e))

Other void agreement under the Act:- Without consideration unless…(s.26) In restraint of marriage (s.27) In restraint of trade (s.28) In restraint of legal proceedings (s.29) The meaning which is not certain or capable of being made certain (s.30) An agreement by way of wager (s.31)

7.0 THE LAW OF CONTRACT III

SYNOPSIS This lecture will discuss the following legal area:-

Discharge from further performance under the contracts Remedies

DISCHARGE FROM FURTHER PERFORMANCE UNDER THE CONTRACTSDischarge of a ContractA contract once formed - imposes duties and obligations on the promisor and promisee which must be carried in fulfillment of their respective promises.

The parties can only be freed from their mutual obligations under the contract by the discharge of the contract.


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Ways for Discharge of a Contract By performance By breach By consent or agreement between the parties; and Under the doctrine of frustration / impossibility Operation of law

Discharge of a ContractVincent Powell-Smith (2000) stated that discharge of a contract refers to “the carrying out of an obligation imposed by contract or statute.” In engineering contracts…Complete Performance, where the contractor carries out the whole of the works in accordance with the contract documents and the employer pays the contract sum will discharge the contract.

Discharge by PerformanceVincent Powell-Smith (2000) - Partial Performance by one party may be sufficient evidence of his intention to be bound by the terms of a contract if he has not made formal acceptance. Whether or not performance is complete is a matter for the courts to decide in each case…the courts will, however, grant relief to the contractor who can show, in such a case that he has achieved ‘substantial performance’, i.e. the work is complete save for some minor omissions or defects.

Performance must be exact and precise and should be in accordance with what the parties had promised.Section 38(1) provides “The parties to a contract must either perform, or offer to perform, their respective promises, unless the performance is dispensed with or excused…”

Discharge by BreachBreach of contract Failure to fulfil a contractual obligation which entitles the innocent party to a remedy. The obligation, or term, may be expressed or implied at common law by statute or statutory instrument (Osborn Law Dictionary, 2001).

General principles The rule of contract – Both parties to the contract must perform their promises

and obligations strictly according to the terms of the contract. If default – breach of contract. Thus, the entire transaction should be aborted, the

respective parties returned to their original position and discharge from further performance.

An intention not to go on with the contract: Repudiated / renounced the contract. A refusal to perform a contract before the performance is due: anticipatory

breach. A refusal to perform a contract when performance is due: discharge.


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Heyman v Darwins (1942)Repudiation for anticipatory breach was held to occur where a party intimates by words or conduct that he does not intend to honour his obligations when they fall due in future.

Position under the ActSection 40 of the Contract Act 1950 states:- “When a party to a contract has refused to perform, or disabled himself from performing, his promise in its entirety, the promisee may put an end to the contract, unless he has signified, by words or conduct, his acquiescence in its continuance”.

Effects of Breach - Section 65“When a person at whose option a contract is voidable rescinds it, the other party thereto need not perform any promise therein contained in which he is promisor. The party rescinding (cancel) a voidable contract shall, if he has received any benefit…restore the benefit…”

If the innocent party has rendered services or had supplied goods, he may recover a reasonable sum for such services or goods rendered. If the innocent party has paid money under the contract, he may be entitled to recover the sum paid.

On the other hand, as a general rule, the party in default cannot terminate the contract which he himself had broken (Pheng 2005, p.158)

Remedies for Breach Remedies available for breach of contract:-

Damages Specific performance Injunction Quantum meruit

Damages - Damages are granted as a compensation for the damages, loss or injury suffered through a breach of contract (Pheng 2005, p.158). The remedy depends on the term breached. Breach of Condition : It ‘goes to the root’ of the contract, - any remedies available. Breach of warranty : Claim for damages, continue with contract.

Hadley v Baxendale (1854)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 may fairly and reasonably be considered either arising naturally, 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. NB: Refer to s.74 of the Contract Act.


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Malaysian Rubber Development Corporation Bhd v Glove Seal Sdn Bhd (1994)Generally (in assessing damages in relation to breach under sale of goods), the value of the goods should be determined at the time of breach. But, if there is no available market, the value is likely to be based upon the price at which the goods are eventually sold.

The plaintiff is under a duty to take reasonable steps to mitigate its loss immediately upon the breach, i.e. buy or sell in the market if there is an available market or, if there is none, act reasonably to mitigate the loss. The question of what is reasonable in every case is a question of fact and not law.

Discharge by Consent or Agreement between the Parties General Principles - Eodem modo quo oritur, odum modo dissolvitur (What has been created by agreement may be extinguished by agreement).

End of Contract via AgreementIf a contract is formed following an agreement then it seems almost pure logic to suggest that the contract can also be ended by agreement without necessarily having performed. Inevitably, what is required is mutuality (Turner 2003, p.156).

Ways of Discharged by Agreement Bilateral discharge: Both parties are to gain a fresh and different benefit from the

new agreement / contract. Unilateral discharge: The benefit is probably only to be gained by one party, who is

therefore trying to convince the other party to let him / her off the obligations arising under the original agreement i.e. lack of consideration.

Cease Contractual RelationshipCancellation by

Mutual waiver Substituted agreement Novation Accord / agreement and satisfaction [remission] Release [one side-must be under seal]

Bilateral discharge is simple where the contract is executory – the waiving of rights is given by one party in return for the waiving of rights by the other.

But where only one party wants to back out of the contract then that party will need to give some consideration, as in accord and satisfied, unless estoppel applies.

Where form is an issue the discharge will need evidence in writing [estoppel].

Discharge under the Doctrine of Frustration


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A contract is frustrated when there is a change in the circumstances which renders a contract legally or physically impossible of performance.

Frustrating Events• Where the intervening event makes performance impossible.• Where performance of the contract becomes illegal.• Where the contract becomes commercially sterilised.• Frustration under the Act

Under section 57(1) of the Contract Act 1950 “an agreement to do an act impossible in itself is void”.

Under section 57(2) “A contract to do an act which, after the contract is made, becomes impossible, or by reason of some event which the promisor could not prevent, unlawful, becomes void when the act becomes impossible or unlawful.”

Goh Yew Chew & Anor v Soh Kian Tee (1970)There was an agreement to construct buildings. However, the construction deemed to be impossible due to encroachment of neighbour’s property. The claim was made by the plaintiff for refund of earnest money. The contract was held impossible ab initio and the court ordered earnest money less deduction for reasonable expenses incurred to be refunded.

Note: Earnest money: A deposit of part payment of the purchase price on a sale to be consummated in the future.

Consequences – Common Law The parties are freed from any further obligations under the contract from the

point of frustration. Still be bound by obligations arising before the frustrating event. Money paid before frustration is recoverable.

Consequences – the ActThe contracts “becomes void” [section 57(2)].“…compensation…for any loss which the promisee sustains through the non-performance of the promise” [section 57(3)].

Restitution / restoration [section 66].However, a party is not absolved merely because performance becomes more expensive or difficult, unless the difficulty arises from some fundamental change of circumstances or supervening event (Davis Contractors Ltd v Fareham UDC (1956); and Metropolitan Water Board v Dick, Kerr & Co Ltd (1918). Metropolitan Water Board v Dick, Kerr & Co Ltd (1918)


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In 1914, the contractor agreed to construct a reservoir in six years, with a provision for extension of time for various delays. In 1916, due to war, the Ministry ordered the work to cease.

House of Lords held that the extension of time provision did not prevent frustration but a contract resumed after the war time interruption would be fundamentally different from what had been envisaged this development was sufficient to bring the contract to an end.

H.A. Berney v Tronoh Mines Ltd (1949)The plaintiff sued for breach of contract of service. On the invasion of Malaya by the Japanese forces. Some of the defendant’s staffs were executed from Tronoh, Tanjong Tualang and other places. The defendants contended that consequent on the Japanese occupation of Perak, the contract of employment between them and the plaintiff was discharged by frustration.It was held that the invasion of Malaya by the Japanese frustrated the performance of the contract and therefore there was no breach of contract by the defendants.

Davis Contractors Ltd v Fareham UDC (1956)In 1964 contractor agreed to build houses for a fixed price in 8 months. Through no fault of either party, there was a scarcity of skilled labour and the work took 22 months to complete and the building cost has risen considerably. The plaintiffs argued that because of the shortage of labour, the contract had been brought to an end by frustration and thus claim a reasonable sum [quantum meruit] for the value of the work.

The House of Lords held that the claim must fail. The contract had not been frustrated. What had happened was squarely within the risk assumed by the contractors.

8.0 THE LAW OF TORT I

SYNOPSISGenerally, this lecture will discuss the legal principle of the law of torts and its relation to the construction industry.

This section will be discussing the following: The nature of the law of tort. Differences between the law of tort and criminal law and the law of contract. General defences available in the law of tort.

INTRODUCTION“The law of tort is mostly to be found in the common law…Tort can be defined as a civil wrong independent of contract; or as breach of a legal duty owed to person generally. The practical consequences of the law of tort are concerned with the adjustment of losses. Where the elements of fault and damage exist, the law determines who should bear the resulting financial loss.”


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(Prof. John Uff, 2002, p.419)

FUNCTIONS AND PURPOSE Winfield (1931) has said that :“Tortious liability arises from the breach of a duty primarily fixed by law; such duty is towards persons generally and its breach is redressed by an action for unliquidated damages.”Tort?

Abdul Aziz and Abdul Rashid (2000) clarified what has been suggested by Basu (1977) in relation to the definition of tort as the following:

1. Perlanggaran hak-hak persendirian (keselamatan diri, nama baik, milikan, kecederaan).

2. Pencabulan sesuatu kewajipan di bawah “common law”.3. Perlanggaran sesuatu kewajipan yang berbangkit daripada sesuatu hak umum.4. Perlanggaran sesuatu hak “in rem” (dihormati oleh semua orang) dan bukan “in

persona” (hak keatas individu) yang mana semua ahli masyarakat tidak melakukan kerosakan kepada jiran-jiran mereka tanpa sebab yang dibenarkan oleh undang-undang.

Michael Jones is “The law of torts is primarily concerned with providing a remedy to persons who have been harmed by the conduct of others.”

The standard model for liability in tort in the modern day would be that the defendant’s act (or omission) has, through the defendant’s fault, caused damage to the claimant of a type which is recognised as attracting liability.

AIMSThere are two aims of the law of torts that also point towards the major remedies available, damages and injunctions.

Compensation – the main outcome of a successful tort action is to compensate the victim of the wrong to the extent of the damage suffered.Aims

Deterrence / prevention – the most satisfactory way of dealing with any wrong is to ensure that it does not happen again or, even, better, to prevent it occurring at all i.e. injunction.Liability

Liability in tort is independent of any contract. It is based on conduct not agreement / contract. The duty not to commit a tort is imposed by law as opposed to being fixed by

agreement / contract.

CATEGORIES OF TORTActionable per se


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Trespass and forcible injury. Normally entitlement to compensation accurse as of right without the requirement

to prove damage occurred.

Non actionable per se The plaintiff must establish that he has suffered actual damages due to the defendant's commission of the tort.

Generally, in order to succeed in an action in tort, the plaintiff must show that the defendant’s behaviour falls into a specified situation covered by law of tort:

Tort of trespass. Tort of nuisance. Tort of negligence.

INTERESTS PROTECTED BY THE LAW OF TORTSBelow are the interests protected by the Law of Torts as stated by Turner (2003).

Personal security Concerns the safety of the individual, including. Trespass or possibly trespass to the person, land or goods. Possibly defamation [damaging someone reputation i.e. libel (publish in permanent

form e.g. newspaper, film etc. and slander (in an oral form e.g. radio or TV)]. Negligence . Other developments in personal injury i.e. claims for psychiatric damages etc. Possibly concepts as privacy.

Reputation – an extension of personal security i.e. defamation, malicious falsehood and deceit / dishonesty.

Property – concern with the property (real/land or personal but not “economic loss”) rights of the individual i.e. nuisance, trespass, Ryland v Fletcher and negligence.

Economic interests – tort is much more concerned with remedying physical damage and personal injury than economic loss.

However, economic loss as a result from negligent misstatement and actual damages can be compensated. But not for a pure economic loss e.g. loss of profits and defective building, which is more readily associated with contract law thus unrecoverable under the law of tort [Teh Khew On & Anor v. Yeoh & Wu Development Sdn. Bhd. & Ors. (1995) 2 MLJ 663].

Teh Khew On & Anor v. Yeoh & Wu Development Sdn. Bhd. & Ors . (1995) 2 MLJ 663.The plaintiffs claimed against the first defendant (“the builder”) in contract for defective works in the construction of the house purchased by the plaintiffs. They also claimed against the second defendant (“the architect”) and the third defendant (“the engineer”) for damages in negligence. The learned Judge found the builder liable for breach of contract


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but dismissed the claim against the architect and the engineer with whom the plaintiffs had no contractual relationship, the claim being for pure economic loss [Held by Peh Swee Chin J (as he then was) that] .

PARTIES TO CLAIM IN TORTOutsiders i.e. persons, who have no contractual involvement in the construction process .

Parties with NO CONTRATUAL LINK Client v Subcontractor(s) Subsequent owner of a building v Construction Parties Subsequent tenants v Construction Parties. Visitors v Construction Parties / Building owner. Passer-by v Construction Parties.

Parties WITH CONTRATUAL LINK Client v Contractor / Builder. Client v Consultants. Builder / Contractor v Consultants.

The law of contract does not prevent action in the law of tort BUT the obligations in tort CANNOT BE GREATER than those found in the contract.

8.8 THE SAME ACT CAN GIVE RISE TO LIABILITY IN CONTRACT AND IN TORT A person who buys a defective tool that causes him to lose his fingers may sue the

supplier for breach of contract, or the manufacturer for the tort of negligence. Where there is an existing contract between employer and contractor / builder or

architect, the contract does not prevent the plaintiff obtaining judgment also in tort. The plaintiff may sue for either breach of contract or negligence, or both, but he cannot

recover damages twice over [Res judicata / issue estoppel]. But not to sue the same party for the same reason for both contract and tort.

Res judicata / issue estoppel means a matter which has been adjudicated on and the plaintiff may not bring a subsequent claim which involves re-opening a matter already decided nor may a plaintiff bring a claim which seeks some relief which was or should have been included in the claim already decided.

Conquer v Boot [1928] 2 KB 336The defendant builder had contracted to build a bungalow for the plaintiff, who brought an action for breach of contract to complete in a good and workmanlike manner. After recovering damages in this action, the plaintiff then brought another action in identical terms but alleging failure to build with proper materials.

Talbot J. held that “The contract is an entire contract. No claim for payment could have been made by the defendant unless and until he had finished the bungalow. There is one contract and one


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promise to be performed at one time, although no doubt the defendant may have failed to perform it in one or in many respects. There may of course be many promises in one contract, the breach of each of which is a separate cause of action…here there is but one promise, to complete the bungalow.”

General PrinciplesDamages or relief arising from any cause of action must be claimed once and for all. It follows that any claim for damages whether in tort of for breach of contract, must claim for all future anticipated loss, which will be assessed at the date of hearing (Batty v Metropolitan Realisations [1978] QB 554).

Batty v Metropolitan Realisations [1978] QB 554In Batty the court awarded damages in respect of a house which was deemed not fit for habitation because it had been built at the top of potential unstable slope. The plaintiff recovered for the anticipated loss even though it had not collapsed and apparently did not subsequently collapse. Batty v Metropolitan Realisations [1978] QB 554.This case showed that there is no mechanism whereby either plaintiff or defendant can ask for damages, once assessed, to be reassessed in the light of subsequent facts once a judgment becomes final.

8.9 GENERAL DEFENCES Martin and Turner (2001) stated that general defences under the law of torts are the following:-

A. Volenti non fit injuria (where there is consent, there is no injury)This means no injury is done to one who voluntarily accepts a risk.Not apply to the situation where the claimant only knew of the existence of the risk rather than understanding it i.e. [Stermer v Lawson (1977) 5 WWR 628].

Not apply where the plaintiff is forced to accept the risk [Smith v Baker (1891) AC 325] for instance in sporting situation if physical harm is likely i.e. rugby [Simms v Leigh RFC [1969] 2 All ER 923; and football Condo v Basi [1985] 2 All ER 453]. Smith v Baker (1891) AC 325.The plaintiff drilled rock in a quarry bottom. He was injured when a crane moved rocks over his head and some fell on him.

Volenti failed in the case because worker was given no proper warning of when the crane was in use and so was unaware of the danger. He was aware of risk of stones falling, but there was no voluntary assumption of risk in the circumstances.

B. Inevitable accidentA defendant is never liable for a pure accident. Pure accident means one beyond the defendant’s control for instance [Stanley v Powell (1891) 1 QB 86] someone has killed


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during a grouse shoot. It was shown that the man was not shot directly. The bullet ricocheted off a tree before it hit him.

C. Act of GodIn construction, concerns with extreme weather conditions. However, they must he unforeseeable condition, not merely bad weather [Nicholls v Marsland (1876)].

D. Common benefit Dunne v North Western Gas Board [1964] 2 QB 806.A gas main exploded without any negligence on the part of the Gas Board. The Court doubted whether the Board had accumulated the gas for their own benefit; it was for the benefit of the consumers and there was no liability.

Green v Chelsea Waterworks Co (1894) 70 LT 547.The defendant were obliged by statute to provide a water supply. The court held that from time to time burst pipe were inevitable consequences of this duty and there could be no liability in the absence of negligence.

E. Statutory authority [Green v Chelsea Waterworks Co (1894) 70 LT 547].

F. Fault of the plaintiff – the plaintiff responsible for the damage suffered.

G. Contributory negligence – partly responsible by the plaintiff. The effect is to reduce the plaintiff’s damages where he has contributed to his/her own

harm. It is not necessary to show that the claimant owed a duty of care, merely that he failed

to take care in all the circumstances. However, causation must always be proved – the claimant act in fact helped cause the

damages suffered.

H. Others defences for action in torts Act of stranger – no control over the third party. Illegality – illegal act. Self defence – saving life. Necessity – to avoid worse damage.

9.0 THE LAW OF TORT II

9.1 SYNOPSISThis lecture is continuation from the last lecture. Therefore, students should remember what has been discussed earlier and make sense what will be discussed in this lecture. This lecture will encompass the legal principles of trespass, nuisance and strict liability or Rylands v Fletcher liability.


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9.2 TRESPASS Occurs where there is direct interference with the person, goods or land of another. It is actionable per se i.e. there is no need to prove damage as a consequence of the tort [actionable].

Types of trespass to the person: assault and battery and false imprisonment. It is more usually dealt with under criminal law.

Trespass to goods: This is an intentional and direct act of interference by a defendant with the goods in the plaintiff’s possession (Conversion), usually by touching and/or removing the goods.

Trespass to land: Trespass to land is of most concern to the construction industry. This consists of direct interference with the plaintiff’s possession of land. 9.3 TRESPASS TO LANDThe slightest entry on to land is sufficient to constitute this tort. It is when a person enters land which somebody else possesses without permission or authority to be there, or remains on the land after permission to be there has been removed i.e. failure to be granted EOT.

Trespass to land is committed when a trespasser makes a conscious decision to enter on to another’s land without permission or authority, or remains on the land after any permission or authority granted has been revoked or lapsed [Minister of Health v Bellotti (1944)]. The interest that is protected under this tort is to enable a person who as possession of land to be free from any physical interference.

Who can sue?The plaintiff is anyone with lawful right and control over the use of land.

Who can be sued?The defendant is the person whose activity constitutes a direct invasion of an interference with another person’s possession of land.

It is no defence that the trespasser intended no harm or did not know that he was trespassing, he must not violate any occupiers’ property rights.

The general rule is that the possessor of land also possesses the soil beneath and the column of air above the land [section 5 and 44(1) of the NLC, 1965]. The latin phrase is Quicquid plantatur solo, solo cedit : whatever is affixed to the soil, belongs to the soil.

Below are the acts constituted as trespass:-• Walking over another’s land.• Throwing things onto the land.• Placing a ladder against the surrounding wall.


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• Dumping soil onto the plaintiff’s land.• Invasion of airspace.• Swinging a crane jib over the land.• Overhead cables and signboards.

Anchor Brewhouse Development Ltd v Berkley House Ltd (1987)The court granted injunctions to prevent over sailing by tower cranes, even where no damages is caused.

Unauthorised entry below the surface of the plaintiff’s land at any depths will also constitute a trespass. Thus tunneling through or digging into the subsoil below the plaintiff’s land is actionable if such activity is carried out without the owner’s consent.

Lord Bernstein of Leigh v Skyways & General Ltd [1977] QB 479Here, aerial photographers flew over the claimant’s land, took photographs, and then tried to sell them to him. It was held not to be a trespass. The claimant’s rights over air space should only extend to a height “reasonably necessary for the enjoyment of the land”.

Hickman v Maisey [1900] 1 QB 752There was a trespass where the defendant used the highway to spy on the claimant’s race horses in training.

Basely v Clarkson (1681) 3 LEV 37Here, the cutting and carrying away of a neighbour’s grass was held to amount to a trespass even though it was carried out by mistake.

Minimal Disturbance?As far as architects, engineers and building contractors are concerned, even the slightest encroachment is actionable, however innocent the situation.

For instance, it is trespass in the case of building operations to allow any soil disturbance, or anything to overhang or fall onto or be thrown over the land.

Woolerton & Wilson v Richard Costain Ltd [1970] 1 WLR 411In this case the defendant’s crane swung out over the claimant’s land and was sufficient to amount to a trespass.

Westripp v Baldock [1938] 2 All ER 799A ladder leaning against the claimant’s wall was a trespass.

Contractor – a trespasser?


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A contractor is said to have a license to be upon the site of the works. He may become a trespasser if he remains on the land or leaves materials there after his work is finished or after his employment has been determined.

Defences for legal action for trespassing • Under statutory authority.• Regaining possession of one’s own property.• Necessity .• Entry by license.

Remedies available if trespassing • Damages .• Injunction to prevent continuance.• Ejection.

9.4 NUISANCEConcerned with the protection of the reasonable use and enjoyment of land.

9.4.1 The Different Between Negligence and NuisanceNegligence is not limited to the protection of any particular interest. Liability in negligence is based on the defendant's conduct and may be imposed in respect of wide range of interests damaged by that conduct.

9.4.2 CLASSIFICATION OF NUISANCE• Public nuisance.• Private nuisance.• Statutory nuisance.

9.4.3 PUBLIC NUISANCE • Consists of generating harm to the public at large.• It is a crime as well a tort.• If a person suffers special damage from the nuisance (in excess of that suffered by

the general public) that person may bring an action in tort.• Does not have to be an interference with the use and enjoyment of land and not

based on proprietary rights [private nuisance].• Also developed as a crime, in which respect it will commonly be prosecuted by the

Attorney General.

9.4.4 EXAMPLES OF PUBLIC NUISANCE• Obstructing the highway.• Polluting a public water supply.• Selling food unfit for human consumption.• Dust caused by quarrying operations.


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However, bear in mind that TO CAUSE SUCH NUISANCE IS A CRIME AND IT IS NOT ACTIONABLE BY THE PUBLIC GENERALLY . The reason to avoid multiplicity of actions [res judicata / issues estoppel]. The person responsible is liable to a criminal prosecution, which is considered to be a sufficient deterrent and punishment.

For private individual affected by public nuisance to sue in tort, he must show that he suffered special and particular harm over and above that suffered by the public at large e.g. where a builder’s skip obstructs the highway and the access to private property.

Section 8 (1) of the Government Proceedings Ordinance 1956 (GPO). For private individual affected by public nuisance to sue in tort, he must show that he suffered special and particular harm over and above that suffered by the public at large e.g. where a builder’s skip obstructs the highway and the access to private property.

Attorney-General v PYA Quarries Ltd [1957] 2 QB 169Here, the nuisance complained of was the noise and vibrations caused by quarrying. The defendant’s argument that too few people were affected failed. It was sufficient that a representative class was affected.

Tate & Lyle Industries Ltd v Greater London Council [ 1983] 1 All ER 1159The House of Lords characterised an interference with navigation rights in the River Thames as physical damage, making it actionable public nuisance.

Rose v Miles (1815) 4 M & S 101The defendant’s barge blocked a navigable river. As a result, the claimant was forced to empty his barge and pay for alternative transport. The defendant was liable for the cost.

Noble v Harrison [1926] 2 KB 332Here, a branch from a tree on the defendant’s land fell on to a bus. The defendant was not liable because the defect in the tree was latent and probably beyond his control.

PRIVATE NUISANCE • Is a civil wrong.• It is committed when one person unlawfully interferes with the use or enjoyment of

another person’s land.• The person suffering the harm is the owner or occupier. • Not actionable per se.• Actual damage must be proved.• Interference will be unlawful only if it is unreasonable and substantial.• It aims to balance the right of individuals to use their own land as they wish with

that of their neighbours who do not wish to be unreasonably disturbed.


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The interference may result the following :-• Damage to persons’ enjoyment of an easement (right of light, right of way, right of

support from adjoining land etc).• Damage of property such as by flooding or vibrations.• An annoyance such as smells, fumes, noise, dust, encroaching tree roots,

sewage/dirt/mess and keeping animals. • Private nuisance

The underlying principle:-THE NUISANCE MUST NORMALLY BE OF A CONTINOUS NATURE BEFORE IT BECOMES ACTIONABLE!

9.4.2 Who Can Sue In Private Nuisance The only person who can sue for nuisance is the occupier of the land. This will cover an owner-occupier and where appropriate, any tenant in occupation.

Malone v Laskey [1907] 2 KB 141Here, the wife of the householder was unable to sue in respect of personal injury sustained when vibrations from machinery caused the cistern to fall on her in the lavatory / toilet.

Khorasandjian v Bush [1993] 3 WLR 476The right to sue was granted to an occupier’s family where they had suffered harassing telephone calls.

9.4.3 Who Can Be Sued In Private Nuisance? The person primarily liable for the nuisance is he who creates it. A person may incur liability simply because the nuisance exists on the land he occupies.If the occupier is not responsible for the nuisance, he must take reasonable steps to abate it otherwise he may well be liable. Where premises are leased, the tenant will be primary be liable. Southport Corporation v Esso Petroleum Co Ltd [1953] 3 WLR 773 The defendant’s oil tanker beached in the estuary and leaked oil that subsequently drifted to local beaches. The court held that the defendant was liable for nuisance even though he is not the occupier of neighbouring land.

Tetley v Chitty [1986] 1 All ER 663 Here, a landlord was liable in nuisance by permitting go-kart racing on his premises.

Smith v Scott [1973] Ch 314A local authority was not liable for letting a flat to a “problem family”. The lease specifically prohibited the creation of nuisances by tenants

Sedleigh Denfield v O’Callaghan [1940] AC 880


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Here, the strangers had blocked a culvert pipe on the defendant’s land. He knew about it but failed to deal with it, so that when it led to flooding on the claimant’s land he was liable.

Leakey n National Trust [1980] QB 485 Here, following heavy rain, a large natural earth mound on a hillside slipped and damaged the claimant’ cottage. The defendants were liable because they were aware of the possibility of it happening and did nothing to prevent it.

Page Motors Ltd v Epsom & Ewell Borough Council (1982) 80 LGR 337Here, the council was liable in nuisance for failing to deal with gypsies who camped out on council land and then interfered with the claimant’s business.

9.4.4 Private Nuisance in ConstructionIn construction, a contractor will be liable for interference with adjoining land caused the construction operations, but the employer may also be liable. In carrying out the works, the contractors are under a duty to take proper precautions to see that nuisance are reduced to a minimum.

Andrea v Selfridge & Co Ltd (1958)In Selfridge, it was held that so long as building operations are reasonably carried on and all proper and reasonable steps are taken to ensure that no undue inconvenience is cause to neighbours whether from noise, dust or other reasons, the defendant will not be liable.

In short, the duty to minimise inconvenience requires the use of reasonable skill and care and the taking of steps and precautions – to be judged as a matter of common sense and degree. Such steps include: restricting hours of noisy work, advise the local community what operations are going to be undertaken, using dust-sheets, debris nettings, restricting noisy working to particular hours, washing down vehicles and the like.

9.4.5 Statutory nuisanceCertain nuisance is prohibited by statute, for instance the Environmental Protection Act. It allows local authorities to proceed quickly where antisocial conduct amounting to a nuisance is taking place.

The local authority may serve an abatement notice on the person creating the nuisance or, in some case, on the owner of the property from which the nuisance originates.

If an abatement notice is not complied with, or the nuisance is likely to re-occur, the offender can be taken before the courts which may make a nuisance order and/or impose a fine.

9.4.6 Remedies For Nuisance• Damages


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• Injunction

9.4.7 Defences For Nuisance • Volenti non fit injuria• Statutory authority• Contributory negligence.• Prescription – not in Malaysia but an easement does [prescription : a grant arising

from long usage].

9.5 NUISANCE RELATING TO LAND Rylands v Fletcher (1868) LR 1 Exch 265, LR 3 HL 330The defendant, a mill owner, hired contractors to create a reservoir on his land to act as a water supply to the mill. The contractors carelessly failed to block off disused mineshafts that they came across during their excavations. Unknown to the contractors, these shafts were connected to other mine works on adjoining land. When the reservoir was filled, water flooded the neighbouring mines. All elements of the modern tort were present.

The Court found in favour of Fletcher and ordered Rylands to pay for all the property damage to the mine. The Court agreed that Rylands had a duty in maintaining the reservoir and of being liable for all harm caused by it with broad scope of liability.

The large volumes of water were not naturally present in that form, but were brought on to the land. Such a large volume or water could quite obviously do damage if it escaped.

Lord Cairns identified that storage of water in these quantities did amount to a non natural use of land. Finally , in the event, the water did escape through the mineshafts causing considerable damage to the claimant.

Ingredients under the rule of Rylands v Fletcher (1868) • A bringing on to land – the thing must not normally be there.• Of a thing likely to cause mischief if it escapes.• Which must involve a non natural use of land.• The thing must actually escape.

Rylands in construction Hoare v McAlpine (1923)Where a contractor drove a large number of piles into soil and, due to the vibrations produced, caused damaged to an old house belonging to the plaintiff, the contractor was held liable, without proof of negligence.

Yat Yuen Hong Co Ltd v Sheridanlea & Anor (1963)


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The appellants were developing their land which was adjacent to the respondent’s land. The appellant's land was situated on higher ground that the respondent’s land. Some earth fell onto the respondent’s land and damaged the respondent’s nursery.

The court held that the appellant used his land for a non-natural use and was therefore liable under the rule in Rylands.

9.5.1 The Defendants for Action under the Rule of Rylands• Owners or occupiers of land thing escaped from.• The people in control of circumstances escape happened from.

9.5.2 The Claimants for Action under the Rule of Rylands • Owners or occupiers of land thing escaped to.• May or may not a proprietary interest in land.• People who suffered damages as result of escape, regardless where the damage

occurs.

9.5.3 Defences for Actions under Rylands • The escape was the fault of the plaintiff.• The mischievous thing was brought on to the defendant’s land with the plaintiff’s

consent [volenti]- express or implied by conduct or common benefit.• The escape was caused by the wrongful act of a third party – an independent and

unforeseeable stranger.• The escape was due to an act of God which was not reasonably foreseeable and so

no provision for such an event was made.• The defendant collected the mischievous thing under statutory authority – such as

to excuse bodies such as the water board from strict liability under the rule in the event of leak from any of their reservoirs.

9.5.4 Differences between Rylands v and Nuisance [Hj Salleh Buang] • Rylands is a tort of strict liability, whilst nuisance is not.• Liability in Rylands depends on “non-natural use” of land; in nuisance, even natural

user may give rise to liability.• A single escape is sufficient under Rylands; liability under nuisance would require a

state of affairs which have continued for some length of time.• Some nuisances, such as noise or obstruction of light are not covered under Rylands.• In Rylands, the defendant is strictly liable for his independent contractor; in

nuisance the position is less clear.

10.0 THE LAW OF TORT III

10.1 SYNOPSISThis lecture will be discussing other ingredients of tort law:

Negligence


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Vicarious liability Occupier liability

10.2 NEGLIGENCEThis is the general legal duty to take care not to injure or to cause loss to other people (neighbours). If the duty is broken and a neighbour can show that the breach caused that person a loss, a right of action in negligence exists.

Negligence can be described as the breach of a legal duty to take care which results in damage to the plaintiff. It is not actionable per se, and therefore loss must be proved by the plaintiff as a result of a breach of duty of care committed by the defendant.

Negligence is not merely careless conduct; it is failure on the part of the defendant to take reasonable care so that no harm comes to the plaintiff in the particular circumstances.

10.2.1 How to Establish Negligence?A plaintiff must prove that:-

• The defendant owed him a duty of care.• The duty was broken by the defendant.• The plaintiff suffered damage as a consequence.

10.2.2 Duty of care However careless the defendant is, he is not legally liable in the tort of negligence unless he owed the plaintiff a legal duty of care.

Donoghue v Stevenson [1932] AC 562Donoghue established the principle that a duty of care arises whenever a person can reasonably foresee that his acts or omissions would injure or cause damage to another. This known as the “neighbour principle”.

FactsThe claimant claimed to suffer shock and gastroenteritis after drinking ginger beer from an opaque bottle out of which a decomposing snail had fallen when the dregs were poured. A friend had brought her the drink, so she could not sue in contract. She claimed £500 from the manufacturer for his negligence and was successful.

Lord Atkin’s judgment contained five critical elements:1) Lack of privity of contract did not prevent the claimant from claiming.2) Negligence was accepted as a separate tort in its own right.3) Negligence would be proved by satisfying a three-part test:

a. the existence of a duty of care owed to the claimant by the defendant.b. a breach of that duty by falling below the appropriate standard of care.


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c. Damage caused by the defendant’s breach of duty that was not too remote a consequence of the breach.

In Donoghue The method of determining the existence of a duty of care – the so-called “neighbour principle”. As Lord Atkin put it:“You must take reasonable care to avoid acts or omissions which you can reasonably foresee would be likely to injure your neighbour. Who, then, in law, is my neighbour?...persons who are so closely and directly affected by my act that I ought reasonably to have them in my contemplation as being affected so when I am directing my mind to the acts or omissions in question”.

The moral behind Donoghue A manufacturer would owe a duty of care to the ultimate consumer, irrespective of the lack of any contractual agreement between them. Since the plaintiff had suffered as a result of the manufacturer’s alleged lack of care in ensuring that the product was fit for consumption, the manufacturer was liable to the girl in negligence.

Hedley Byrne & Co Ltd v Heller & Partners Ltd [1964] AC 465In this case, the House of Lords recognised another duty situation. It was held that a duty of care arises whenever a party reasonably relies upon another to provide information or advice and the person providing the information knows or ought to know that the inquirer is relying on him. In such a situation, a negligent misstatement can give rise to an action in negligence for damages.

Caparo Industries v Dickman [1990] 1 All ER 568Latest development relating to duty of care set out by Bingham LJ. Three stage test in imposing liability:-

Foresight of harm . there is proximate relationship between the parties, and that is just and reasonable to impose a duty.

Haley v London Electricity Board [1965] A.C. 778 FactsThe defendants excavated a trench in the street. They took precautions for the protection of passer-by which were sufficient for normal sighted person. However, the plaintiff, who was blind, suffered injury because the precautions taken by the defendants were inadequate for him.

HeldIt was held that the number of blind persons walking about the street alone was sufficient to require the defendants to have them in contemplation and to take precautions appropriate to their condition.

Townsends (Builders) v Cinema News Property Management [1959] 1 All ER 7The contractor had been liable to the employer for certain breaches of statute (installation of toilets in contravention of a by-law).


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The CA held that, since the architect had led the contractor to rely on him and ensure compliance with the by-laws, the contractor was entitled to recover from the architect the damages that he had to pay the employer.

10.2.3 Breach of duty of careAs, you can see in the earlier slides, the plaintiff complaining of a breach of duty must prove that there was such a breach and damage is caused by the breach of that duty. The test to determine duty of care exist and breach of that duty:-

By not doing something which a reasonable man would do in circumstances where a duty to act is owed, or

By doing something which a reasonable man would not do.

In Bolam v Friern Hospital [1957] 1 WLR 582; [1957] 2 ALL ER. The judge said that the reasonable man is the man in “in the street” or the “man on top of the Clapham omnibus”. In other words, the basic question is whether the defendant’s conduct fell below the standard of care with is expected of the reasonable man. The reasonable man is expected to know the law and regulate his conduct by it.

In Bolam McNair J. described the standard as follows: “The test is the standard of the ordinary skilled man exercising and professing to have that special skill. A man need not possess the highest expert skill; it is well established law that it is sufficient if he exercise the ordinary skill of an ordinary competent man exercising that particular art”.

In deciding whether a particular act breaches the standards of the reasonable man, the court will take into account:-

• The likelihood of injury occurring.• The seriousness of the injury that is being risked.• The practicability of taking precautions.• The social usefulness of the defendant’s act and the harm caused.

The likelihood of injury occurringBolton v Stone (1951)The plaintiff was hit and injured by a cricket ball hit out of the ground by a batsman during an ordinary game cricket. It was alleged that the cricket club was negligent in not providing a fence sufficiently high to prevent such accidents.

It was held that the cricket club was not negligent. There was only a small risk that the ball would be hit so far or cause injury if it did.

Seriousness of the injuryParis v Stepney (1951)The plaintiff, P who had only one good eye, was blinded during the course of his employment. It was alleged that the employer, D, was negligent in not providing goggles. In


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its defence, D, brought evidence that it was customary practice at that time for employers not to provide eye protection.

It was held by the House of Lords that the D was negligent. It owed a higher standard of care to the plaintiff because of the increased seriousness of the injury risked.

PrecautionsLatimer v AEC (1952)A flood has caused a factory floor to be greased-covered. Although the employers did everything they could to get rid of the effects of the flood, the plaintiff slipped and injured himself. The plaintiff argued that the factory ought to have been closed because of the flood.

It was held that the company had not been negligent because the risk of injury on that slippery floor was not sufficient to justify the closure.

Usefulness of the defendant’s act and the harm causedWatt v Hertfordshire CC (1954)A fireman was injured by heavy equipment incorrectly secured on the back of a lorry. The fire authorities had used the lorry because they were rushing to the scene of an accident to attempt to save someone trapped under a heavy vehicle.

It was held that the risk they took in an attempt to save life was held not to be breach of the duty of care which they owed to the plaintiff.

10.3 TYPES OF LOSS1. Physical damage2. Economic loss

10.3.1 Physical damageDamage caused to persons or property [Donoghue]. In cases where the plaintiff suffered physical injury as result of the negligence of the defendant, the courts have generally recognised the existence of a duty of care.

10.3.2 Economic loss: Negligent misstatementFinancial damage only [Hedley Byrne]. In Hedley Byrne, the court established the principle of for claiming loss in the absence of physical damage to other property and without contract. There may be liability for financial loss arising from negligent misstatement.

Hedley Byrne & Co Ltd v Heller & Partners Ltd [1964] AC 465In Hedley, liability may arise where the negligent misstatement causes economic loss (purely financial). The duty of care could exist on the following:-

• There was a ‘special relationship’ based on an assumption of responsibility between the parties.


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• The plaintiff relied on the defendant’s skill and judgment. • The defendant knew, or ought reasonably to have known that the plaintiff was

likely to rely upon his statement (inferred assumption of responsibility) and• It was reasonable in the circumstances for the plaintiff to so rely on the

defendant’s statement.

10.3.3 Economic loss: Consequential damage to propertyEconomic loss consequential to damage to property is recoverable in negligence [Spartan Steel]. Spartan Steel & Alloys v Martins Construction (1973)D’s employees negligently cut the electric cable under a road. At the time the electricity failed, the P was melting material in furnace and the melt was ruined.

It was held that P was able to recover for Damage to the materials in the furnace (direct physical loss) and For the loss of profit on that melt (consequential economic loss-economic loss was

the direct consequences of physical damage to the melt).

P was not able to recover for the loss of profit on melts which could not take place because of the power failure (pure economic loss).

Conclusion from Spartan Steel Pure economic loss therefore means loss which is not injury to the person or damage to the plaintiff’s property. As a general rule, no duty of care is owed [in tort] where a plaintiff suffers only pure economic loss i.e. cost of repair works is considered pure economic loss such as defective buildings therefore not actionable in court.

10.4 NEGLIGENCE IN TORT & CONTRACTIt can be said that the term negligence refers to a breach of duty of care, whether owed in tort or in contract.

10.4.1 Negligence in contractThe term negligence is also found in the contract of breach of contract, for instance, the architect may be negligent in designing a building or in his supervision, the quantity surveyor may be negligent in preparing estimates of costs, and the contractor may be negligent in carrying out the works.

Sutcliffe v Thackrah [1974] AC 727


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In Sutcliffe the architect over-valued a series of certificates and the employer duly paid the contractor. The contractor then went into liquidation / winding up before the job was completed. As the result the employer could not recover the money that had been overpaid.It was held that the architect / contract was not acting in a “quasi-judicial” capacity and had no immunity form liability. The architect was liable to compensate the employer for the money lost.

10.5 CONTRIBUTORY NEGLIGENCEAt common law, if the plaintiff’s injuries have been caused partly by the negligence of the defendant and partly by his own negligence, then, the plaintiff can recover nothing.It is clear that this rule is a harsh one and hardship is caused especially where the plaintiff’s negligence was not the major cause of the accident.

Section 12 of the Civil Law Act 1956 (Revised 1972) provides to the effect that in a case of contributory negligence, the damages recoverable by the plaintiff are to be reduced “to such extent as the court thinks just and equitable having regard to the claimant’s share in the responsibility for the damage”.

Jones v Livoc Quarries Ltd [1952] 2 QB 608The plaintiff/claimant was employed in a quarry and, in disobedience of his employer’s express instructions, rode on the rear towbar of a ‘traxavator’. The driver was unaware of the plaintiff/claimant and, when another vehicle collided and with it the plaintiff/claimant was injured.

His damages was reduced by 5%. Lord Denning stated that:‘A person is guilty of contributory negligence if he ought reasonably to have foreseen that, if he did not act as a reasonable, prudent man, he might be hurt himself; and in his reckonings he must take into account the possibility of others being careless’.

10.6 VICARIOUS LIABILITYIs not an individual tort as nuisance or negligence. It means of imposing liability for a tort on to a party other than the tortfeaser, the party causing the tort. Mersey Docks & Harbour Board v Coggins and Griffiths (Liverpool) Ltd [1947] AC 1A crane driver negligently damaged goods in the course of his work. The Harbour Board hired him out to stevedores to act as their servant. The Harbour Board was still liable for his negligence since he would not accept control from the stevedores.

10.6.1 Vicarious Liability in ConstructionThe government / employer who refuse to allow the architect / contract administrator to certify claim until the treasury has approved the payment of a claim or V.O may be vicarious liable.

10.7 OCCUPIER’S LIABILITY10.7.1 Liability of an occupier of premises


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Occupier’s liability is the liability of an occupier of premises for any damage suffered by visitors to the premises.

In Wheat v Lacon & Co Ltd, Lord Denning said that an “occupier” is a person who has a sufficient degree of control over premises to put him under a duty of care towards those who come lawfully upon the premises.

10.7.2 Duties of an occupierAt common law, the duties of an occupier are cast in a descending scale to four different kinds of persons:-

1. One who has entered the premises in pursuance of a contract with him.2. “Invitee” – a person who, without any contract, entered the premises on business of

interest.3. “Licensee” – a person who entered with the occupier’s express or implied

permission to enter but no common interest, e.g. guest staying for the night, salesman and policeman with search warrant.

4. Trespasser, who had no permission. A trespasser enters the premises entirely at his own risk. But the occupier has duty not to inflict damage intentionally on a trespasser whom he knows to be there. To do so would constitute trespass to the person.

10.7.3 Occupier’s liability in construction A contractor as “occupier” of the construction site owes a duty of care to those who enter the site.

10.8 DEFENCES AND REMEDIES Defences• Volenti non fit injuria• Contributory negligence• Exclusion of liability• Statutory authority• Limitation of action

RemediesTwo main remedies in tort:-• Damages• Injunction

11.0 LAND LAW I


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11.1 SYNOPSIS

Generally, the purpose of this lecture is to discuss the general principles of land law. In particular, this lecture will cover the following:-

• Torrens system

• The definition of land

• Fixture and chattel

11.2 OVERVIEW

Construction cannot be separated from “land”. Construction is synonymous with land development. Any land development project is subject to various land related laws and regulations. The land development in Malaysia is highly regulated by legislations administered by the relevant authorities. Anyone that involves in land development projects must have some amount of knowledge of the relevant legislations and the authorities.

11.3 INTRODUCTION

The land law of Malaysia are contained in four main pieces of legislation.

1 The National Land Code 1965 (Act 56 of 1965).2 The National Land Code (Penang and Malacce Titles) Act 1963.3 The Sarawak Land Code; and the Sabah Land Ordinance.

11.4 TORRENS SYSTEM

Invented by an Australian, Sir Robert Torrens. The basic principle underlying the Torrens system is that all dealings in land must be registered in order to be effective [section 206]. Torrens title is a system of land title where a register of land holdings maintained by the state guarantees indefeasible title to those included in the register.

The system was formulated to combat the problems of uncertainty, complexity and cost associated with old system title, which depends on proof of an unbroken chain of title back to a good root of title.

The person whose name is registered in the document of title acquires an ‘indefeasibility of title.’ It means that the person’s title as the registered owner of the land cannot be disputed. The onus is on the person who disputes the title of the registered owner by showing that the registration is obtained by some unlawful or illegal means.

11.5 LAND

The general rule is that the possessor of land also possesses the soil beneath and the column of air above the land [section 5 and 44(1) of the NLC, 1965].


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The latin phrase” Quicquid plantatur solo, solo cedit” meaning whatever is affixed to the soil, belongs to the soil.

Definition of land

Under section 5 of the National Land Code, “land” includes:-

a) the surface of the earth and all substances forming that surface;

b) the earth below the surface land all substances therein;

c) all vegetation and other natural products, whether for not requiring the periodical application of labour to their production, and whether on or below the surface;

d) all things attached to the earth or permanently fastened to any things attached to the earth, whether on or below the surface; and

e) all land covered by water.

11.6 FIXTURE

Fixture is a real property and form part of land. The English law in Holland v Hodgson (1872) provides two tests for establishing whether an item is a fixture or a chattel:-

The degree of annexation.

Purpose or object of annexation tests.

The degree of annexation

a. An objective test.

b. Raises a prima facie findings of facts by looking at the degree to which an article is affixed to the land.

c. An article which is affixed to land even slightly gives rise to a rebuttable presumption that it is part of the land [fixture].

d. An article attached to the land by its own weight is not to be considered part of the land [chattel].

The purpose of annexation


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a. An objective test.

b. The inquiry is directed at the intention of the person who affixes the item.

c. The prima facie findings of facts established by the degree of annexation test

i. An article which is affixed to land [fixture].

ii. An article attached to the land by its own weight [chattel].

d. Strengthened and rebutted by a consideration of the purpose or object of the annexation.

e. For the better enjoyment of the land [fixture]

f. For the more complete enjoyment [chattel].

g. The purpose of annexation is to be inferred not merely from the motive or intention;

The basic rule

• Fixture pass with land but chattels do not.

• On the sale of land, chattels may be removed but fixtures must be left for the new owner.

Goh Chong Hin & Anor v The Consolidated Malay Rubber Estates Ltd

In April 1921 Goh Chong Hin (GCH) executed a charge in favour a money lender (chargee) secured by a few pieces of rubber estate land. On June 1921, GCH executed a bill of sale assigning to the respondents certain machinery in one of GCH’s factories which was charged. On October 1923, the money lender (chargee) took possession of the rubber estate. On December 1923, the respondent applied for an order to seize and sell the machinery by virtue of his bill of sale. The chargee in possession opposed the application.

The court held that, the ordinary English law of fixtures applies in this country. It is well settled by that law that prima facie machinery affixed to earth becomes a fixture and part of the land. Even if the machinery was set up after the date of the charge, it nevertheless accrued to the land and became part of the chargee’s security.

The Shell Company of the Federation of Malaya Ltd v Commissioner of the Federal Capital of Kuala Lumpur (1964)

The appellants are the owner of holdings under which are constructed tanks for the storage of petrol. The tanks are buried two feet below ground level and covered with concrete. To


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remove them, the concrete has to be taken up, the earth excavated, the concrete manhole boxes removed, all pipes connections unbolted and the tank with its concrete sinker weights then raised with blocks and tackle. The respondent, in determining the annual value of the holdings, included the value attributable to the underground storage tanks. On appeal, the appellants contended that the tanks did not fall within the definition of “building” and as such could not be or form part of “a holding” and were not rateable.

The respondent contended that the tanks had become part of the land as fixtures and as such were within the definition of “holding” and therefore rateable.

It was held that the underground tanks are land within the definition of “land” in the NLC 1965 as they are rateable.

Socfin Co Ltd v Chairman, Klang Town Council (1964)

The respondent in determining the annual value of the appellant’s holdings for rating took into account the bulk storage tanks standing thereon. The storage tanks were used for storing palm oil and there were vertical cylinders resting on pre-cast concrete pillars which stood freely on a reinforced concrete platform foundation.

The tanks themselves consisted of pre-cast bottom, side and roof steel plates which were assembled and riveted on site to form the bulk storage tanks. The platform foundation rested on prepared ground. The appellant contended that the tanks were not rateable since they were neither “land” nor “building”.

It was held that the storage tanks were buildings, being structures connected with platforms and pillars and was accordingly rateable. The storage tanks were annexed to the land for its better use and enjoyment and formed part of it and were accordingly rateable. The storage tanks enhanced the value of the holdings on which they stood and as they were not machinery used for industrial purposes under NLC, thus rateable.

Registration of land

Charged land which was not registered cannot be foreclosed; Sime Bank Bhd v Mohd Hassan Sulaiman (2000). The effects of registration are defeasibility. Section 340(1) states that “The title or interest of any person or body for the time being registered as proprietor of any land, or in whose name any lease, charge or easement is for the time being registered, shall, subject to the following provisions of this section, be indefeasible.”

However, indefeasibility is not absolute. There are specific circumstances wherein a registered title or interest may be set aside or defeated.

Teh Bee v K. Maruthamuthu (1977)

The fact that the register document of title was in the name of the appellant was conclusive evidence that the title to the land was vested in the appellant. Under the Torrens system, the register is everything and it would be wrong to allow an


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investigation as to the right of the person to appear upon the register when he holds the certificate of title.

Under section 340 below are the exceptions to indefeasibility: fraud; misrepresentation; forgery; and insufficient or void instruments.

Fraud

In Tai Lee Finance Co Sdn Bhd v Official Assignee (1983), the court held that fraud under S.340 of the NLC “must be actual fraud and mere knowledge of the existence of an unregistered interest shall not of itself be imputed as fraud within the meaning envisaged by section S.340.”

In Assets Co v Mere Roihi (1905) it was held that “fraud” means actual and not constructive or equitable fraud on the part of the person whose title or interest is being impeached. It must involve dishonesty of some sort which was committed prior to or at the time registeration.

Misrepresentation

Misrepresentation within the context of S.340(2) would mean “fraudulent misrepresentation” and is a species of fraud (Loke Yew v Port Swettenham Rubber Co. Ltd (1983); Datuk Jaginder Singh & Ors v Tara Rajarathnam (1883)).

According to Pheng (2005) instances of fraudulent misrepresentation include the following:-

1. The suggestion as to a fact, of that which is not true by one who does not believe it to be true;

2. the active concealment of a fact by one having knowledge or belief of the fact;

3. a promise made without any intention of performing it;

4. any other act fitted to deceive; and

5. any such act or omission as the law specially declares to be fraudulent.

Forgery

In Chew Lip Seng v Perwira Habib Bank (M) Bhd, the plaintiff granted a declaration that the charge of the property of the defendant bank was not executed by him and that the signature on the charge document was forgery. The high court also ordered for the charge to be cancelled and the title of the deed of the property returned to the plaintiff.


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Insufficient or void instruments

According to Pheng (2005), examples of instruments which are void due to prohibition imposed by law:-

1. Dealing effected in favour of or minors . The laws prohibiting such dealings are S.43(1)(a), NLC 1965 and S.11, Contracts Act 1950. The case of Tan Hee Juan v Teh Boon Keat (1934) is authority for the principle that an instrument of dealing effected in favour of or my minors is void.

2. Transactions made in contravention of the Moneylenders Ordinance 1951.

3. Transactions made in contravention of Malay Reservation Enactments.

12.0 LAND LAW II

12.1 SYNOPSIS

The purpose of this lecture is to discuss and make aware on the following area :-

Alienation of land.

Form of title.

Condition of land.

Dealings.

Restraint of Dealing.

12.2 ALIENATION OF LAND

Definition

A transferring of property, or the voluntary resignation of an estate by one person, and its acceptance by another. “Alienate” means to dispose of State land in perpetuity or for a term of years, in consideration of the payment of rent, and otherwise in accordance with the provision of section 76 [section 5, NLC1965].

Types of alienation are the following:-

A. Freehold land

B. Leasehold land

C. Tenancies


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D. Temporary licence [TOL]

Freehold Land

When state Land is disposed of by the state authority to an individual in perpetuity. The land vests in such individual and his successors in title for an indefinite period. It is perceived as better market value and best security. State authority will alienate in perpetuity only where [section 76 of the NLC] :-

The Federal Government requires the State Authority to them or public authority.

To be used for public purposes.

Special circumstances and appropriate to do so.

Leasehold Land

State land is dispose by the state authority to an individual and successors for a term of years as originally granted.

Minimum 3 years cannot exceed 99 years [section 76 of the NLC].

After 99 years to be reverted back to the state government [section 76 of the NLC].

Good security.

Tenancies

Subject to payment/quit rent.

Periodical - cannot exceed 3 years and renewable.

Not to be registered [not a title] and may be created by word of mouth or in writing i.e. tenancies agreement.

Not to be taken as security for loans by the financial institution.

No security.

Others

Temporary occupation license.

Squatter rights (adverse possession).


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Unconverted land such as Malay reservation.

12.3 FORM OF TITLE

Final title and Qualified Title

Final form of title under which lands are alienated after they have been surveyed, whereby qualified title [hak milik sementara] for the purpose to enable land to be alienated and to enable titles to be issued in the of sub-division, partition or amalgamation lands in advance of the completion of a survey.

Condition of Land Use

All alienated lands are subject to conditions limiting them to one of the following categories of land use:-

a. Agriculture

b. Building; and

c. Industry

The land designated for a prescribed land use cannot be used for any other purpose unless there is a conversion of land use. Breach of condition of land use shall result in the land being liable for forfeiture by the state.

12.4 DEALINGS

Transfers

Section 214 of the NLC provides that the whole, but not part only, of any alienated land; undivided share in alienated land; any charge; and tenancies shall be capable of transfer.

Leases

The characteristics of leases:-

The lessee is given the right to exclusive possession of the demised premises.


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The parties must have intended to create a lease and not a license, evidenced by a written agreement or conduct.

Lease must be granted for a definite period or for a period which is capable of being ascertained.

Charges

Land is the most tangible form of security and its supply is inelastic. Land is most sought after security by lenders whether they are :-

Chettiers [Goh Chong Hin & Anor v The Consolidated Malay Rubber Estates Ltd ]

Finance companies.

Bankers.

Charges do not involve the transfer of the land to the chargee.

The chargee has the power of take possession/foreclosure upon default of repayment of the debt.

The registration of charge confers upon the chargee a legal interest in the land.

Ho Giok Chay v Nik Aishah (1961)

It was held that charge is an interest in land especially in view of the fact that it renders the land liable as a security which the chargee could enforce by way of the sale of the land in the event of default by the chargor.

Liens

Method of taking security when the borrowing is short term.

In Paramoo v Zeno Ltd (1968) is was held that the intention to create lien may be gathered from the fact that the issue document of title to the land is deposited with the lender as a security for the loan and for no other purposes.

Easements


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Right granted by a proprietor of the servient land to the proprietor of the dominant land for the beneficial enjoyment of the dominant’s land (Section 282 of the NLC).

An easement under the NLC can only arise by way of express grant under Section 284 of the NLC.

Section 283(1) of the NLC states that he rights capable of being granted as easements are:-

(a) any right to do something in, over or upon the servient land; and

(b) any right that something should not be so done.

The rights do not include to take anything from the servient land or right to the exclusive possession.

Essential characteristics

According to Salleh Buang (2001) [Re Ellenborough Park (1955)] the essential characteristics of an easement are the following:-

1. There must be a dominant and a servient tenement;

2. An easement must “accommodate” the dominant tenement;

3. Dominant and servient owners must be different persons; and

4. The right must be capable of forming the subject matter of a grant.

12.5 RESTRAINTS OF DEALINGS

Two kinds of restraints of dealings: Caveats and prohibitory order.

12.5.1 CAVEATS

The Latin cavere, means "warning" (or more literally, "let him beware").

The land cannot be registered if caveat is applied.

The NLC permits a person who claims he is entitled to a caveatable interest to lodge a caveat against the land to protect his interest.


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Types of Caveat

Private Caveats

Trust Caveats

Lien-holder Caveats

Registrar’s Caveats

Private Caveats

Applicable to any person claiming title to the land or registereable interest to claim such registered interest.

A registered proprietor of land is not entitled to enter a private caveat in respect of his own land.

Effect is to prohibit only

Valid for 6 years

Trust Caveats

Means of protecting the interests of beneficiaries under a trust.

Not form of security accepted by lenders.

Lien-Holder's Caveats

May only lodge by a person with whom the document of title has been deposited as security for a loan.

A lien-holder’s caveat may be withdrawn by the caveator.

May be cancelled by the Registrar or court upon proof of the satisfaction of all sums due under the lien.


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Registrar's Caveat

Entered by Registrar for the reasons of the following:-

1. For the prevention of fraud or improper dealing.

2. For protecting the interests of the federation or the state authority or any person under disability of minority, mental disorder or unsoundness mind.

3. By reason of error in register or issue document of title.

12.5.2 PROHIBITORY ORDER

For persons who do not have any caveatable interest under the NLC.

For judgment creditors, they may obtain a prohibitory order for the purpose of imposing restraint on dealings over land owned by the judgment debtors.

Life span for 6 months.

The effects are that they prohibit the registration, indorsement or entry.

REFERENCES

Lee Mei Pheng (2005), General Principles of Malaysian Law, Penerbit Fajar Bakti Sdb Bhd.

National Land Code (Act 56 of 1965) & Regulations, International Law Book Services.

Salleh Buang (2001), The Malaysian Torrens System, Dewan Bahasa dan Pustaka.

Smith & Keenans (2001), English Law, Pearson Education Limited.


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