MdAsrulNasidKPFAB2007TTT

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NATURE OF DELAY IN NOMINATED SUBCONTRACTING

MD. ASRUL NASID BIN MASROM

A dissertation submitted in fulfillment

for the award of the degree of

Master of Science in Construction Contract Management

Faculty of Built Environment

Universiti Teknologi Malaysia

JUNE, 2007

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I declare that this thesis entitled “Nature of Delay in Nominated Subcontracting” is

the result of my own research except as cited in the references. The thesis has not

been accepted for any degree and is not concurrently submitted in candidature of any

other degree.

Signature : .................................................................

Name : .................................................................

Date : .................................................................

MD. ASRUL NASID BIN MASROM

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DEDICATION

Thanksgiving to Allah s.w.t, as with the consent awarded, I am able to finish this

dissertation within the given time.

To my beloved mother, Asmah Binti Majid, “you are my strength when I was weak”,

my siblings, my beloved friends…

and not forgetting to my late grandmother…Tok Yah (mak)

my late grandfather…Tok Mat (abah)

my late father..

may Allah bless you…Amin.

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ACKNOWLEGDEMENT

First and foremost, I extend my highest gratitude to my supervisor of this

dissertation, Dr.Nur Emma Mustaffa who has provided guidance, advice, support and

thought in writing this dissertation.

Highest credit also goes to the coordinator of ‘Dissertation’, Assoc. Prof. Dr.

Rosli b. Abdul Rashid, and other lecturers for the course of Master of Science

(Construction Contract Management), for encouragement, guidance and critics.

I am also indebted to Sultan Iskandar Foundation (Yayasan Sultan Iskandar)

for sponsoring my study. Not forgetting to my beloved mother, my siblings and my

colleague for giving full support. Lastly , I would like to thank to my classmate and

also others in giving me support and cooperation to complete this dissertation and

also providing me essential information needed to fulfill my study requirements.

Thank you.

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ABSTRACT

Construction delay is a results of occurrence beyond the control of either the

contractor or the employer. Delay can be categorized as excusable, non-excusable,

compensable and concurrent. There are many causes that can contribute delay in

construction. However, delay in nominated subcontracting are very seldom

acknowledged and the ways to improve also seldom discussed. As a result, to

identify the causes of delay on account of nominated subcontractor’s work are often

difficult. Thus, the objective of this study is to identify circumstances which are

caused delay in nominated subcontractor’s work and their implication to the main

contractor. In Malaysia, most of the standard form of contract such as PWD203A,

PAM 19988 and CIDB 2000 have provided grounds which gives entitlement for an

extension of time to the main contractor in the event of delay on the part of the

nominated subcontractor. The methodology that has been applied in this study is a

detail analysis of ten (10) cases which have been selected through Malayan Law

Journal. The results proved that there are several circumstances which caused delay

in nominated subcontractor’s work. Every causes have their own implication to the

main contractor in terms of entitlement of extension of time as well as the liability of

damages. This study concludes that, irregular payment is the prominent cause which

contributed to delay in nominated subcontracting.

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ABSTRAK

Kelewatan di dalam pembinaan adalah disebabkan oleh kerana ia berlaku di

luar kawalan samada daripada kontraktor ataupun majikan. Kelewatan boleh

dikategorikan sebagai kelewatan dengan alasan, kelewatan tanpa alasan, kelewatan

boleh dibayar gantirugi dan kelewatan serentak. Terdapat pelbagai punca yang

menyumbang kelewatan di dalam pembinaan. Namun begitu, kelewatan di dalam

kerja subkontraktor dinamakan yang perlahan adalah kurang diberi perhatian dan

jarang dibincangkan. Akibatnya, kelewatan di dalam kerja subkontraktor dinamakan

ini sukar untuk dikenalpasti puncanya. Oleh yang demikian, objektif utama kajian ini

adalah untuk mengenalpasti keadaan-keadaan yang menyebabkan kelewatan di

dalam kerja-kerja subkontraktor dinamakan serta implikasinya ke atas kontraktor

utama. Di Malaysia, kebanyakan borang kontrak seperti PWD 203A, PAM 1998 dan

CIDB 2000 ada menyediakan alasan-alasan yang boleh digunapakai untuk

melayakkan kontraktor utama mendapatkan masa tambahan akibat kelewatan dari

pihak subkontraktor dinamakan. Kaedah yang digunakan untuk mencapai objektif

kajian, adalah dengan menganalisa 10 kes yang telah diperolehi melalui Jurnal

Undang-undang Malaya (Malayan Law Journal). Keputusan kajian ini membuktikan

terdapat beberapa keadaan yang menyebabkan kelewatan di dalam kerja-kerja

subkontrak dinamakan. Setiap punca mempunyai implikasinya yang tersendiri ke

atas kontraktor utama terutamanya di dalam menentukan kelayakan ke atas tambahan

tempoh masa pembinaan begitu juga dengan tanggungan ke atas gantirugi. Kajian ini

menyifatkan pembayaran yang tidak mengikut jadual adalah punca utama yang

menyumbang kelewatan di dalam kerja-kerja subkontraktor dinamakan.

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TABLE OF CONTENTS

CHAPTER TITLE PAGE

Title i

Declaration ii

Dedication iii

Acknowledgement iv

Abstract v

Abstrak vi

Table of Contents vii

List of Cases xi

List of Table xv

List of Figures xvi

List of Abbreviations xvii

1 INTRODUCTION

1.1 Background Study 1

1.2 Problem Statement 3

1.3 Objectives of the Study 6

1.4 Scope of the Study 7

1.5 Significance of the Study 7

1.6 Research Methodology 8

1.6.1 Stage 1: Identifying The Research Issue 8

1.6.2 Stage 2: Literature Review 9

1.6.3 Stage 3: Data Collection 9

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1.6.4 Stage 4: Research Analysis 10

1.6.5 Stage 5: Conclusion and Recommendation 10

2 DELAY IN CONSTRUCTION PROJECT

2.1 Introduction 12

2.2 Time is of The Essence 13

2.3 Contract Commencement and Completion Date(s) 15

2.3.1 Substantial Completion 20

2.4 Definition of Project Delay 21

2.5 The Nature of Delay Claims 24

2.6 Causes of Delay 25

2.6.1 Owner-Caused Delay 26

2.6.2 Designer-Caused Delay 27

2.6.3 Contractor-Caused Delay 28

2.6.4 Subcontractor Delay 29

2.6.5 Delay Not Caused by Parties to the Design

and Construction Stage 30

2.7 Type of Delay 33

2.7.1 Excusable Delays 34

2.7.2 Non-Excusable Delays 35

2.7.3 Compensable Delays 36

2.7.4 Concurrent Delays 37

2.8 Extension of Time (EOT) 39

2.9 Liquidated Ascertained Damages (LAD) 42

2.10 Summary 43

3 SUBCONTRACT DELAYS

3.1 Introduction 44

3.2 Nature of subcontracting 45

3.2.1 Assignment 46

3.2.2 Domestic Subcontract 47

3.2.3 Nominated Subcontract 48

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3.3 Relationship of the Parties in Construction 49

3.3.1 Main Contractor 51

3.3.2 Nominated Subcontractor 52

3.3.3 Domestic Subcontractor 53

3.4 Relationship between Employer and Subcontractor 53

3.5 Relationship between the Main Contractor and

Subcontractor 56

3.6 Provision under Subcontractor Form in relation to

the Nominated Subcontractor 57

3.6.1 Delay and Extension of Time 58

3.6.2 Relevant Events in Standard Form of

Contract 59

3.6.3 Breach of Contract 65

3.6.4 Damages for Non Completion 66

3.7 Nature of Delay in Nominated Subcontracting

Work 67

3.8 Circumstances Contributes to Delay in Nominated

Subcontractor’s Works 71

3.8.1 Late Instructions 71

3.8.2 Delay in Delivery of Materials and Goods

by The Employer 73

3.8.3 Late Payment 74

3.8.4 Changes Out of Scope of Work 76

3.8.5 Delay in Giving Possession of Site 77

3.8.6 Suspension of Works 78

3.8.7 Main Contractor Fails to Provide and Erect

Facilities 79

3.8.8 Interference by The Main Contractor 80

3.8.9 Negligence by The Nominated

Subcontractor 80

3.8.10 Delay to Rectify Damages 81

3.8.11 Default by The Main Contractor 83

3.9 Summary 84

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4 COMMON CIRCUMSTANCES CAUSING DELAY IN

NOMINATED SUBCONTRACTING

4.1 Introduction 85

4.2 Analysis of Cases 86

4.2.1 Number of Cases Within Time Frame 86

4.2.2 Type of Nominated Subcontractor

According to Specialisation 88

4.2.3 Causes of Delay 90

4.3 Circumstances Causing Delay in Nominated

Subcontracting 91

4.3.1 Circumstances No.1 92






5 CONCLUSION AND RECOMMENDATIONS

5.1 Introduction 115

5.2 Summary of Research Findings 115

5.3 Problems Occurred When Conducting This

Study 120

5.4 Further Studies 120

5.3 Conclusion 121

REFERENCES 122

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LIST OF CASES

CASE PAGE

Alliance (Malaya) Engineering Co. Sd. Bhd. v. San Development Sdn. Bhd. (1974) 2 MLJ 94 75,93 Antara Elektrik Sdn.Bhd. v. Bell & Order Bhd (2002) 3 MLJ 321 75,96 Behzadi v. Shaftsbury Hotels Ltd (1992) Ch 1 15 Carr v. JA Berriman Pty Ltd (1953) 89 CLR 327 97,102 Chandler Brothers Ltd v. Boswell (1936) 3AII ER 179 56 Clydebank Engineering & Shipbuilding Co. v. Castaneda and Others (1905) AC 6 43 Croudace Ltd. v London Borough of Lambeth (1986) 33 BLR 25 74 CSK Electrical Co. Bhd. V. Regional Construction Sdn. Bhd. (1987) 2 MLJ 76 75,112 CSK Electrical Co. Bhd. V. Regional Construction Sdn. Bhd. (1987) 2 MLJ 763 79 Davies & Co.Shipfitters Ltd. v. William Old Ltd(1969) 67 LGR 395 48 DEC Electric, Inc. v. Raphael Construction Corp (1989) 538 So. 2d 963, 964 75 Dodd v. Churton (1897) 1 Qb 562 110 Dunlop Pneumatic Tyre Co. Lt v. New Garage Motor Co. Ltd. (1915) AC 79 42 Engineering Construction (PTE) Ltd v. Ohbayashi – Guni Ltd. (1986) 1 MLJ 21 75,96,98

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Engineering Construction (PTE) Ltd v. Ohbayashi –Gumi Ltd (1986) 1 MLJ 218 83 Equitable Debenture Assets Corporation Ltd v. Morgan Branch Roberts and Ors. (1984) 2 CLD 10-01 81 Freeman & Son v. Hensler (1900), 64 JP 200 100,103 Freeman v. Hensler (1900) 64 JP 260 18 Geary, Walker & Co Ltd v. W Lawrence & Sons Ltd (1906) 57 Gilbert Ash (Nothern) Ltd v Modern Engineering (Bristol) Ltd (1973) 3 AII ER 195 57 GLC v. Cleveland Bridge and Engineering Co Ltd (1984) 34 BLR 50 18 Glenlion Construction Ltd v. Guiness Trust (1987) 39 BLR 89 73 Glenlion Construction Ltd. V. The Guiness Trust (1987) 39 BLR 89 28 H. Fairweather & Co. Ltd. v. London Borough of Wandsworth (1987) 39 BLR 106 29 Hampton v. Glamogan County Council (1917) A.C 17 54 Harbutt’s Plasticine Co. Ltd. v. Wayne Tank & Pump C. Ltd. (1970) 66 Helstan Securities Ltd. v. Hertfordshire County Council (1978) 3 AII ER 262, Messrs Renhold 46 Henry Boot Construction (UK) Ltd v. Malmaison Hotel (Manchester) Ltd (1999) 70 CLR 32 39,40 Hoenig v Isaacs (1952) 2 All ER 176 19 Holme v.Guppy (1838) 2 M & w 387 110 Hong Kong Fir Shipping Co. Ltd v. Kawsaki Kisen Kaisha Ltd (1962) 66 J.M. Hill v London Borough of Camden (1980) 18 BLR 31 78 Jurong Engineering Ltd v. Paccon Building Technology Pte. Ltd (1999) 3 SLR 667 (CA) 56 Kitsons Sheet Metal Ltd v. Matthew Hall Mechanical and Electrical Engineers Ltd (1989) 47 BLR 82 18 Lebaupin v. Crispin (1920) 2 KB 714 34,63

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Levy v. Assicurazioni Generali (1940) 2 AII ER 437 64 Lightweight Concrete Sdn.Bhd. v. Nirwana Indah Sdn.Bhd. (1999) 5 MLJ 351 73,105 London Borough of Hounslow v. Twickenham Garden Developments Ltd. (1970) 7 BLR 81 102 Maryon v. Carter (1830) 4 C & P 295 63 Miller v. London County Council (1934), 151 LT 425 14,26,43 Mitsui Construction Co. v. The Attorney General of Hong Kong (1986) CLJ 134 77 Multiplex Constructions Pty Ltd v. Abragus ty Ltd (1992) 36 Neodox Ltd v Swinton and Pendlebury Borough Council (1958) 5 BLR 34 37,72 Nokes v. Doncaster Amalgamated Collieries Ltd (1940) A.A 1014 (H.L) 46 North West Metropolitan Regional Hospital Board v. TA Bickerton & Sons Ltd. (1970) 1 AII ER 1039 52 Peak Construction (Liverpool) Ltd. v. Mcknney Foundations Ltd. (1970) 15,27,40 Penang Development Corporation v. Teoh Eng Huat (1992) 1 MLJ 749 63 Percy Bilton Ltd V. Greater London Council (1982), 20 BLR 1 27,29 Pigott Construction Co. Ltd. v. W.J. Gowe Ltd (1961) 27 DLR (2d) 258 113 Pritchett,etc.,Co. Ltd. v. Currie (1916) 2 Ch 515 C.A 54 Roberts v Bury Commissioners (1870) LR 5 CP 310 111 Robinson v Harmon (1848) 1 Exch 850 at 855 107 Ryoden (M) Sdn.Bhd. v. Syarilkat Pembinaan Yeoh Tiong Lay Sdn.Bhd.(1992) 1 MLJ 33 54,94 Shanklin Pier Ltd. v. Detel Products (1951) 2 K.B 854. 55 Shen Yuan Pai v. Dato’ Wee Hood Teck & Ors (1976) 1 MLJ 16 72,108 Smith and Montgomery v. Johnson Bros Co.Ltd. (1954) 1 DLR 392 47

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Surrey Health Borough Council v. Lovell Construction (1990) 48 BLR 108 64 Teoh Kee Keong v. Tambun Mining Co. Ltd. (1968) 1 MLJ 39 107 Tham Cheow Toh v. Associated Metal Smelters Ltd. (1972) 1 MLJ 171 107 Thamesa Designs Sdn.Bhd v. Kuching Hotels Sdn.Bhd. & 3 Ors. (1993) 2 AMR 2083 40,78,101 The Queen in Right of Canada v Walter Cabott Construction Ltd (1975) 21 BLR 42 102 Wallis v. Robinson (1862) 130 RR 841 54 Watson v Auburn Iron Works (1974) 318 NE 2d 508 96 Wells v. Army & Navy Co-operative Society (1902)86 LT 764 110 Westminster City Council v. Jarvis & Sons Ltd (1970) 7 BLR 64 1,19,68,70 Woh Hup (Pte) Ltd & Anor v. Turner (East Asia) Pte Ltd. (1987) 1 MLJ 443 99 Young & Marteen Ltd v. . Mcmanus Childs Ltd (1969) 1 AC 454 82

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LIST OF TABLES

TABLE NO. TITLE PAGE

Table 3.1 Comparison of Grounds for Granting Extension

of Time in Different Standard Forms of Contract 62

Table 4.1 Number of Cases Dealing With The Period of

Time 87

Table 4.2 Number of Cases Dealing With Types of

Nominated Subcontractor 89

Table 4.3 Causes of Delay 90

Table 5.1 Analysis For Circumstances Which Causes Delay In

Nominated Subcontractor’s Work and Their

Implication to The Main Contractor 116

Table 5.2 Analysis For Circumstances Which Causes Delay In

Nominated Subcontractor’s Work and Their

Implication to The Main Contractor 117

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LIST OF FIGURES

FIGURE NO. TITLE PAGE

Figure 1.1 Research Methodology 11

Figure 2.1 The Relationship Between Cost and Construction

Duration 24

Figure 2.2 Causes of Delay 32

Figure 3.1 Contractual Relationships of the Parties 50

Figure 3.2 Relationship Arising From a Subcontract 55

Figure 3.3 Delay on the Part of Nominated Subcontractor 69

Figure 3.4 Delay Caused by Nominated Subcontractor 67

Figure 4.1 Number of Cases Dealing With The Period

of Time 88

Figure 4.2 Number of Cases Dealing With Type of

Nominated Subcontractor 89

Figure 4.3 Causes of Delay 91

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LIST OF ABBREVIATIONS

CIDB Construction Industry Development Board

PWD Public Work Department

JCT Joint Contract Tribunal

PAM Persatuan Arkitek Malaysia

RIBA Royal Institute of British Architects

SO Superintending Officer

EOT Extension of Time

LAD Liquidated Ascertained Damages

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CHAPTER 1

INTRODUCTION

1.1 Background Study

Construction industry is a series of different specialist in contributing to the work

at different times, different skills, work for different organization and sometimes different

geographical locations.1 However, the parties including clients, designers, contractors and

suppliers share the same goals of minimizing costs and duration to deliver the projects.2

Furthermore, every construction project has a defined goal or objective, specifics

tasks, defined time including beginning and end, defined deliverables and resources being

consumed. To complete any projects successfully, many tasks need to be accomplished

by the project team for instance, the owner must define the requirements, the designer

needs to translate the requirements into contract document and the construction

1 Murdoch, J. and Hughes,W. (2000).Construction Contracts-Law and Management,3rd ed., Spon Press, London. 2 H.A. Rahman (2006). Mitigation of Delaying During Commissioning of Construction Project Using Knowledge Management- Contractor’s Perception, Quantity Surveying National Convention. 137-150

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professionals need to organize and manage the physical construction in accordance with

the contract document.3

Besides, project schedules are useful and essential to the successful coordination

of the project. Eggleston4 stipulates that, most construction contracts specify performance

time in achieving completion of the whole of the works. On top of that, time may be

fixed either by reference to specified dates or by reference to a construction period and it

is essential that precise completion date can be established.

Sundra Rajoo5 is of the view, a contractor’s obligation is to carry out and

complete the works accordance to the contract. Furthermore, the contractor’s legal

obligation is to complete the project by the date for completion or within the date for

completion.6

Wright7 however, asserts that finishing a project on schedule is a difficult task to

accomplish in the uncertain, complex, multiparty and dynamic environment of

construction. Most of projects are eventually completed more or less to specification but

seldom on time and within budget. Thus, many of these problematic situations are either

beyond control and often lead to delay.8

1.2 Problem Statement

3 Levy, S.M. (1994). Project Management in Construction, 2nd ed., Mgraw-Hill Inc. USA. 4 Eggleston,B. (1997). Liquidated Damages and Extension of Time. 2nd ed. Oxford: Blackwell Science Ltd. 5 Rajoo, S. (1999).The Malaysian Standard Form of Building Contract (The PAM 1998 Form), Malayan Law Journal, Malaysia. 6 M.S.M.Danuri (2006). Delay Claims and Damages, Proceedings of the 2006 One Day Seminar on Mitigation of Delay in Construction Projects. November 23, University of Malaya 7 Wright,J.N. (1997). Time and Budget: The Twin Imperatives of a Project Sponsor. International Journal of Project Management. 15(3): 181-186 8 H.A.Rahman (2001). Critical Factors for Mitigation of Delay in Construction, Conference paper of National Conference of Construction Industry Development. Johor Bahru

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Many construction projects suffer from delay. Failure to finish either within the

original planned time and budget or both, ultimately results in a delay. In addition to that,

construction projects involve more variables and uncertainties than in the product line

also increases the probability of delay.9

Therefore, disputes involving delayed of construction project are widespread in

the construction industry.10 Datuk Seri Mohd Effendi Norwawi has noted that delays in

government projects have become crucial problems which need to be solved

immediately.11 Furthermore, National House Buyer Associated12 highlight that the

complaints statistics regarding late delivery and liquidated ascertained damages (LAD) in

year 2002 is 13%, and 14% in year 2005. Besides, abandoned projects had increased

from 19% in 2002 to 23% in 2005.

Recently, the “blame game” over the long-delayed of Sultanah Bahiyah Hospital

in Alor Setar continues between the parties involved. This project failed to be completed

on time in December 2003 and due to that the cost incurred to RM565 million for the

four-year delay. Nevertheless, there is nobody who wants to take the blame over this

problem. In fact, the parties still unable to identify the causes constitute to the four-year

delay of the hospital.13

How delay can occur in construction project? There are many ways that a

construction project can be delayed. In short, all parties to the design and construction

9 H.A.Rahman (2001). Experiences in Handling Project Delays In Construction, National Construction Industry Development Conference.1-15 10 Smith, Curie & Hancock (2001). Common Sense Construction Law- A Practical Guide for the Construction Profesional, John Wiley & Sons, Canada 11 F.N.Karim , Incompetent Contractors, Delays, Cost Overruns, Failed Projects: Lesson Learnt. News Straits Times, February 5, 2007. 12 Complaints Statistics, News Sunday Times, February 11, 2007 13 R.Abdullah . Delay of Sultanah Bahiyah Hospital Project, News Straits Times, March 8, 2007

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process can delay the project. Delay may be the result of their direct action or of their

failure to act especially if they have duty to act in the circumstances.14

Nevertheless, unexpected events may happen during the life of the construction

project and can affect construction time necessary for completion of the work. For

instance, force majeure, negligence, discrepancies and so forth, may occur on the

construction project to increase the time of performance of the overall project or affect

any given activity and most common causes differ under different project. 15

Based on Sundra Rajoo’s views16, it shows that delaying circumstances can be of

three types namely delay caused by Contractor, delay caused by the natural events and

delay caused by Employer or his agent. Besides, delay caused by nominated sub-

contractor or supplier also disturb of the progress of the works.17

In addition to that, it has been highlighted in several studies on causes of delay

and one of them shows that delays in subcontractor’s work has been ranked at no. 25 out

of 73 causes.18 According to a study on contractor’s responses of the significance of

factors causing delays in building projects, it has been asserted that delay in

subcontractor’s work has been ranked at no. 11 out of 20.19 Further to this, study on delay

factor in relation to subcontractors also proven that it falls at ranking no. 9 out of 28. 20

Another study proves that, by basing on the overall ranking of the 44 factors, delay in

14 Bramble,B.B, Callhan, M.T.( 1992). Construction Delay Claims, 2nd ed., John Wiley & Sons, New York. 15 Fong, L.C. (2004). The Malaysian PWD Form of Construction Contract, Sweet & Maxwell, Malaysia 16 Rajoo, S. (1999).The Malaysian Standard Form of Building Contract (The PAM 1998 Form), Malayan Law Journal, Malaysia. 17 Carnell,N.J (2005). Causation and Delay in Construction, Blackwell Publishing Ltd., UK 18 Hadi,S.A & Al-Hejji, S.(2006), Causes of Delay in Large Construction Projects, International Journal of Project Management, 24, 349-357. 19 Kumaraswamy,M.M & Chan, D.W.M.(1998).Contributors to Construction Delay, Construction Management and Economics, The University of Hong Kong,16, 17-29. 20 Odeh, A.M & Battaineh,H.T.(2002). Causes of Construction Delay: Traditional Contracts, International Journal of Project Management, 20, 67-73.

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subcontractor’s works is among the top 4.21 With reference to that, it reveals that delay

caused by subcontractors can be considered as a significance cause that contributes to

delay in projects. Therefore, these studies show that delay caused by nominated

subcontractor is a significance cause of delay in construction world.

Basically, under PWD 203A Clause 43(k), PAM 98 Clause 23.7(vii) and CIDB

Clause 24.1(p) has asserted that the contractor is allowed extension of time on account of

delays on the part of the nominated sub-contractor or nominated suppliers. Due to that,

the main contractor is entitled to an extension of time when delayed by a nominated sub-

subcontractor and there is no liability on the part of the employer for liquidated damages.

However, a particularly controversial area of risk allocation in respect of

nominated sub-contractors and suppliers is that of delay. The reason why this is

controversial is that, where such an extension of time is granted to main contractor, the

employer is deprived of the right to claim liquidated damages which the main contractor

would otherwise passed on to the delaying sub-contractor.22

Besides that, in the case of Westminster City Council v. Jarvis & Sons Ltd (1970)

7 BLR 64 , cites that the main contractor claimed extension of time by rely on phrase

‘delay on the part of nominated sub-contractor’ and has taken all reasonable steps to

avoid and reduce. Finally, the court held that no extension should be granted.23 Thus, it

shows to identify causes of delays are often difficult and the burden on the party seeking

to prove delay is a heavy one.24 Hence, what is the nature of the delay in nominated

subcontractor’s work? What are the main causes that contribute to this delay? What are

21 Aibinu,A.A, & Odeyinka,H.A.(2006). Construction Delays and their Causative Factors in Nigeria, Journal of Construction Engineering and Management, 132, 667-677. 22 Murdoch,J. , Hughes, W. (2000). Construction Contracts- Law and Management, Spon Press, London. 23 Ibid, 21 24 Carnell,N.J (2005). Causation and Delay in Construction, Blackwell Publishing Ltd., UK

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common circumstances causing delay in nominated subcontracting and their implication

to the main contractor?

In the view of the above, it is necessary for the parties in this construction

industry, mainly employer, architect, main contractor and nominated subcontractor to

have better knowledge of the causes of delay in nominated subcontractor’s work before

considering it’s the implication to the main contractor.

1.3 Objective of the Study

With reference to the above problem statement, the following is the objective of

this study:

1. To identify circumstances which are caused to delay in nominated

subcontractor’s work and their implication to the main contractor.

1.4 Scope of the Study

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The following the scope of study:

1. The approach adopted in this study is case law based. The case will be

referred is only having connection to this study which is delay in nominated

subcontractor’s work. Although, the issue of delay is closely related to extension

of time and liquidated damages, these areas are not elaborated in detail.

2. The standard forms of contract used in Malaysia, PAM 98, PWD203A and

CIDB 2000 will be compared and discussed. The court cases referred in this study

include Malaysia, Singapore, Australia, and English cases. There is no limit to the

cases chosen in terms of time frame, as long as it has not been overruled by higher

court and establishes a good law.

1.5 Significance of the Study

Basically, this study is expected to answer some of the uncertain issues that arise

in construction contracts such as issues that related delay in construction project. In

accordance to that, issues will be analyzed based on the interpretation and judgment by

the courts. Normally, the reason why these issues arise in the event of delay is due the

parties who are unclear and unaware of the causes of delay. Thus, by identifying the

ground or causes of delay in construction project, this study will be able to create

awareness to the parties consist of employer, consultant, contractor, sub-contractor and

supplier about their obligation in carrying out the works within the time, budget and

quality as in the contract.

8

In addition to that, it can be as a basic guidance for those who are involved in

construction industry for instance, developers, architects, engineers, quantity surveyors,

and etc. in relation to the issue of delay. Finally, hopefully it assists in avoiding

unnecessary disputes while assuring project success and better relationship among the

contractual parties.

1.6 Research Methodology

In order to achieve the objectives of this study, a systematic process of conducting

this study had been organized. Basically, this study process comprised of five major

stages, which involved identifying the study issue, literature review, data collection, data

analysis, conclusion and suggestions.

1.6.1 Stage 1 : Identifying The Research Issue

The study issue arises from intensive reading of books, journals and articles

which can be attained from the UTM library, Building Construction Information Centre

(BCIC) and Resource Centre of Alam Bina (RC).Based on the study issue, the objective

of the study has been identified. In addition to that, this research is executed to review the

relevant court decisions, with the intention of identifying and determining the common

causes constitutes delay claim in construction project.

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1.6.2 Stage 2 : Literature Review

Collection of various documentation and literature regarding the study field is of

most important in achieving the research objectives. Besides, secondary data is collected

from reading materials in printing form like books, journals, research paper, magazines,

reports, proceedings, seminar paper as well as information from internet. It is important

to identify trends and developments over time in construction industry, as well as the

general state of knowledge concerning the subject area of delay such as background,

definition, type, procedures, relevant events and etc.

1.6.3 Stage 3 : Data Collection

In this stage, after identifying all the background and relevant issues through

literature review, legal cases based on written opinions of courts, which are related to the

study issue, will be collected from different sources such as All England Law Reports,

Malayan Law Journals, Singapore Law Report and etc. via UTM library electronic

database, namely Lexis-Nexis Legal Database.

1.6.4 Stage 4: Research Analysis

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Once the previous related court cases under Malayan Law Journal are collected, it

will be conducted by reviewing and clarifying all the facts of the cases. The focus will be

on two parts, issues in delay caused by nominated subcontractors and the other is the

implications of the delay towards the parties involved in the contract especially the main

contractor. The circumstances which constitute delay in nominated subcontractor’s work

will be determined from the relevant cases. After issues presented by each cases,

thorough discussion and comparison will be done in order to achieve objectives of this

study

1.6.4 Stage 5 : Conclusion And Recommendation

In this stage, reviews on the whole process of the study will be made with the

intention to identify whether the study objective has been achieved. After presenting the

study findings, recommendations and limitations of the study, topics for further research

emerge.

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Figure 1.1: Research Methodology

RESEARCH ISSUE • The issue is what the circumstances are caused to delay in nominated

subcontractor’s work and implication to the main contractor.

RESEARCH OBJECTIVE To identify circumstances which are caused to delay in nominated

subcontractor’s work and implication to the main contractor.

LITERATURE REVIEW Time for performance and delay, occurrence of construction delay, types of

delay, and delay in phases of construction, consequences of delay, provision of standard forms of contract, delay in other country, extension of time, liquidated ascertained damages, sub-contracting.

RESEARCH METHOD Data collection:

- Legal cases in relation to the causes of delay in construction - Access to UTM library electronic database(Lexis-Nexis Legal

Database) - Collect cases from All England Law Report, Malayan Law

Journal, Singapore Law Report, Current Law Journal and etc. Data analysis: Detail study on legal cases

DISCUSSIONS

CONCLUSION & RECOMMENDATIONS

12

CHAPTER 2

DELAY IN CONSTRUCTION PROJECT

2.1 Introduction

Some delays are the result of occurrences beyond the control of either the

contractor or the owner. In addition to that, many delays however, result from one party

or the other’s failure to fulfill its contractual obligations. Any entity involved in the

construction process must understand its rights and responsibilities in each type of delay

situation.

To have such an understanding, employers, contractors, subcontractors, and

material suppliers must be able to recognize and distinguish among the various types of

delay. Thus, this chapter will explain on completion, definition and characteristics of

delay, relevant events set out under standard form of contract i.e. PWD 203, PAM 98,

and CIDB and briefly JCT 98.

13

2.2 Time is of The Essence

In construction contract, time may be stated either by reference to specified date

or by reference to a construction period. Thus, this part will consider the basic principles

of time in relation to construction contracts. Normally, when parties enter into a contract

it is normal that they specify the time in which performance of that contract must be

carried out.25

An interesting stipulation encountered frequently in building contracts is one

which purports to state that time is of the essence of the contract. The stipulations are

usually inserted in the preliminaries section of the bills of quantities or in some portion of

the contract specification. In many cases, it amounts to nothing more than just a well

intended exhortation to the contractor to apply himself diligently to complete the works

on time.26

However, Martin27 has highlighted that time of the essence is one of the most

misused contractual terms, particularly in construction contract. In the normal situation,

where a time for completion is expressly stated in the contract, thus the employer is

entitled to damages if the contractor does not complete on time. Besides that, time is of

the essence where failure to meet the particular date is a fundamental breach of contract

entitling the other party to treat the contract as repudiated and claims damages. On the

other hand, in a case of Miller v. London County Council28 cites that the parties lost the

benefit of the clause due to the fact that stated time is not definite clearly in the contract,

25 Martin,R.L.(2004), Introduction Time Within Contracts, Bullet-Proof EOTs Conference.July 27. Kuala Lumpur. 1-21. 26 Fong,C.K. (2004) Law an Practice of Construction Contracts, 3rd Edition, Thomson Sweet & Maxwell Asia, Singapore 27 Martin,R.L.(2004), Introduction Time Within Contracts, Bullet-Proof EOTs Conference.July 27. Kuala Lumpur. 1-21. 28 Miller v. London County Council (1934), 151 LT 425

14

thus there was no date from which the liquidated damages could run and damages could

be recovered.

In relation to that, there is a situation under common law where time is shown to

be the essence of a contract; the court will hold that a delay in its performance constitutes

a breach which goes to the root of the contract, regardless of the magnitude of the breach

or the scale of its actual consequences. The innocent party, in the circumstances, is

entitled to terminate the contract and bring an action for damages against the defaulting

party.29

Under what circumstances can time be held of the essence of a contract? In

United Scientific Holding Ltd v Burnley Council, the House of Lords, citing with

approval a statement on the position in Halsbury’s Laws of England (4th Ed), ruled that

time should not be held to be of the essence unless the following conditions present:30

1. The parties must have expressly stipulated in the contract that conditions as to

time should be strictly complied with.

2. The nature of the subject-matter of the contract and the surrounding

circumstances demonstrate that time should be considered to be of the essence.

3. The party who has been subjected to unreasonable delay gives notice to the party

in default making time of the essence.

It must be a term so fundamental that its breach would render the contract

valueless, or nearly so, to the other party. It is noteworthy that where a term is not

originally of the essence it may be made of the essence by one party giving the other a

29 See United Scientific Holdings Ltd v. Burnley Council (1978) 30 Fong,C.K. (2004) Law an Practice of Construction Contracts, 3rd Edition, Thomson Sweet & Maxwell Asia, Singapore

15

written notice to that effect. 31 In that case, failure to comply with the notice would be

evidence of a repudiatory breach rather than a repudiatory breach itself. This may be of

limited use in cases where a contractor consistently fails to meet time targets for reasons

which do not entitle him to an extension of time under the contract provisions. However,

in the case of most standard form building contracts, the provisions for determination (e.g

for failure to proceed regularly and diligently) adequately cover the situation.

There is authority that time will not normally be of the essence in building

contracts unless expressly stated to be so. This is because the contract makes express

provision for the situation the employer is wholly or partly responsible for the

contractor’s failure to complete on time where the employer cannot recover liquidated

damages unless the contract provides otherwise.32

In a nutshell, most contract documents provide that ‘time is of the essence’. This

clause makes time a material requirement of the contractor’s performance obligation and

ensures that the owner can recover delay damages for missed milestone or completion

dates. In the absence of such a clause, or an expression by the contract as a whole that

time is material element of performance , delay damages may not recoverable.

2.3 Contract Commencement and Completion Date (s)

Time is an extremely important issue in construction. Together with cost and

quality, it is a primary objective of project management and a major criterion by which

31 See Behzadi v. Shaftsbury Hotels Ltd (1992) Ch 1 32 See Peak Construction (Liverpool) Ltd. v. Mcknney Foundations Ltd. (1970)

16

the success of a project is judged. It has clearly stated in every form of contract including

PWD 203A, PAM 98, CIDB 2000 and JCT 98 which sets out:

PWD 203 (Clause 38 (b))

Unless the Contract Document shall otherwise provide, possession of the Site as

complete as may reasonably be possible but not so as to constitute a tenancy,

shall be given on or before the Date for Possession stated in the Letter of

Acceptance of Tender to the Contractor who shall thereupon and forthwith

commence the Works and regularly and diligently proceed with and complete

the Works on or before the Date for Completion as stated in the appendix.

PAM 98 (Clause 21.1)

On the Date of Commencement stated in the Appendix, possession of the site

shall be given to the Contractor who shall thereupon begin the Works, and

regularly and diligently proceed with the same and complete the same on or

before the Date for Completion stated in the Appendix subject to any extension of

time in accordance with Clause 23.0 and/or sub-clause 32.

CIDB 2000 (Clause 17.2 (a)

Unless the Contract otherwise provides, the Contractor shall be entitled on or

before the Date of Commencement access to and possession of the Site or such

part of the Site to enable the Contractor to commence the Works. The

Contractor’s access to possession of the Site or such part of the Site shall not be

exclusive but shall be subject to the Employer’s rights under Clause 18 in respect

of other contractors.

17

JCT 98 (Clause 23.1)

On the Date of Possession of site shall be given to the contractor who shall

thereupon begin the Works, regularly and diligently proceed with the same and

shall complete the same on or before the Completion Date.

These clauses are identifies the three basic time-related issues as commencement,

progress and completion. In fact there are also two other issues where the contractor’s

continuing obligations after completion, and the extension of time which may be

available to the contractor when the work is delayed by certain specified clause.

In addition to that, the factor to be analyzed in assessing a delay claim is the

contract commencement, progress and completion dates. Based on the study carried out

by Scott33, it shows that construction contracts usually specify performance periods either

by setting forth commencement and completion dates or by establishing that the work

shall be completed within a specified number of days after the notice to proceed or

commencement of work.

Under the commencement factor, the issues at the beginning of the contract

involve giving possession of the site to the contractor, the timing of this possession and

potential delays to the possession. Normally, possession should take place not more than

two months after the successful contractor has been awarded the contract. Too speedy a

start may cause extra work and delay, rather than hastening the construction period. This

needs to be balanced against the needs of the client to avoid undue delay which may

cause extra costs.34

33 Scott,S. (1997), Delay Claims In U.K Contracts, Journal of Construction Engineering and Management. 238-242. 34 Murdoch, J., Hughes,W. (2000), Construction Contracts-Law and Management, 3rd Edition, Spon Press, London

18

Where a contract specifies the date for the commencement of work, the employer

may be deemed to have warranted the readiness of the work site as the specified date.

The employer has to give possession of site to the contractor to permit him to carry out

his obligations.35 Clause 21.1 of the PAM 98 stipulates expressly what would otherwise

be implied as was in the case of Freeman v Hensler36 where if the work site is not a

sufficient state of readiness to permit the contractor to begin work on that date, the

employer may be liable for delay damages. In an attempt to avoid liability for such

delays, employers often include a statement that the specified commencement date is

only a projection or an estimate.

While, in the situation where a construction contract fixes a date for completion,

but makes no provisions to the rate at which the works are to progress, it appears that the

courts will not imply any such term. This is because, in the absence of any indication to

the contrary, the contractor has absolute discretion as to how the progress is planned and

performed, provided only that it is completed on time. 37

Furthermore, while many contracts require the contractor to submit a programme

for the execution of the works, this in itself does not mean that there is contractual

obligation to keep to that programme.38 Indeed, it should be appeared that, if there were

such an obligation, it would apply to both parties. Thus, employer would have to ensure

that the contractor was provided with all necessary information at such a time as to

enable compliance with programme.

In construction contracts, completion is a vague concept. The fact that building

projects can be handed over in a less than perfect state is to the advantage of both parties. 35 Rajoo,S. (1999). The Malaysian Standard Form of Building Contract (The PAM 1998 Form), Malayan Law Journal, Malaysia. 36 Freeman v. Hensler (1900) 64 JP 260 37 See GLC v. Cleveland Bridge and Engineering Co Ltd (1984) 34 BLR 50 38 See Kitsons Sheet Metal Ltd v. Matthew Hall Mechanical and Electrical Engineers Ltd (1989) 47 BLR 82

19

This is clear when the legal meaning of completion is considered. A contractor cannot

truly be said to have totally performed the contract if a single item of work is missing or

defective. However, from a practical point of view, to delay the handover of something as

complex as a large building for a trivial breach would causing enormous inconvenience.

As a result, most building contracts require the contractor to bring the works to a state

described by such expressions as practical completion or substantial completion.

There is a question of whether or not a building is complete in this sense is

normally a decision for the contract administrator, based on an inspection of the works

and the exercise of reason. Practical completion can be defined as completion for all

practical purposes that are to say for the purpose of allowing the employers to take

possession of the works and use them as intended. 39

In addition to that, many contracts also include interim milestone dates,

specifying the dates upon which certain portions of the work are to be completed. The

inability to meet interim milestone dates may provide the basis for an acceleration

directive claims. To avoid misunderstandings and disputes, all parties should take great

care to clearly define contract commencement dates and the interim completion to meet

any such dates should also be clearly defined.

2.3.1 Substantial Completion

39 Westminster CC v Jarvis & Sons Ltd (1970) 7 BLR 64

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Most of contract documents define “substantial completion” of the work as “the

stage in the progress of the work when the work or a designed portion thereof is

sufficiently complete so the owner can occupy or utilize the work for its intended use.

Robinson40 has emphasized that the phrase ‘substantial completion’ has been

adopted to describe the state of completion that the law would imply as the minimum

prerequisite for entitlement to payment under an entire contract in the absence of an

express requirement for entire completion. In addition to that, the word ‘substantial’

imports a somewhat indeterminate requirement for a level of achievement falling short of

completion.

In practice, acceptance of the contractor’s performance will reflect the

practicalities of the employer’s needs at the point in time. In the case of Hoenig v

Isaacs41, it shows that the plaintiff was employed by the defendant to decorate and

furnish a flat for the sum of £750, the term of payment being ‘net cash, as the work

proceeds and balance on completion.’ The defendant paid £350 on the ground that some

of the design and workmanship was defective. The judge held that there had a substantial

performance of the contract and the defendant was liable for £750, less the cost of

remedying the defects which was assessed at £56.

Generally, an owner may not assess, and a contractor is not liable for, delay or

liquidated damages after substantial completion. Thus, even when a contractor does not

fully completed the work specified by its contract, or has performed work in a defective

manner, the owner may prevented from collecting actual delay damages or liquidated

damages if the contractor has advanced work sufficiently to have achieved substantial

completion.

40 Robinson,N.M. (1996). Construction Law in Singapore and Malaysia, 2nd Ed. Butterworth Asia, Singapore. 41 Hoenig v Isaacs (1952) 2 All ER 176

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2.4 Definition of Project Delay

Today’s projects are technically complex and scheduled driven. Multi-

disciplinary nature of modern construction projects require management and execution by

highly skilled and task organized project team. For a successful completion of any

project, both the timing and cost have to be carefully planned, monitored and controlled.

Project must also meet the technical performance specifications and mission to be

performed.

Nevertheless, Ndekugri42 asserts that these objectives may be impeded by

situations where contractor fails to complete the works according to due date. Basically,

the term ‘delay’ is defined as the extension of time beyond planned completion dates

traceable to the contractors.43

Besides that, Turner44 has viewed delay as being treated only if it leads to failure

to achieve the completion date and not in its effects on the programmed before

completion. On the entirety principle, delay is assumed to be the responsibility of the

contractor, so leading to him having to pay liquidated damages, even if delay is not

necessarily his fault, unless contract specifically provides otherwise.

42 I.Ndekugri (1994). Delays, Extension of Time and Liquidated Damages under JCT80, Construction Papers, Reading University. 35,1-14. 43 Kaming,P.F.,Olomolaiye,P.O, Holt,G.D. & Harris,F.C.(1996). Factors Influencing Construction Time and Cost Overruns on High-Rise Projects in Indonesia. University of Wolverhampton,U.K.15, 83-94. 44 Turner,D.F.(1989). Building Contract Disputes-Their avoidance and Resolution, Longman Group UK Limited.

22

Meanwhile, in business, a project is defined as delayed when its progress has not

matched the planned progress. On the other hand, delay also can be defined as a slowing

down of a work without stopping it entirely.45 Besides, in the layperson’s sense of the

word ‘delay’ simply means a postponement in the completion of a task. But, in the legal

sense of the word ‘delay’ can actually involve several distinct that present different legal

claims and defenses.46

All significant stages of the project must take place no later than their specified

dates, to result in total completion on or before the planned finish date. In general, delay

in progress of works has a significant effect to the project performance, it does not only

increase the time required to perform the contract work but may also increase the cost for

many of the parties involved. To recover damages for extended performance or obtain a

time extension, the delay must affect the overall project completion.

The client, consultants, contractors and the suppliers that are all interrelated to

form the life cyclic of construction may cause delays. Many things may occur on the

construction project to increase the time of performance of the overall project or affect

any given activity and most common causes differ under different site conditions. Very

long delays can be caused by pre-verification, legal or planning difficulties, shortage of

information, lack of funds or other resources, and a host of other reasons. However, a

common risk to projects is failure to start work on time and hardly be expected to finish

on time.47

Every construction contract considered time as the essence of the project.

Typically, a time period is specified as the contract duration. The contractor is obliged

under the contract to achieve substantial completion within the specified period.

45 Bartholomew,S.H.(1998). Construction Contracting/Business And Legal Principles, New Jersey. 46 Cox,A. & Thompson,I. (1998). Contracting for Business Success, Thomas Telford Publishing, U.K 47 Turner,D.F. (1989). Building Contracts Disputes-Their Avoidance and Resolution, Longman Group UK Limited.

23

Unfortunately, proves that unexpected events can happen during the life of the

construction project and can affect the construction time necessary for the completion of

the work. When the contractors fail to complete the project within the contract period,

delay becomes the reality of the project. 48

If the panned timescale is exceeded, the original cost estimation and budget are

almost certain to be exceeded too. According to Yahya49, a project costs money during

every day of it existence from beginning of the program right through until the project

end, both in direct cost and indirect cost. Direct cost included material, machinery,

workforce and supervision costs. The “variable” or “direct” project costs of material and

workforce man-hours are time-related in several ways. Cost inflation is one factor, so that

a job started and finished later than planned can be expected to cost more because of

intervening materials price rises and increases in wages, salaries and other costs. While,

the “fixed” or “overhead” cost of management, administration, accommodation, services

and general facilities are directly time-related. If the project runs late, then these costs

will have to be come for a longer period than planned and must exceed their budget.

The success of a project depends on getting things done on time and within

budget. The time/cost relationship is illustrated in Figure 2.1. According to Figure 2.1, an

optimum point can be achieved with reasonable construction duration, well-planned

resources and maximum usage of resource.

48 Kumaraswamy,M.M & Chan,D.W.M. (1996). Contributors to Construction Delays, Construction Management and Economics.The University of Hongkong, 16,17-29. 49 Yahya, I.A. (2006). Delay in Construction Projects, Proceedings of the 2006 One Day Seminar on Mitigation of Delay in Construction Projects. November 23, University of Malaya

Cost

Crash cost

Minimum cost

Optimum Duration

24

Figure 2.1: The relationship between cost and construction duration

Source: Adopted from Yahya,I.A (2006)

2.5 The Nature of Delay Claims

The legal rights and obligations of the parties associated with performance delays

arise from either an express contract obligation to perform by given date or within a

specified time frame, or the implied obligation in every contract that each party will

specified time frame, or the implied obligation in every contract that each party will not

delay, hinder or interfere with the performance of the party.50 A party that hinders or

prevents performance by the other party, or that renders performance impossible, may not

benefit from its wrong. This rule of law prevents a party from taking advantage of its own

contract breaches. The same rule also provides a basis for the recovery of costs generated

by delays that are the fault or responsibility of one of the contracting parties.

Basically, the contractor’s obligation to complete the works by the completion

date is, like all such obligations, backed up by legal sanctions. Under certain type of

50 Smith, Curie & Hancock (2001), Common Sense Construction Law- A Practical Guide for the Construction Profesional, John Wiley & Sons, Canada

25

contract, time is expressly or impliedly ‘of the essence’.51 Where this is so, any lateness

in performance entitles the other party to determine the contract. However, construction

contracts very rarely fall into this category. Consequently, the employer’s remedy for late

completion will be award of damages for breach of contract.52

Most of the studies has been carried out and indicate that common causes of

delays include inclement whether, labor disputes, ultimately equipment delivery,

defective specifications, changes of the work and differing site conditions. These kinds of

delays often increase both time required to perform the work and the cost of the work

where it will be elaborated in detail later.

2.6 Causes of Delay

There are many ways that a construction project can be delayed. Although it is

extremely difficult to generalize on what can cause delay, in most cases delay results

from a failure to plan and to assess possible occurrences and consequences.53

This section will explain the causes of delay by looking at the responsibility of the

major parties to the design and construction process for instance the owner, designer,

contractor, subcontractors, and suppliers. In assessing responsibility of the various parties

for delay, one must first start with a factual analysis of who did or failed to do what. This

51 Chappel,D.,Smith,V.P,Sims,J.(2005), Building Contract Claims, 4th Edition, Blackwell Publishing Ltd., UK. 52 I.Ndekugri (1994). Delays, Extension of Time and Liquidated Damages under JCT80, Construction Papers, Reading University.35, 1-14 53 Carnell,N.J (2005). Causation and Delay in Construction, Blackwell Publishing Ltd., UK

26

requires a further examination of the contractual responsibilities and duties implied by

law. Generally, the causes can be classified as follows:54

2.6.1 Owner- Caused Delay

Owner-caused delay can be detailed further into four main categories55; delay

resulting from failure to fulfill contractual responsibilities, delay caused by changes made

in the work required under the construction contract, delay caused by interfering with

responsibilities of the contractor and failure to coordinate the activities of any separate

contractors. Although specific duties will depend upon the individual contract, the

owner’s contractual responsibilities can be generalized to responsibility to provide the

project site, approvals, finances and design as well as contract administrations.

The court in Miller v London Country Council (1934) 151 LT 425 supports that

there is power to extend the time for delays caused by the building owner, and such

delays have taken place, but the power to extend the time has not been exercised, either at

all or within the time expressly or impliedly limited by the contracts, it follows (unless

the builder has agreed to complete to time notwithstanding such delay) that the building

owner has lost the benefit of the clause.

54 Abdul Rahman,H. (2001), Critical Factors for Mitigation of Delay in Construction, National Conference of Construction Industry Development 2001. 55 Nee,C.S. (2005). Extension of Time: The Issue of Delay Notification, Faculty of Built Environment,UTM.Msc.Thesis.

27

Another situation, in the case of Percy Bilton Ltd v.Greater London Council 56

where judge held that an employer is not entitled to liquidated damages if by his acts or

omissions he has prevented the contractor from completing the works by the completion

date. The employer also cannot recover liquidated damages where he is wholly or partly

responsible for the contractor’s failure to complete on time.57

2.6.2 Designer-Caused Delay

According to Rahman et.al’s58 study, delay caused by designers generally results

from four common deficiencies; defects in design, slow correction of design problems,

tardy review of shop drawings and delays in tests and inspections. Besides that, their

finding also clearly explained the problems faced by the contractor with regards to the

quality of civil and structural design of The Chemistry and Biochemistry Building,

Faculty of Science, University Malaya. The effects of poor quality of design are listed as

major and minor problems.

Because of integral role the designer has in the development of the project design,

preparation of contract documents and contract administration, deficiencies in its

performance may have significant impact upon the progress of construction works. The

impact of the designer’s errors is first felt by the contractor who may or may not have

direct recourse against the designer depending upon the jurisdiction.

56 Percy Bilton Ltd V. Greater London Council (1982), 20 BLR 1 57 Peak Construction (Liverpool) Ltd v. Mckinney Foundations Ltd (1970), 1 BLR 111 58 H.A.Rahman, I.A. Abbas & M.A. Berawi (2001), Experiences in Handling Project Delays in Construction, Conference paper of National Conference of Construction Industry Development, Johor Bahru.1-15.

28

The relevant event is in two parts.59 In the first part, if the architect does not

provide the information as set out in the schedule, the contractor has a ground for

extension of time provided that other criteria are met. Meanwhile, the second part of the

relevant event refers to the failure of the architect to comply with the situation whereby

information release schedule has not been provided for or in the situation when the

information required is not listed on the schedule.

But if the contractor’s rate of progress is such that he will not finish by the due

date, the architect may have regard to this act. Moreover, the architect entitled to slow

down the rate of provision of information to the contractor in order to match the

contractor’s progress.60

2.6.3 Contractor-Caused Delay

Delay attributable to the contractor most often stem from five major causes;61

failure to evaluate the site or design, contractor management problems, inadequate

resources such as cash, material, or labor, poor workmanship and subcontractor failures.

The specifics contractor problems are often unknown to the owner and designer until

major slippage in the schedule is recognized. Even then, the exact reasons for the project

delay are often unknown. The contractor may allege a variety of causes which are

excusable and compensable.

59 Chappel,D.,Smith,V.P,Sims,J.(2005), Building Contract Claims, 4th Edition, Blackwell Publishing Ltd., UK. 60 Glenlion Construction Ltd. V. The Guiness Trust (1987) 39 BLR 89. 61 Kumaraswamy,M.M & Chan,D.W.M. (1996). Contributors to Construction Delays, Construction Management and Economics.The University of Hongkong, 16,17-29.

29

In relation to that, under PWD203A Clause 43(j) will grant an extension of time

to the contractor if the securing of the materials is beyond his control, but the shortage

must have been one that could not have reasonably been foreseen at the date of the

closing of the tender. It should be noted that this clause is not applicable for shortage of

labour even though essential for the execution of the works.62

2.6.4 Subcontractor Delay

In general, the contractor is responsible to the owner for the none-excusable

delays incurred by its subcontractors.63 However, if the delay is caused by a second tier

subcontractor, and the general contractor and first tier subcontractor make diligent efforts

to expedite the work of the second tier contractor, the general contractor may be excused

for the delay. Since the second tier subcontractor’s action may be beyond the control of

the contractor and not due to contractor fault negligence, the contractor may be neither

assessed liquidated damages nor compensated for such delay.

Most of the contracts have been set out the provision that related to subcontractor

delay for instance PWD203A Clause 43(k), PAM98 Clause 23.7(vii), CIDB Clause

24.1(p) and JCT 98 Clause 25.4.7. However, this provisions has a limited meanings

where ‘delay on the part of the Nominated Sub-contractors’ is only means delay by the

nominated sub-contractor during execution of the sub-contract works. 64

62 Fong,L.C. (2004). The Malaysian PWD Form of Construction Contract, Sweet & Maxwell, Malaysia. 63 Chappel,D.,Smith,V.P,Sims,J.(2005), Building Contract Claims, 4th Edition, Blackwell Publishing Ltd., UK. 64 Percy Bilton Ltd. V. Greater London Council (1982) 20 BLR 1.

30

In this case, the contractor has an obligation to avoid or reduce delay by

nominated subcontractors. In fact, the contractor also has responsibility for nominated

subcontractor’s production of installation drawings where it has been derived from a case

of H. Fairweather & Co. Ltd. v. London Borough of Wandsworth (1987) 39 BLR 106.

2.6.5 Delay Not Caused by Parties to the Design and Construction Process

Most of the delays which are not caused by the owner, designer, contractor,

subcontractors, suppliers or other parties to the design and construction process are

excusable or non-compensable delays.65

In addition to that, these delays are beyond the control of any of the parties and

contract where some are dealt with specifically in the contract documents are adverse

weather, labor disputes, unavoidable calamities, acts of God and unusual delays in

transportation. Based on Fong’s views66, it concludes that a catch-all the contract may

designate “any cause beyond the contractor’s control” or “any cause beyond the

contractor’s control and without the fault or negligence of the contractor.”

The purpose of such clauses is to protect the contractor from the risk of the

unexpected. Foreseeability of the event is an important consideration. Therefore, just

because the contractor encounters one of the enumerated causes of delay, it may not be

entitled to a time extension if the event was unforeseeability. 65 A.M.Odeh & H.T. Battaineh.(2002) Causes of Construction Delay:Traditional Contracts, International Journal of Project Management.20, 67-73 66 Fong,C.K.(2004). Law and Practice of Construction Contracts, 3rd ed.,Sweet & Maxwell Asia,Singapore.

31

Causes of Delay

32

2.7 Type of Delay

Contractor-Caused Delay

Designer-Caused Delay Subcontractor

-Failure to evaluate -Contractor management problems -Inadequate Resources -Construction defects

-Design defects -Slow correction -Tardy Shop drawing review -Delay due to tests and inspection

Figure 2.2: Causes of Delay Source: Modified from H.A.Rahman (2006)

Owner-Caused Delay Delay – Not Caused by Parties

-The project site -Approvals -Owner’s financial obligations -Owner Contract Administration Responsibilities -Changes in the works -Owner interference -Failure to coordinate separate prime contractors

-Weather -Acts of God -Strikes and labor disputes

33

Many studies have been carried out and proved that construction delays generally

adversely affect construction progress. Most disputes arise out of delays that are at least

partially the fault of the owner. As has already been shown, Kaming67 elaborated that

such delays can be due to suspension of work, slow owner responses to the contractor’s

questions, slow processing of shop drawings and other submittals, failure to provide

timely access to the construction site, differing site conditions, variation orders, and other

actions of the owner.

Most contracts provide additional contract time when owner-caused delays occur.

If the contract does not contain a no-damage for delay provision, the contractor will also

have a good chance to receive monetary compensation for owner-caused delays.

In addition to that, construction projects are delayed by numerous causes. Besides,

delay is considered a major cause of construction claim. Claims could be due to four

types of delay namely: 68

1. excusable delays

2. non-excusable delays

3. compensable delays

4. concurrent delays

2.7.1 Excusable Delays

67 Kaming,P.F.,Olomolaiye,P.O, Holt,G.D. & Harris,F.C.(1996). Factors Influencing Construction Time and Cost Overruns on High-Rise Projects in Indonesia. University of Wolverhampton,U.K.15, 83-94. 68 Smith, Curie & Hancock (2001), Common Sense Construction Law- A Practical Guide for the Construction Profesional, John Wiley & Sons, Canada

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The occurrence of a construction delay raises the issue of who should bear both

the responsibility for, and the cost of that delay. In deciding this question, courts and

arbitration panels look both to the causes of the delay and to the express ad implied

obligations imposed by the parties.

Generally, the parties’ contract dictates whether a delay is excusable.69 Typical

examples of excusable delays to a contractor’s work are differing site conditions, design

problems, changes to the work, inclement weather, strikes and acts of God. As this list

implies, when unanticipated outside forces delay completion of the contractor’s work, the

delay is generally considered excusable.

Excusable delays are those not attributable to the contractor’s actions or in

actions, and typically include unforeseen events. Basically these events are beyond the

contractor’s control and are without fault or negligence on his/her part.

One of the events is force majeure which is usually considered to cover a host of

highly unusual and superhuman event.70 In the classic case of LeBaupin v. Crispin71, the

court accepted that the term is used with reference to all circumstances independent of the

will of man, and which it is not in his power to control.

Most contracts specifically enumerate the types of excusable delays for which a

time extension is due. These terms vary from contract to contract. Because contracts

differently allocate the risk of both non-performance an unanticipated occurrences

beyond control of the parties, the precise term of the contract are critical.

69 S.Alkass, M.Mazerolle & F.Harris(1995). Construction Delay Analysis Techniques, Shool of Construction,Engineering and Technology,University of Wolverhampton,UK.14,375-394 70Fong,C.K.(2004). Law and Practice of Construction Contracts, 3rd ed.,Sweet & Maxwell Asia,Singapore 71 Lebaupin v. Crispin (1920) 2 KB 714

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Some contracts exhaustively list each type of excusable delay and seek to limit

the granting of extensions to the listed delays. Other contracts may contain somewhat less

extensive list, but may conclude the enumeration excusable delays with catchall phrase

such as “causes beyond the control, and without the fault or negligence of the contractor.”

Each party to a construction contract must have a clear understanding of the intended

scope and operation of such a clause when requesting time extensions or analyzing time

extension requests.72

2.7.2 Non-Excusable Delays

In contrast of excusable delay, a non-excusable delay provides no bases for

recovery of either the time or the monetary impact of the delay.73 Moreover, the legal

consequences of non-excusable delay are borne by the perpetrator of the delay. Put

another way, the party that causes a non-excusable delay likely creates an excusable, and

under certain circumstances a compensable, delay to the other party’s work.

Consequently, this type of delay presents no entitlement to a time extension or

delay damages for the contractor if the delay can be proved to have affected the whole

project. The owner however could be entitled to liquidated damages. For instance, a non-

excusable delay would be when a contractor fails to provide sufficient manpower to

complete the job on time. 72 Abdul Rahman,H. (2001), Critical Factors for Mitigation of Delay in Construction, National Conference of Construction Industry Development 2001. 73 S.Alkass, M.Mazerolle & F.Harris(1995). Construction Delay Analysis Techniques, Shool of Construction,Engineering and Technology,University of Wolverhampton,UK.14, 375-394

36

In addition to that, non-excusable delay is for which the party assumes the risk of

delayed performance and its consequences. Common non-excusable delays for a

contractor include failure to perform work within the allotted time frame. In the

Australian decision of Multiplex Construction Pty Ltd. V. Abragus Pty. Ltd74

demonstrates that the employer is likely to suffer in the event that the works are delayed.

Thus the remedy for breach by the contractor of his obligation to complete works on time

lies generally in damages.

2.7.3 Compensable Delays

Basically, compensable delay is when the contractor will be entitled to additional

compensation for the cost of delay and as well as additional time for contract

performance and it may be granted extension of time and money if there is any change in

scope of work, late supply of owner materials or information, impeded site access,

differing site conditions and failure to provide timely and review shop drawings.75

Furthermore, this type of delay is delays for which the innocent party is entitled to

both a time extension and additional compensation for the resulting costs.76 In other

word, the contractor is entitled both due to insufficient time of the employer to provide all

necessary instruction and details. For instance, where the owner or employer causes a

delay, if the contract does not include a provision exonerating the owner from liability for

74 Multiplex Constructions Pty Ltd v. Abragus ty Ltd (1992) 75 Kaming,P.F.,Olomolaiye,P.O, Holt,G.D. & Harris,F.C.(1996). Factors Influencing Construction Time and Cost Overruns on High-Rise Projects in Indonesia. University of Wolverhampton,U.K.15, 83-94. 76 Neodox Ltd v Swinton and Pendlebury Borough Council (1958) 5 BLR 34

37

such delays, the contractor is entitled to both compensatory damages and a time

extension.

Building contracts do not usually require the contractor to utilize all of the

performance time allotted by the contract. Recognizing this, courts held owners liable for

delaying contractors where, even though the project was finished within the contractually

allotted time, the contractor was prevented from achieving an early finish. Thus, timely

completion does not necessarily preclude the recovery of delay damages where a

reasonable as–planned schedule would otherwise have yielded early completion.

2.7.4 Concurrent Delays

Concurrent delay is in addition to excusable delay and non-excusable delay, as an

analytical framework for identifying and evaluating construction delays. Concurrent

delays are delays that occur, at least to some degree, during the same period of time.77 In

construction, the term concurrent delay is a term of art that refers to the situation when an

excusable compensable delay and non-excusable delay occur at the same time or during

overlapping time periods.

According to Alkass78, concurrent delays refer to delay situations when two or

more delays (regardless of the type) occur at the same time or overlap to some degree.

Besides, this concurrent delay is used to denote a period of project overrun which is

caused by two or more effective causes of delay which are of approximately equal

77 Fong,C.K.(2004). Law and Practice of Construction Contracts, 3rd ed.,Sweet & Maxwell Asia,Singapore 78 S.Alkass, M.Mazerolle & F.Harris(1995). Construction Delay Analysis Techniques, Shool of Construction,Engineering and Technology,University of Wolverhampton,UK. 375-394

38

causative potency.79 In a nutshell, this type of delays can be described as expression

which explains a situation where here are more than one causes of delay operating at a

particular point of time.

There is a case that deal with the question of dominance is Galoo Ltd and Others

v. Bright Grahame Murray where it was held that the ‘but for’ test of causation was not

sufficient and it was clear that if there was a breach of contract by a defendant entitling

him to claim for damages, it must first be held to be an effective or dominant cause of his

loss. In considering whether a breach duty imposed upon a defendant whether in contract

or in tort, the court had to arrive at decision on the basis of the application of common

sense.

However, if there two concurrent causes of delay, one of which is a relevant

event, and the other is not, then the contractor is entitle to an extension of time for the

period of delay caused by the relevant event notwithstanding the concurrent effect of the

other event.80 Thus, to take a simple example, if no work possible on site for a week not

only because of exceptionally inclement weather (a relevant event), but also because the

contractor has shortage of labour (not a relevant event), and if to work during the week is

likely to delay the works beyond the completion date by one week, then if he considers it

fair and reasonable to do so, the architect is required to grant an extension of time of one

week. He cannot refuse to do so on the grounds that the delay would have occurred in any

event by reason of the shortage of labour.

Concurrent delay creates complex legal issues regarding assessing responsibility

for overall project delay.81 The analysis of concurrent delays may be further complicated

if:

79 J.Marin (2002). Concurrent Delay, A Paper of the Society of Construction Law, London. 80 Fong,C.K.(2004). Law and Practice of Construction Contracts, 3rd ed.,Sweet & Maxwell Asia,Singapore 81 Henry Boot Construction (UK) Ltd v. Malmaison Hotel (Manchester) Ltd (1999) 70 CLR 32

39

1. The delay periods are different lengths

2. The delay periods are not totally concurrent

3. The delay periods are periods have different impact on the number and types of

work activities they affect and the severity of the impact upon the affected work

activities is different for each of the delays.

2.8 Extension of Time (EOT)

Most of the building contracts contain express provisions under which the period

allowed for the contractor to undertake and complete the works can be extended. These

provisions cater for delays that are neither the fault nor the responsibility of the

contractor.

Based on Martin’s82 views, traditional extension of time clauses contain a list of

delaying events for which the contract administrator is empowered to grant extensions of

time and the forms of currently used in Malaysia are no exception to this.

Furthermore, Ndekugri83 added that an examination of the list makes two facts

very clear. Firstly, the matters include not only those which are attributable to the

employer but also events outside his control. Secondly, the list is by no means exhaustive

of possible events for which the employer might be responsible.

82 Martin,R.L.(2004), Introduction Time Within Contracts, Bullet-Proof EOTs Conference.1-21. 83 I.Ndekugri (1994). Delays, Extension of Time and Liquidated Damages under JCT80, Construction Papers, Reading University. 35,1-14.

40

Every contract has asserted under particular provisions, for instance PWD 203A

under clause 43, PAM 69 and PAM 98 under clause 23 and CIDB under clause 24.

According to PWD 203A conditions of contract include lists of relevant events. Under

Clause 43 PWD 203A provides for the Superintending Officer to grant an extension of

time on specified grounds and extension of time is grantable on those grounds and no

other.

The operation of clause 43 modifies the liability of the Contractor to complete the

Works by the Date for Completion specified in the Appendix and to pay Liquidated and

Ascertain Damages to the Government upon the failure of the contractor to meet the

deadline. Nevertheless, this clause contained limited grounds for extending time and did

not cover many common delaying events, for instance failure to give possession of site

on the due date. It has been demonstrated in a case of Peak Construction (Liverpool) Ltd.

v. Mckinney Foundation Ltd. (1970) 1 BLR 11 and also in Thamesa Designs Sdn.Bhd v.

Kuching Hotels Sdn.Bhd. & 3 Ors. (1993) 2 AMR 2083.

On the other hand, PAM 98 has similar list of the relevant events to PWD 203A.

Clause 23.0, asserts that an employer could impose an absolute obligation on the

contractor to complete the Works by a certain date and regardless any delay

circumstances. Thus, the contractor may be imposed liquidated damages for failure to

meet the completion date. 84

CIDB conditions of contract make it a pre-requisite to the contractor’s right to an

extension of time that he has carried out the Works or any section of the Works with due

diligence and has taken all reasonable steps to avoid or reduce such delays.85 In addition

84 Henry Boot Construction Ltd v. Central Lancashire New Town Develoment Corporation (1980)1 BLR 1 85 Clause 24.1 of CIDB Standard Form of Contract for Building Works 2000 Edition

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to that, Martin86 highlights the relevant events which are common to PWD 203A and

PAM 98 forms, the CIDB conditions include other relevant events such as:

i) an instruction from the Superintending Officer to resolve a discrepancy in or

between any of the contract documents(Clause 24.1(f))

ii) compliance with Statutory Requirements for which he employer is responsible or

which results in a variation (Clause 24.1 (g))

iii) testing or opening up the works not provided for under the contract (Clause

24.1(h))

iv) an instruction to suspend any work (Clause 24.1(k))

v) an instruction in relation to a Prime Cost or P.C or Provisional Sum giving rise t a

variation.

Hence, every each standard forms of contract are aimed at allocating the risk of

non-completion between parties. It reduces the contractor’s risk in relation to delays by

entitling him to an extension of time for practical completion on account of delay based

on various circumstances.87

Extension of time clauses, therefore have various purpose such as to retain a

defined time for completion, to preserve the employer’s right to liquidated damages

against acts of prevention and to give contractor relief from his strict duty to complete on

time in respect of delays caused by designated neutral events.88 On the other hand, these

clauses provide for the machinery for notification of delay by the contractor and the grant

of extension of time by the architect on specified grounds. An extension of time is

grantable only on those grounds under these clauses.

86 Martin,R.L.(2004), Introduction Time Within Contracts, Bullet-Proof Eots Conference. 1-12. 87 Rajoo, S. (1999).The Malaysian Standard Form of Building Contract (The PAM 1998 Form), Malayan Law Journal, Malaysia. 88 Eggleston,B. (1997). Liquidated Damages and Extension of Time. 2nd ed. Oxford: Blackwell Science Ltd.

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2.9 Liquidated Ascertained Damages (LAD)

As has been mentioned earlier in previous chapter, liquidated ascertained

damages will be briefly discussed in this study. In general, liquidated ascertained

damages means a fixed and agreed sum as opposed to unliquidated damages which is a

sum neither fixed nor agreed, but must be proved in court, arbitration or adjudication. In

detail, liquidated ascertained damages are compensatory in nature and should be a

genuine attempt to predict which is not related to probable damages but rather stipulated

in terrorem.89

In other words, liquidated ascertained damages also can be explained as a

monetary amount fixed and agreed by the parties in advance, as the damages payable in

the event of a specified breach of contract. In building contracts commonly, liquidated

damages are payable only for the contractor’s failure to complete on time. A provision

for liquidated ascertained damages is enforceable if the amount fixed is a genuine pre-

estimate of the loss likely to be caused by the breach. In contrast, a ‘penalty’ clause is

invalid. If the agreed sum is extravagant in relation to the greatest possible lost, it will be

held to be penalty. Liquidated ascertained damages are recoverable without proof of loss.

There are numbers of classic cases demonstrated in relation to this discussion such as

Dunlop Pneumatic Tyre Co. Lt v. New Garage Motor Co. Ltd. (1915) AC 79, Clydebank

Engineering & Shipbuilding Co. v. Castaneda and Others (1905) AC 6 and Miller v.

London County Council (1934), 151 LT 425.

89 Chappel,D.,Smith,V.P. & Sim.J.(2005). Building Contract Claims, Blackwell Publishing Ltd. UK.

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2.10 Summary

In construction, time is extremely important. It can be divided into three basic

time-related namely commencement, progress and completion. According to that, a

proper planning is very important in order to execute the construction works until

completion within time and budget provided. Thus, the contractor’s obligation is to

complete the works by the completion date given. Under certain types of contract, time is

expressly or impliedly ‘of the essence’. Where this is so, any lateness in performance

entitled the other party to terminate the contract. However, contracts very rarely fall into

this category. Consequently the employer’s remedy for late completion will be an award

of damages for breach of contract. On the other hand, the contractor may be granted

extension of time if the cause falls in the relevant events provided under forms of

contract.There are many causes of delay in construction. Basically, delays often increase

both time required to perform the work and the cost of the work. Besides, delay is

considered a major cause of construction claim. Claims could be due to four types of

delay such as excusable delays, non-excusable delays, compensable delays, and

concurrent delays.

CHAPTER 3

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SUBCONTRACT DELAYS

3.1 Introduction

The construction process requires an extensive diversity of skills and materials

not all of which may be sourced from the resources of a single construction firm. Thus,

most contractors depend on a sub-contractors and suppliers to undertake specialist works

or other builder works.90 To understand the problems in relation with sub-contract delays,

therefore it is important to have better knowledge of the nature of sub-contracting,

responsibilities associated with nominated sub-contractor, the main contractor and the

employer.

For that reason, this chapter will explain the definition of main contractor,

nominated subcontractor and domestic subcontractor. In addition to that, discussion will

be focused on the provisions that have been sets out in the contract (PWD 203A, PWD

203N, PAM 1998, PAM Subcontract Form, CIDB 2000 and CIDB.B (NSC)/2002) which

are related to nominated sub-contractor, main contractor and employer. Besides that,

breach of contract where default by nominated sub-contractor and delay in nominated

sub-contractor’s works also will be discussed in this chapter.

90 M.John & Hughes.W. (2000). Construction Contracts-Law and Management, 3rd ed.,Spon Press.London.

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3.2 Nature of Subcontracting

In normal practice, main contractors are to an ever-increasing extent, reducing

their dependence on directly employed labour. A main contractor too may have or be in

the process of creating a contract with an employer to carry out certain works. According

to Atkinson91 , it has been shown that a main contractor may consider that part of the

works is best carried out by another contractor. Subcontractors play vital role when they

are hired to perform specific tasks on a project.92 Moreover, subcontractors are specialist

agents in the execution of a specific job, supplying manpower, besides materials,

equipment, tools or designs.93

Nevertheless, Murdoch94 says that subcontracting as a phenomenon is not unique

to the construction industry as other business seems to be following in the same way. In

construction, there are several ways in which persons may come to be employed on the

works or on the site, or possibly on both, despite the contractor’s right of possession and

his obligation to carry out and complete the works. Thus, the processes of distinguishing

of the right and obligation through subcontracting will be discussed as follows:

3.2.1 Assignment

91 Atkinson,D.(1999). Subcontracting, Atkinson Law, London. 92 D.Arditi,M.Asce & R.Chotibhongs (2005). Issues in Subcontracting Practice, Journal of Construction Engineering and Management, 131, 866-876. 93 Shimizu,J.Y & Cardoso,F.F (2002). Subcontracting and Cooperation Network in Building Construction: A Literiture Review, Proceedings IGLC,10 August. 94 M.John & Hughes.W. (2000). Construction Contracts-Law and Management, 3rd ed.,Spon Press.London.

46

According to Turner95, assignment can be identified when the contractor passes

over his performance of the whole of the works and rewards for so doing to another,

while not being relieved of his contractual liability over performance. Keating96 added

that in considering assignments it is essential to distinguish between the benefit and the

burden of a contract.

In the normal building contract, the burden on the contractor is the duty to

complete the works, and his benefit is the right to receive the contract money when it

falls due. The burden on the employer is the duty to pay such money, and the benefit is

the right to have the works completed.97

However, in general, it has been shown that the burden of a contract cannot be

assigned without the consent of other party. Building contracts commonly, contain

clauses restraining assignment and sub-letting.98 Therefore, a contractor cannot assign

his liability to complete the work somewhere else. 99 However, the contractor would be

entitled to assign his rights but if the contract forbids assignment, such an assignment is

ineffective to transfer rights to assignee against the employer as cited in the case of

Helstan Securities Ltd. v. Hertfordshire County Council (1978) 3 AII ER 262, Messrs

Renhold contracted with the council for road works on ICE,4th edition. Condition 3

provided: “The contractor shall not assign the contract or any part thereof or any benefit

or interest therein or thereunder without the written consent of the employer.” Renhold

purported to assign their rights to payment under the contract to the plaintiffs. The Judge

held that the assignment was ineffective.

3.2.2 Domestic Subcontract

95 Turner, D.F.(1994). Building Contract- A Practical Guide, 5th ed.,Longman Scientific & Technical, UK. 96 Keating,D. (1978). Building Contracts, 4th ed. London Sweet & Maxwell. 97 Ibid. 98 Smith,V.P & Furmston,M. (1984). A Building Contract Casebook, Granada Publishing 99 Nokes v. Doncaster Amalgamated Collieries Ltd (1940) A.A 1014 (H.L)

47

On the other hand, Fong100 asserts that a contractor passes over a part only of the

works and rewards as in abovementioned, while remaining directly related to the

employer and continuing with the consultants. This is called domestic subcontracting or

sub letting.

A domestic subcontractor is one in whose selection and appointment the employer

normally plays no part, other than simply giving consent where this is required under the

terms of the main contract.101 However, a major practical problem in relation to sub-

contracts is the way in which the main and sub-contract fit together. Provisions of the

main contract cannot be read into subcontract unless they have been expressly

incorporated. 102

It has clearly stated in the case of Smith and Montgomery v. Johnson Bros Co.Ltd.

(1954) 1 DLR 392, the defendants were the main contractors to construct a tunnel sewer

for the City of Hamilton through the Hamilton mountain. The plaintiffs, who were

miners, undertook a subcontract for tunneling according to the dimensions and

specifications as set forth in the contract between the City of Hamilton and the defendant.

Unfortunately, the judge held that these words were not apt to incorporate the terms and

conditions of the main contract into the sub-contract.

3.2.3 Nominated Subcontract

100 Fong,C.K.(2004). Law and Practice in Construction Contract, 3rd ed., Sweet & Maxwell Asia. 101 M.John & Hughes.W. (2000). Construction Contracts-Law and Management, 3rd ed.,Spon Press.London. 102 Smith,V.P & Furmston,M. (1984). A Building Contract Casebook, Granada Publishing

48

There is another situation in subcontracting whereby the contractor has no option

about whether to subcontract and little option about to whom to subcontract, as the

architect’s nomination will usually have to be accepted. Normally, the nomination is

indicated by a prime cost sum in the tender document and is made post contractually.

This situation is named as nominated subcontracting.103

In this approach, it allows the employer or his professional team full involvement

in the early selection of the individual company, using the subcontractor’s expertise for

design and coordination.104 Besides, nomination is the practice by which an employer,

through the contract administrator, selects a person who then enters into sub-contracts

with the main contractor.105

In addition to that, the contractual position between contractor and nominated

subcontractor must be found in the subcontract. In A. Davies & Co.Shipfitters Ltd. v.

William Old Ltd 106 cites that the defendant was the main contractor for the erection of a

new store on JCT 63 terms, which provided for certain work to be subcontracted to a

subcontractor which was nominated by the architect. The architect obtained a tender for

this work from the plaintiff and instructed the defendant to accept it. The defendants sent

an order to the plaintiff on their standard printed form, which contained on its reverse

printed conditions which included a ‘pay when paid’ clause. The plaintiffs wrote

thanking the defendant for the order and carried out the work. The employer became

insolvent before having paid for all the work. The Judge held that the contract between

plaintiff and defendant was on the basis of the defendant’s printed conditions, which the

plaintiff had accepted. The defendant was only liable to pay for the work in so far he had

himself been paid by the employer.

103 Fong,C.K. (2004). Law and Practice in Construction Contract, 3rd ed., Sweet & Maxwell Asia. 104 Robinson, M.N. et.al(1996). Construction Law in Singapore and Malaysia, 2nd ed., Butterworth Asia. 105 M.John & Hughes.W. (2000). Construction Contracts-Law and Management, 3rd ed.,Spon Press.London. 106 (1969) 67 LGR 395

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3.3 Relationship of The Parties In Construction

Traditionally, the construction process is undertaken by two groups which

consists of consultants and contractors where both working on behalf of their client. In

addition to that, there are also subcontractor and suppliers who assist the contractor in

various ways and tasks.107 The contractual relationship between main parties is illustrated

in Figure 3.1.

Based on that, each of the parties is increasingly sub-divided into specialist

interests such that any building project will bring together a large number of different

specialists. With reference to that, this part will briefly discuss on responsibilities of each

parties namely main contractor, nominated subcontractor and domestic subcontractor.

107 Kwakyee,A.A (1997). Construction Project Administration in Practice, The Chartered Institute of Building.

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Key: Contractual Procedural Agreement/warranty, optional with suppliers

Figure 3.1: Contractual relationships of the parties

Source : Adopted from S.Colin

3.3.1 Main Contractor

Architect

Contractor Employer

Supplier Nominated Supplier

Domestic Subcontractor

Nominated Subcontractor

51

The production aspects of projects are undertaken by building contractors who are

essentially commercial companies that enter into a contract to construct development

projects.108 According to JKR 203A, contractor has been defined as the person or

persons, partnership, firm or company whose tender for the Works has been accepted and

who has or have signed this Contract and includes the Contractor’s personal

representatives, successors and such other persons or body of persons to whom the

Contractor has assigned or sub-let pursuant to Clause 27 of these Conditions. 109

Based on Fong’s110 views, the contractor may be sole proprietor or partnership or

body corporate typically registered under the Companies Act 1963. It includes persons

vicariously performing the contract for the contractor. While, PAM 98 defined that the

contractor as the other principal party to the main contract and may have any status and

thus could be a natural or legal person whether incorporated or not as a company,

partnership, or joint venture. 111

In short, a main contractor is the parties who are enter the contract with the

employer to execute works and to organize his considerable resources. Besides, the main

contractor is also responsible to carry out his works and diligently proceed with the same

and shall complete the same on or before the completion date as stated in the contract.

3.3.2 Nominated Subcontractor

108 Kwakye,A.A(1997). Construction Project Administration-In Practice, Addison Wesley Longman. 109 Fong,L.C.(2004).The Malaysian PWD Form of Construction Contract, Sweet & Maxwell Asia. 110 Ibid. 111 Rajoo.S(1999). The Malaysian Standard Form of Building Contract (The PAM 1998 Form), 2nd ed., Malayan Law Journal Sdn.Bhd.

52

The system of nominated subcontracting in the construction industry is common

and widespread and it is seems to have a number of advantages for the employer. 112For

that reason, it enables the employer to select a subcontractor to the contractor to carry out

certain work, particularly specialist works such as M & E works. Besides, the employer

may obtain the most competitive price for the execution of the work.

Furthermore, in PWD 203A form of contract provides the definition for

nominated subcontractor as “all specialists, merchants, tradesmen and others executing

any work or services, or supplying any materials or goods for which Prime Cost Sums (or

P.C Sums) are included in the Bills of Quantities or for which the SO has given written

instructions in regard to the expenditure of Provisional Sums.”113

Thus, the contractor is entitled to choose his own subcontractors, Clause 27.0 of

the PAM 1998 Form allows the architect to nominate subcontractors whom the contractor

must employ to carry out specific works. In the case of North West Metropolitan

Regional Hospital Board v. TA Bickerton & Sons Ltd. (1970) 1 AII ER 1039 has cited that

the employer remains bound to renominate in the situation where the nominated

subcontractor did not carry out his work as specified in the contract. According to

Rajoo114, nominated subcontractor under PAM 1998 Form is a person selected by the

architect to do defined work as a subcontractor on the site of the main contractor.

3.3.3 Domestic Subcontractor

112 Rawling,B.E. (2001).Nominated or Named, HKIS Newsletter 10(5)b June 2001. 113 Fong,L.C.(2004).The Malaysian PWD Form of Construction Contract, Sweet & Maxwell Asia. 114 Rajoo.S(1999). The Malaysian Standard Form of Building Contract (The PAM 1998 Form), 2nd ed., Malayan Law Journal Sdn.Bhd.

53

The key contractual difference between ‘nominated’ and ‘domestic’

subcontractors is that with domestic subcontractor the main contractor has the freedom of

choice over which subcontractor to employ and the terms on which they are employed.115

And nominated subcontractors as it has been explained earlier is a person selected by the

employer. In addition to that, the root principle of any domestic sub-contract is that a

main contractor selects and appoints the subcontractor to perform work for which he, the

contractor has tendered as part of the main contract.116

Most of the standard form of contract does not provide any provision that related

to the domestic subcontracting. Thus, domestic subcontracts are the result either of

individual negotiation or commonly, of imposition by one side or the other. 117

Discussion on domestic subcontractor for the purpose of this study is limited

because the focus is more on nominated subcontractor.

3.4 Relationships between employer and subcontractor

Under the traditional common law position is that a subcontract executed between

a main contractor and subcontractor cannot give rise to any privity of contract between

the subcontractor and employer. This is because subcontracting operates as a subletting

of the physical construction of the works only and does not constitute an assignment of

rights and liabilities under the main contract. The main contractor continues to be

115 Cheeseman,G.(2004). And the Nomination are…., Construction Management,RCIS. 116 Turner,F.D.(1990). Building Contract Disputes-Their Avoidance and Resolution, Longman Scientific and Technical,UK. 117 M.John & Hughes.W. (2000). Construction Contracts-Law and Management, 3rd ed.,Spon Press

54

responsible to the employer for the whole of the works and to be liable for any defective

work delay or any other default committed by his sub-contractors.118

In addition to that, the main contractor is acting as an agent for the employer

when he negotiates and awards the nominated subcontracts. However, a situation where

the circumstances were indeed exceptional was encountered in the classic case of Wallis

v. Robinson (1862) 130 RR 841 which cited that an architect negotiated with a

subcontractor, in the presence of the employer to execute work in a certain manner which

suggested that the subcontractor would be paid extra for this work.

The court held that, a separate contract was created between the employer and the

subcontractor, so that the subcontractor was entitled to recover the additional payment

directly from the employer. The decision in this case, turned on its facts where it seems

that the employer and the subcontractor had intended to enter into a separate contract.

A subcontractor who has entered into a contract with the main contractor to which

the employer is not a party has no cause of action against the employer for the price of

work done or goods supplied under his contract, 119 unless he sues under valid

assignment. Whether he has any lien on goods supplied, the property in which has passed

to the main contractor.120 Likewise the employer has no claim in contract against a

subcontractor unless he can rely on a collateral warranty. In relation to that, if a

subcontractor or supplier warrants the quality of his work or goods, in consideration of

the employer causing the contractor to enter a contract with the subcontractor or supplier,

the employer can sue the subcontractor or supplier for loss caused by breach of that

118 Ryoden (M) Sdn.Bhd. v. Syarilkat Pembinaan Yeoh Tiong Lay Sdn.Bhd.(1992) 1 MLJ 33. 119 Hampton v. Glamogan County Council (1917) A.C 17 120 Pritchett,etc.,Co. Ltd. v. Currie (1916) 2 Ch 515 C.A

55

warranty.121 The relationship arising in a subcontract is illustrated in the Figure 3.2

below.

Figure 3.2: Relationships arising from a Subcontract

Sources: Adopted from Fong.C.K.(2004)

3.5 Relationship between the main contractor and subcontractor

121 Shanklin Pier Ltd. v. Detel Products (1951) 2 K.B 854.

Employer

Main Contract

Collateral Warranty

Sub Contract

Subcontractor

Main Contractor

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In this part, consideration will be based on the effect of terms in the main contract

in order to have effective explanation of relationship between both parties. Normally,

problems arise where the terms which the main contractors are required to observe under

main contract turn out to be inconsistent with his obligations to the subcontractor under

the subcontract.122

Furthermore, in the classic case of Chandler Brothers Ltd v. Boswell (1936) 3AII

ER 179 asserts that an engineer was empowered under the terms of the main contract to

order the main contractor to remove a subcontractor. The main contractor did not provide

for this contingency in terms of the subcontractor. As a result, he was placed in an

untenable position where he would commit a breach of the subcontract if he carried out

the engineer’s instruction o remove the particular subcontractor and if he did not, he

would commit a breach of the terms of the main contract. In the event, the main

contractor chose to comply with the order of the engineer to remove the subcontract for

delay. However, in so doing, the main contractors were held to have committed a breach

of the subcontract.

Besides, a subcontract may be drafted to expressly incorporate certain terms of

the main contract into the subcontract in order to forestall these inconsistencies. Where

the terms of incorporation are clear, the effect of incorporation may be readily

determined.123

Nevertheless, terms of incorporation may not always clear. There is a question

whether a materials term of the main contract has been effectively incorporated in a

subcontract. Thus, in a classic case of Geary, Walker & Co Ltd v. W Lawrence & Sons

122 Russell,J.(2006). Protecting The Subcontractor’s Entitlements, Electrical Times, April 2006 edition. 123 Jurong Engineering Ltd v. Paccon Building Technology Pte. Ltd (1999) 3 SLR 667 (CA)

57

Ltd (1906) cites that “the term of payment for the work….shall be exactly the same as

those set forth in clause 30 of the (main)….contract.” In relation to that, problems with

incorporation are exacerbated where the structure of the main contract is of a different

contractual character from that of the subcontract. 124

In a nutshell, in the absence of any express incorporation clause, there is some

dicta to the effect that recourse may be made to the terms of the main contract to resolve

ambiguities in the subcontract in favor of a meaning which would enable the main

contractor to comply with the main contract as demonstrated in the case of Gilbert Ash

(Nothern) Ltd v Modern Engineering (Bristol) Ltd (1973) 3 AII ER 195.

3.6 Provision under Subcontract Form in relation to Nominated Subcontractor

In order to have a better understanding of responsibilities and rights of each party,

discussion on the provisions in the standard form of contract is needed. Therefore, this

study will be based on the provisions in nominated subcontract mainly related to delay

and extension of time. According to Arditi and Chotibongs’s125 study, they points out that

subcontractors are very important to the successful completion of most construction

projects, yet the many issues involved in subcontracting practice are seldom

acknowledged.

3.6.1 Delay and extension of time

124 Fong,C.K. (2004). Law and Practice in Construction Contract, 3rd ed., Sweet & Maxwell Asia. 125 D.Arditi,M.Asce & R.Chotibhongs (2005). Issues in Subcontracting Practice, Journal of Construction Engineering and Management, 131, 866-876.

58

It is unusual for standard form of contract not to contain provisions dealing with

the entitlement of extension of time.126 In addition to that, extension of time as

contractual remedies is so essential to the interest of the employer. 127 In order to grant

extension of time, the delay occur will be measured according to type of delay that has

been explained in chapter 2 such as excusable, non excusable, compensable and

concurrent.128

Generally, delays are classified according to liability into two major types,

namely excusable or non excusable delays.129 Delay causes by nominated subcontractor

are one type of excusable delay. According to PWD 203A Clause 43 (k), PAM 1998

clause 23.7 and CIDB 2000 clause 24 (p) assert that the main contractor are entitled to

claim for extension of time if there is delay on the part of nominated subcontractor.

In relation to that, the provisions of extension of time under subcontract are also

considered in this study. Responsibilities of each party on extension of time differ. In

PWD 203N Clause 26(a), PAM 1998 Subcontract Clause 8.1 and CIDB.B (NSC)/2002

Clause 19.2, it has been set out that the subcontractor is required to give written notice of

the delay progress or completion of the subcontracts works or any section to the

contractor. Moreover, the architect or the S.O is required to grant reasonable extension of

time after receiving the subcontractor’s notice of delay and the main contractor shall give

the notice of delay from the subcontractor to the employer’s responsibilities.130

126 Ventrella,T(1994). A contractor’s Guide to Contract Law, Dunnick Publications Ltd., London 127 Robinson, M.N. et.al(1996). Construction Law in Singapore and Malaysia, 2nd ed., Butterworth Asia. 128 Alkass.S, Mazerole,M. & Harris, F.(1995). Construction Delay Analysis Techniques, Construction Management and Economics, 375-394. 129 Ibid. 130 Rajoo.S(1999). The Malaysian Standard Form of Building Contract (The PAM 1998 Form), 2nd ed., Malayan Law Journal Sdn.Bhd.

59

Based on that, it proves that giving notice by the subcontractor is a condition

precedent to the performance by the architect (PAM 1998) or the S.O (PWD 203A) of his

duties under the contract. The subcontractor’s notice of delay is essential before the

architect is obliged to consider, prior to practical completion, whether an extension of

time might be appropriate. 131

An extension of time can be granted by the architect (PAM 1998) and the S.O

(PWD 203A) by the reasons fixed under the contract. There are a number of causes of

delay which may give rise to an extension of time to the subcontractor, for instance,

variation order, late commencement of works, late of information and other items which

give an entitlement to the nominated subcontractor as well as contractor for an extension

of time for the completion of the main contract.132

3.6.2 Relevant Events in Standard Form of Contract

In general, many of the building contracts contain similar provisions where the

procedure and grounds for granting extension of time set out in the contracts are about

the same. This is due to the reason that commonwealth countries such as Malaysia,

Singapore and Hong Kong have drafted their own standard forms of contract based on the

English JCT contracts.133

131 Fong,L.C.(2004).The Malaysian PWD Form of Construction Contract, Sweet & Maxwell Asia. 132 I.Ndekugri(1994).Delay, Extension of Time and Liquidated Damages under JCT80, Construction Paers, Reading University,1-14. 133 Nee,C.H.(2005). Extension of Time: The Issue of Delay Notification, Faculty of Built Environment,UTM.

60

In addition to that, every each contracts also set out ground for granting extension

of time for example PWD 203 under clause 43, PAM 1998 under clause 23.7 and CIDB

2000 under clause 24. A fundamental point is that the time for completion can only be

extended where the contract permits, and strictly in accordance with the contract

provisions. Nevertheless, if delay is caused by some event which the contract does not

cover, then the contractor cannot claim an extension, nor can the employer insist on

giving one.

This study will focus more on delay in nominated subcontractor’s work, thus

provision under subcontract form such as PWD 203N Clause 26(a), PAM 1998

Subcontract Clause 8.1 and CIDB.B (NSC)/2002 Clause 19.2 will be referred accordingly

with the main contract. From provisions of these forms of contracts, it can be concluded

that the nominated subcontractor shall forthwith written notice of the delay in the

progress of the subcontract works to the main contractor. In addition to that, the notice

must be substantiated by relevant events that causing to delay, expected effect of the

delay and an estimate of time required. Further to that, the main contractor shall inform

the architect thereof and of any representations made to him by the nominated

subcontractor.

In PAM 1998 Subcontract Clause 8.2, it has been provided that the relevant

events causing delay for which extension of time may be given. It has been expanded that

after the architect had received the information is of the opinion that the completion of

the subcontract works is likely has been delayed beyond the period based on two main

reasons whereby the first reason is any of the matters specified in the Clause 4.1(

Variations) and Clause 6.1 (Commencement and Completion of Subcontract Works) of

this subcontract or by any act or omission of the main contractor which is included his

subcontractors, his servants or agents, and the second reason is for any (except delay on

the part of the subcontractor) for which the main contractor could obtain an extension of

time for completion under the main contract. For that reason, the architect shall provide

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his written consent to the main contractor to grant the extension of time to the nominated

subcontractor.

Basically, it could be said that most of the building contracts has set out similar

grounds for granting extension of time in the main contract which is incorporated in the

subcontract. Thus, most common grounds has been adopted from the main contract which

are force majeure, exceptionally inclement weather, insurance contingencies, civil

commotion, strikes and lockout, architect or superintending officer’s instructions,

variation,testing and inspection, late supply of information, employee’s licensees,

materials and goods supplied by the employer, delay or failure to give site possession,

contractor’s inability to secure labour, goods and materials, act of prevention or reach of

contract by employer. The cause or causes of delay of which the nominated subcontractor

enumerate in the notice must fall under the events listed are to qualify for an extension of

time. Table 3.1 below demonstrates the grounds for granting extension of time provided

in different standard forms of contract.

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Table 3.1: Comparison of Grounds for Granting Extension of Time in Different

Standard Forms of Contract

Forms of Contract Relevant Events

PWD 203 PAM 98 CIDB

Force Majeure √ √ √

Exceptionally inclement weather √ √ √

Insurance Contigencies √ √ √

Civil commotion, strikes, lockout √ √ √

Architect or superintending officer’s instructions

√ √

Discrepancies in or between contract documents

√

Variation √

Discovery of antiquities and fossils √

Testing and inspection √ √

Prime cost or provisional sum item which give rise to a variation

√

Late supply of information √ √ √

Employer’s Licensees √ √ √

Materials and goods supplied by employer √

Delay or failure in giving possession of site √ √

Disputes with neighboring owners √

Contractor’s inability to secure labour, goods and materials √

One or ore of the “excepted risks” √

Compliance with statutory requirements which result in a variation

√

Act of prevention or breach of contract by employer √

Any other ground √

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According to Table 3.1 above, it shows that most of the forms of contract are

provide relevant events which interest to both parties under main contract. However, for

this study, the ground which has been provided in the main contract will be applied in the

subcontract. It could be said that, the most common event is force majeure which this

term refers to acts of God or man-made events which beyond the control of the parties.

However, it must have a restricted meaning as several of the events normally classified

under this term such as war, strikes and lightning are dealth with separately.134

In the classic case of Lebeupin v Crispin (1920) 2 KB 714, McCardie J accepted

that force majeure is normally used ‘with reference to all circumstances independent of

the will of man and which it is not in his power to control’.135 Fundamentally, it is clearly

used to describe situations where an unforeseeable event makes execution of the contract

wholly impossible and is of such important that it cannot be overcome. 136 Nevertheless,

the parties may always revert to force majeure as a residual provision where the events

do not fall precisely within the detailed list.137 It has been demonstrated in the case of

Penang Development Corporation v. Teoh Eng Huat (1992) 1 MLJ 749.

Exceptionally inclement weather is one of the most common grounds on which a

claim or extension of time is made.138 However, the adverse weather conditions do not

excuse the contractor’s non-performance. The case of Maryon v. Carter (1830) 4 C & P

295 is illustrative. The effect of the exceptionally inclement weather must be assessed at

the time and in relation to the work being actually carried out and not when it was

134 I.Ndekugri (1994). Delays, Extension of Time and Liquidated Damages under JCT80, Construction Papers, Reading University. 35,1-14. 135 Rajoo.S(1999). The Malaysian Standard Form of Building Contract (The PAM 1998 Form), 2nd ed., Malayan Law Journal Sdn.Bhd. 136 M.John & Hughes.W. (2000). Construction Contracts-Law and Management, 3rd ed.,Spon Press 137 Rajoo.S(1999). The Malaysian Standard Form of Building Contract (The PAM 1998 Form), 2nd ed., Malayan Law Journal Sdn.Bhd. 138 I.Ndekugri (1994). Delays, Extension of Time and Liquidated Damages under JCT80, Construction Papers, Reading University. 35,1-14.

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programmed to be carried out by the contractor at the time of delay.139 In addition to that,

to succeed with a claim on this ground the contractor as well as nominated subcontractor

must produce evidence that the conditions complained against are exceptional for that

time of year and location. Weather records covering a reasonable period as well as site

diaries will normally be determined by architects.140

According to Table 3.1, which delay is caused by some specified perils, which

normally covered by works insurance, the nominated subcontractor may be entitled to an

extension of time. The principles of this case can be applied in the delay in nominated

subcontractor’s work. In Surrey Health Borough Council v. Lovell Construction (1990)

48 BLR 108 has construed that even if the loss or damage is brought about by omission or

default of the contractor, it appears that this clause still applies. In addition to that, some

extension of time clause clearly stated that the main contractor shall not be given

extension time where instruction or acts of the employer or the architect or

superintending officer are necessitated by or intended to cure any default of breach of

contract by the main contractor. Based on this provision, the man contractor is not

entitled to a time extension for anything that is his own intentional default as opposed to

his default or negligence.141

This Table 3.1 also shows that civil commotion, strikes and lockout has been

provided in most of the forms of contract. Under this clause the events which justify an

extension of time are civil commotion, strike or lockout affecting any of the trades

engaged in the preparation, manufacture or transportation of any of the goods or materials

required for the works. The first event listed is civil commotion and the essential element

here is that of tumult or turbulence has cited in the case Levy v. Assicurazioni Generali

(1940) 2 AII ER 437. This decision is important to employers. Delays which can be 139 Turner,D.F.(1994). Building Contracts – A Practical Guide, Longman Group Limited,U.K. 140 Kaming,P.F.,Olomolaiye,P.O, Holt,G.D. & Harris,F.C.(1996). Factors Influencing Construction Time and Cost Overruns on High-Rise Projects in Indonesia. University of Wolverhampton,U.K.15, 83-94. 141 Rajoo.S(1999). The Malaysian Standard Form of Building Contract (The PAM 1998 Form), 2nd ed., Malayan Law Journal Sdn.Bhd.

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attributed to a strike or civil commotion do not entitle contractors to claim loss and /or

expenses against the employer.

Besides, late instruction, drawings and other information is considered as

important ground for the claim or extension of time. This is the most controversial

relevant event. The most frequent use of this ground for extension is in relation to late

receipt or non-receipt of information and instructions on nominations. 142

In short, the nominated subcontractor may attempt to claim for extension of time

in the event of project delay. It must be also noted that an extension of time can only be

granted on the relevant events expressly set out in the contract as in the Table 3.1.

3..6.3 Breach of Contract

Basically, if one of two parties to a contract breaks the obligation which the

contract imposes, a new obligation will in every case arise, a right of action conferred

upon the party injured by the breach.143 A breach of condition at law is a major breach. In

addition to that, when the breach is of a condition and so fundamental in its effect, it may

entitle the aggrieved party to treat the contract during or before progress as repudiated by

the other, so as to bring it to an end, or to treat the precise and apparently binding terms

of the contract as overruled.144

142 I.Ndekugri (1994). Delays, Extension of Time and Liquidated Damages under JCT80, Construction Papers, Reading University. 1-14. 143 Guest,A.G.(1975). Anson’s Law of Contract, Twenty Fourth Edition., Clarendon Pres.Oxford. 144 Turner,F.D.(1990). Building Contract Disputes-Their Avoidance and Resolution, Longman Scientific and Technical,UK.

66

The recognition of fundamental breach should be done carefully. Thus, in a case

in which such breach was alleged over the non-availability of a hired ship due to the

defendant’s fault for 20 weeks out of a total hire period of 24 months, it was held that

there was not fundamental breach, as the plaintiff could still obtain a large part of the hire

benefit.145 On the other hand, the installation of defective pipework which led to the

complete destruction of a mill by fire was held to be fundamental.146

In this study, the circumstances where defaulting party breach of the contract and

whether be liable to pay damages to the innocent party will be discussed.

3.6.4 Damages for non-completion

In practice, building contract provides a remedy for breach of contract by the

contractor of his obligation to complete the works on time lies generally in damages. For

that reason, apart from the contracts must be set time is held to be of the essence for the

contract. The same principle commonly applies under subcontract, where the nominated

subcontractor liable for damages in the event of delay in completion of the works. In

essence, the nominated subcontractor’s delay allows the main contractor to be granted an

extension of time.147

In PAM 1998 Subcontract Clause 7.1, it provides that if the subcontractor fails to

complete the subcontract’s work or any section within stipulated time or extended period,

145 Hong Kong Fir Shipping Co. Ltd v. Kawsaki Kisen Kaisha Ltd (1962) 146 Harbutt’s Plasticine Co. Ltd. v. Wayne Tank & Pump C. Ltd. (1970) 147 Fong,C.K. (2004). Law and Practice in Construction Contract, 3rd ed., Sweet & Maxwell Asia.

67

the subcontractor shall pay or allow to the main contractor a sum equivalent to any loss or

damages suffered caused by the failure of the subcontractor. Nevertheless, exceptional

has been sets out in Clause 7.2, it shows the main contractor may not entitle to claim any

loss or damage under Clause 7.1 unless the architect shall have issued to the main

contractor a certificate in writing stating that in his opinion the subcontract works o the

relevant section ought to be have been completed within specified time.

3.7 Nature of Delay in Nominated Subcontracting Work

The primary nature of this event is delay in the execution of work by one of the

nominated subcontractors or nominated suppliers. Usually, a contractor will responsible

towards an employer for whatever nominated subcontractors and suppliers do or fails to

do. 148 However, the contractor is allowed to secure an extension and avoid damages

when a nominated subcontractor has defaulted in the manner stated, provided that

thecontractor has done everything reasonable in the circumstances to mitigate the effects.

In addition, if the contractor has taken appropriate action, he is not liable to the

employer.149

Therefore, PAM 1998 Clause 27.5 deals with delay in the completion of the

subcontract works by the nominated subcontract and the circumstances in which the

contractor may grant an extension of time to the nominated subcontractor. It provides

that, the contractor shall not grant any extension of time to a nominated subcontractor

without the written consent of the architect which must not be unreasonably withheld.

148 Turner,F.D.(1990). Building Contract Disputes-Their Avoidance and Resolution, Longman Scientific and Technical,UK. 149 Chappell,D., Smith,V.P, & Sims,J.(2006). Building Contract Claims, 4th ed., Blackwell Publishing.

68

The use of the phrase delay on the part of the nominated subcontractors and

nominated suppliers came in for some judicial criticism in Westminster Corporation v.

J.Jarvis 150which arose from JCT 63. According to the court the phrase does not mean the

delay caused by nominated subcontractors or nominated suppliers. It was construed as a

failure to complete the nominated subcontract works within the appropriate subcontract

period. It followed that nominated subcontractors who completed on time but had to

return to carry remedial work could have caused the sort of delay described by the

phrase.151

According to PWD 203A Clause 43(k) and PAM 1998 Clause 23.7(vii) and CIDB

Clause 24.1(p), the contractor is allowed to an extension of time on account of delay on

the part of the nominated subcontractors or nominated suppliers. Furthermore, the

contractor would be entitles to an extension of time in any event if the reason the same

reasons as set out in the PAM 1998 Clauses 23.7(i) to 23.7(vi) and Clauses 23.7(viii) to

23.7(xiii). As the case of Westminster Corporation v. J.Jarvis, the case demonstrated that

this clause is limited and where it was held by the House of Lords that such ‘delay on the

part of nomination subcontractors’ was confined to delay in completing the subcontract

works.

Thus, as has been illustrated by the case if a nominated subcontractor ostensibly

completes his subcontract works but later found to be breach and has to return to the site

to remedy breach, that is not ‘delay on the part of the nominated subcontractor’.152

Accordingly, in those circumstances, the contractor is not entitled to an extension of time.

The House of Lords explained their reasoning as follows:

150 (1970) 1 WLR 637 1 AII ER 943 151 I.Ndekugri(1994).Delay, Extension of Time and Liquidated Damages under JCT80, Construction Papers, Reading University,1-14. 152 Rajoo.S(1999). The Malaysian Standard Form of Building Contract (The PAM 1998 Form), 2nd ed., Malayan Law Journal Sdn.Bhd.

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“…..the subcontractor is not in delay so long as, by the subcontract completion

date, he achieves such apparent completion that the contractor is able to take

over, notwithstanding that the work so apparently completed may be defective.”

On the other hand, if the breach is discovered before the subcontract works or the

supply of goods or materials period ends so that completion is then delayed beyond the

completion date, either case while the breach is being remedied, this would amount to

‘delay on the part of the nominated subcontractor’ and thus gives rise to a right to

extension of time.153

The distinction between delays on the part of nominated subcontractor and delay

caused by a nominated subcontractor can be illustrated in figure 3.3 and figure 3.4 as

follows.

153 Robinson, M.N. et.al(1996). Construction Law in Singapore and Malaysia, 2nd ed., Butterworth Asia.

NSC Programme completion period

Delay on the part of NSC

Default rectification

Default discovered Actual completion date

Figure 3.3: Delay on the part of Nominated Subcontractor Source: Adopted from Robinson et.al (1996)

70

With reference to the illustrations in Figure 3.3, it established the contractor’s

claims and entitlement to an extension of time. In a contrasting situation, no liquidated

damages may be claimed by the employer, and the employer suffers his own loss caused

by the delay. In other words, both nominated subcontractor and employer lose, while the

contractor is compensated.

However, according to illustration in Figure 3.4, it demonstrated that the situation

whereby the contractor cannot claim extension of time and must be therefore either

accelerates his programme to meet the original date for completion or suffer liquidated

damages for delay.154 In fact, the employer is either not affected or is recompensed for his

own loss. Further, the contractor claims his disturbance cost (which includes any

liquidated damages he has suffered under the main contract) from the nominated

subcontractor. As a result, nominated subcontractor loses and both contractor and

employer are compensated.

154 Westminster City Council v. Jarvis & Sons Ltd. (1970) 7 BLR 64

NSC Programme completion period

Delay caused by NSC

Default rectification

(Apparent completion)

Actual completion

date

Figure 3.4: Delay caused by Nominated Subcontractor Source: Adopted from Robinson et.al (1996)

(Default discovered)

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3.8 Circumstances Contributes to Delay in Nominated Subcontractor’s Works

Further discussion will be focuses more on circumstances that constitute to delay

in nominated subcontractor works will be carried out in this study. The circumstances are

illustrated based on the court cases. However, for those circumstances which are not

supported by the court cases will be substantiated by the relevant clauses of the standard

form of contract (i.e PWD203A, PAM 98, CIDB 2000). The circumstances which will be

discussed on account of common causes which are contribute delay in nominated

subcontractor’s works. The circumstances are include late instructions, delay in delivery

of materials and goods by the employer, late payment, changes, delay in giving

possession of the site, suspension of works, discrepancies between contract drawings and

contract bills, main contractor fail to provide and erect facilities, interference by the main

contractor, negligence by the nominated subcontractor, delay to rectify damages and

default by the main contractor.

3.8.1 Late Instructions

Basically, this problem is caused by the late constructional information furnished

by the S.O (PWD 203A) or architect (PAM 1998) for execution of work. In practice,

under main contract, the S.O (PWD 203A) or architect (PAM 1998) is obliged to provide

the main contractor with further reasonably necessary information to amplify the

drawings or bill of quantities as and when necessary. Meanwhile, under subcontract PAM

1998 Clause 5.1 asserts that, a nominated subcontractor may requires the main contractor

to request the architect to specify in writing the provision of the main contract which

empower the issue of the said instruction. Further to this, the main contractor shall

convey the architect’s answer of the request.

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However, the failure of the S.O (PWD 203A) or architect (PAM 1998) to provide

the instruction in good time puts the employer in breach of contract. Thus, the

subcontractor has to make the request for the information at the right time. 155 In Neodox

Ltd v. Swinton and Pendlebury Borough Council (1958) 5 BLR 34, the main contractor

alleged that there was an implied obligation on the part of the employer to provide all

necessary information ‘in sufficient time to enable the contractor to execute and compete

the works in an expeditious and economic manner and/or sufficient time to prevent the

main contractor being delayed in such execution and completion.” Nevertheless, Diplock

J ruled that:

“What is reasonable time does not depend solely upon the convenience and

financial interest of the claimants (contractors). No doubt it is to their interest to

have every detail cut and dried on the day the contract is signed, but the contract

does not contemplate that. It contemplates further details and instructions being

provided, and the engineer is to have a time to provide them which is reasonable

having regard to the point of view of him and his staff and the point of the

Corporation (employer), as well as the point of view of the contractors.”

With reference to that, delay may occur in nominated subcontractor’s work when

the instruction is not given in appropriate time. It was illustrated in the case of Shen Yuan

Pai v. Dato’ Hood Teck & Ors.156 This case cites that, the plaintiff was the main

contractor, and the defendant was the employer, had contracted for the construction of an

office building in Thompson Road in Kuching. The defendant was found that contractor

had delay in completion. The plaintiff contended that the delay has been caused by

nominated subcontractor because of the lack of instructions or directives by the architect.

It was held that the delay was solely by the defendant’s default and that such failure led

to delay in the progress of the main contract works. Thus, the main contractor was not

liable to pay damages. By this case, it proves that the late instruction by the architect can

155 Fong,L.C. (2004). The Malaysian PWD Form of Construction Contract, Sweet & Maxwell Asia,Malaysia. 156 Shen Yuan Pai v. Dato’ Wee Hood Teck & Ors (1976) 1 MLJ 16

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be results delay in nominated subcontractor. In addition to that, the contractor is not

entitled to receive necessary information to enable early completion too. This principle

has been illustrated in Glenlion Construction Ltd v. Guiness Trust (1987) 39 BLR 89.

3.8.2 Delay in delivery of materials and goods by the employer

The employer may choose to supply some of the materials or goods for

incorporation in the works. In PAM 1998 Clause 23.7 (ix) has provided that the delay or

failure by the employer to supply materials and goods which it has been agreed to

provide for the works which may entitle the nominated subcontractor to attain an

extension of time.

It must be noted that, in PAM 1998 there is no express provision in the conditions

to allow for the possibility of the works being carried out using materials and goods

which are to be supplied by the employer. However, certain circumstances do in reality

exist and if there is a delay caused the employer in supplying the materials and goods,

thus the main contractor should be entitled to an appropriate extension of time. Same

goes if the delay occurs in nominated subcontractor’s work. It could be possibly if the

employer caused to delay by failure to deliver such important material for nominated

subcontractor’s work. It has been established in the case of Lightweight Concrete

Sdn.Bhd. v. Nirwana Indah Sdn.Bhd. (1999) 5 MLJ 351. Based on this case, the plaintiff

was nominated subcontractor to design, manufacture, supply, delivery and installation of

the pre-finished concrete panel with granite slabs. The defendant was developer

(employer).The plaintiff was late in completion. Thus the defendant claimed the damages

for the delay. However, the plaintiff contended that the delay was due to the neglect of

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the defendant himself to secure sufficient and timely granite to the plaintiff. It was held

that the defendant claimed was dismissed.

In view of the above case, it has proven that circumstances may contribute in

extending of completion date in nominated subcontracting. For that reason, the employer

should liable to be granted an extension of time to the main contractor if that delay which

has been illustrated affected to the work programme.

3.8.3 Late Payment

This study will also look an overview of this circumstance which is considered as

a significant cause of delay in nominated subcontractor’s work. Problems in the payment

delays become common in construction contract.157It includes where the architect or

quantity surveyor fails to consider or evaluate claims submitted by the main contractor

within reasonable time, delay payment by the employer, payment is disputed by the main

contractor or the employer, problem with certificate and withhold the payment without

reasonable reasons.

Normally, as provided in standard form of contract, the main contractor has to pay

the nominated subcontractor when he receives payment certificates from he employer

(PAM 1998)158 or when he receive payment from the employer (PWD 203N).159 In other

word it also known as pay when paid clause. Based on PAM 98 Clause 27.3, has asserts 157 Croudace Ltd. v London Borough of Lambeth (1986) 33 BLR 25. 158Rajoo.S(1999). The Malaysian Standard Form of Building Contract (The PAM 1998 Form), 2nd ed., Malayan Law Journal Sdn.Bhd. 159 Fong,L.C. (2004). The Malaysian PWD Form of Construction Contract, Sweet & Maxwell Asia,Malaysia.

75

that the nominated subcontractor is entitle to be paid by the main contractor within 14

days after received the certificate from the architect. The question that should be noted is

the main contractor fails to pay the nominated subcontractor and whether the main

contractor entitles to withhold the money which is has been certified by the employer.

The non payment of the employer does not necessary due to employer default in

payment. The employer might withhold the payment due to default by the main

contractor. The problem arise is when the nominated subcontractor request for payment

but he rely on the clause pay when paid. There is a case illustrated that this clause is

enforceable. In DEC Electric, Inc. v. Raphael Construction Corp.160 under the

subcontract provided that no funds will be due to the subcontractor unless the main

contractor is paid by the owner in accordance to the sworn statement. Thus, the court

found that as a matter of law, that language was a condition precedent and that the

subcontractor was not entitle. Further discussion on the cases which are same issues such

as Antara Elektrik Sdn.Bhd. v. Bell & Order Bhd (2002) 3 MLJ 321, Engineering

Construction (PTE) Ltd v. Ohbayashi – Guni Ltd. (1986) 1 MLJ 218, CSK Electrical Co.

Bhd. V. Regional Construction Sdn. Bhd. (1987) 2 MLJ 763, and Alliance (Malaya)

Engineering Co. Sd. Bhd. v. San Development Sdn. Bhd. (1974) 2 MLJ 94.will be carried

out in the following chapter. According to above elaboration, it shows that this

circumstance can be delayed in nominated subcontracting and the entire construction.

3.8.4 Changes Out of Scope of Work

160 (1989) 538 So. 2d 963, 964.

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Most of the standard forms of contract provide a clause in relation to changes or

commonly known as variation. This clause is one of the important provisions for

covering any changes in terms of scope of work procedure, materials and goods to be

used. However, by this clause it also creates some problem to delay in nominated

subcontractor’s work. In addition to that, the Privy Council decision can be referred as in

Mitsui Construction Co. v. The Attorney General of Hong Kong (1986) CLJ 134. Thus ,

it is conceivable, in most cases that the basis for determining a contractor’s entitlement to

time extension on this ground could be different from the basis for determining the effect

of a variation on the contract price.

Furthermore, both of the subcontracts PWD 203N and PAM 1998 Subcontract

have been provided that the provisions on the scope of changes. As a result, the time of

the construction work can be delayed by this circumstance. This discussion will be

referred to substantial changes where normally require work beyond the scope of the

contract. In the case of Peter Kiewit Sons Co. v. Summit Construction Co. (DDC 1968)

292 F, the plaintiff was a main contractor and he substantially increased the magnitude

and difficulties of the subcontractor’s back filling work on missile project. The court

found that the main contractor breached the subcontract by ordering changes beyond the

scope of the contract.

3.8.5 Delay in giving possession of the site

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Normally, the main contractor and nominated subcontractor may suffer due to the

failure on the part of the employer to grant him timely possession of site. Furthermore, if

the delay or any deferment without reasonable reason may constitutes a breach of

contract and sets time to become at large.161

The contractor shall from time to time make available to the nominated

subcontractor such part of the site and main contracts works and such means of access

thereto within the site is reasonably necessary to enable the nominated subcontractor to

execute his works. 162 However, the main contractor shall not be bound to give to the

nominated subcontractor possession or exclusive control of any part of the site or the

main contract works. With reference to that, the problems may arise when the part of the

site of subcontract work not ready for the nominated subcontractor to carry out his work.

Subsequently, this problem may constitute to delay in the subcontract works thus, the

issue is whether the main contractor is entitling to an extension of time.

According to Rajoo163, the contractor may allowed an extension of time if the

delays of the nominated subcontractors or suppliers fall within the relevant events which

identified in PAM 1998 Clause 23.7(except clause 23.7(vii)). However, PWD 203A

Clause 38(d) has highlighted that the S.O is empowered to issue an instruction to revise

the Date for possession in the event of any delay in the giving of possession of site or

sections or part thereof by the date for possession. In consequence the S.O is also

empowered to grant the appropriate extension of time pursuant to PWD 203 Clause

43(g). However, it is clearly provided that the contractor would not entitle to any losses

161 Turner,F.D.(1990). Building Contract Disputes-Their Avoidance and Resolution, Longman Scientific and Technical,UK 162 Clause 11(a), PWD 203N Standard Form of Subcontract 163 Rajoo.S(1999). The Malaysian Standard Form of Building Contract (The PAM 1998 Form), 2nd ed., Malayan Law Journal Sdn.Bhd.

78

or damages caused by such delay in giving possession of the site.164 Thus, in order to

determine the circumstances that cause to delay in nominated subcontractor, further

discussion on the case of Thamesa Designs Sdn. Bhd. v Kuching Hotels Sdn.Bhd. (1993)

2 AMR 2083) will be carried out in chapter 4.

3.8.6 Suspension of works

Basically, on account of the main contractor fails to make a payment in

appropriate time, the nominated subcontractor have the right to suspend the further

execution of the subcontract works until such payment being paid and such period

suspension shall be deemed to be an extension of and be added to the period of

completion.165 Moreover, in PAM 1998 Clause 11.7, it emphasizes that any extension of

time granted to the nominated subcontractor in this respect will not entitle the main

contractor to an extension of time under the main contract.

In addition to that, it has been illustrated in the case of J.M. Hill v London

Borough of Camden (1980) 18 BLR 31,CA. According to this case, the contractor was

held entitled to suspend the works because he was being paid certified sums and his claim

for loss and expense were being ignored by the architect. As a result, the contractor was

held to have reasonable grounds for suspending the works. But, the problem may arise if

the nominated subcontractor suspends the work without any reasonable grounds. With

reference to that, delay in nominated subcontractor has a potential to be occurred by this

occasion.

164 Fong,L.C.(2004).The Malaysian PWD Form of Construction Contract, Sweet & Maxwell Asia. 165 Rajoo.S(1999). The Malaysian Standard Form of Building Contract (The PAM 1998 Form), 2nd ed., Malayan Law Journal Sdn.Bhd.

79

3.8.7 Main contractor fail to provide and erect facilities

Under normal construction, a main contractor has an obligation to provide and

erect facilities for the nominated subcontractor. In this situation, the main contractor

should provide all the facilities for the subcontract works such as water, lighting,

watching, site security, allocation of space for storage and accommodation and rubbish

clearing at his own cost. Thus, a nominated subcontractor has right to make all necessary

in appropriate manner. It has been clearly stated in PAM 1998 Subcontract Clause 15.1,

PWD 203N Clause 5, Clause 6 and Clause 7 and CIDB.B (NSC)/2002 Clause 8.

However, CIDB.B (NSC)/2002 expands the clause and states that such utilities

are supplied by the main contractor then the nominated subcontractor have to pay the

main contractor for the consumption of the same in connection with the subcontract

works. Besides that, the nominated subcontractor has to bear at his own cost. The

problem may arises when the main contractor failed to supply any utilities such as

electrical for the nominated subcontract works. As a result, the delay may occurred in the

process of the nominated subcontractor to carry out his work. It has been demonstrated in

the case of CSK Electrical Co. Bhd. V. Regional Construction Sdn. Bhd. (1987) 2 MLJ

763. According to this case, the plaintiff was the nominated subcontractor for the

execution of electrical works under the main contract. The defendant was the main

contractor. One of the issue has been highlighted in this case is when the main contractor

failed to pay to CSK in full amount due to late in completion in nominated subcontract

works. However, the plaintiff contended that the delay has been caused by failure of

plaintiff to obtain some of the necessary electrical equipment. The court found that, the

plaintiff’s order because the delay caused by the defendant. As an implication, the

defendant should liable for damages if it affected in the main contract. Thus, it proves

that the delay in nominated subcontracting works may also caused by this circumstances.

3.8.8 Interference by the main contractor

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Delay in nominated subcontractor’s works also can be caused by wrongfully

interfere by the parties of the project. The problem which may occurs is when the

nominated subcontractor not able to precede the subcontract works in properly within

specified time and it lead to delay in completion. According to PAM 98 Subcontract

Clause 17, it has been highlighted that the contractor and subcontractor shall not

wrongfully use or interfere with the plant, ways, scaffolding, temporary works,

appliances or other property respectively belonging to or provided by either of them.166

Besides, the same provision also has been asserted in PWD 203N Clause 9.

This problem also has been highlighted in the different approach. There is a

classic case of British Waggon Co. v Lea (1880), where the contract involved the repair

of railway wagons. It was held that the defendants did not attach any importance to

whether the repairs were done by the company or anyone with whom the company might

enter into a subsidiary contract to do the work. According to the principle of the case, it

can be apply into this discussion which the nominated subcontractor was delay due to

unreasonable information had given.

3.8.9 Negligence by the nominated subcontractor

The main contractor is liable to the employer for all defaults in the work of

nominated subcontractor, irrespective of whether the subcontractor’s default arises in his

design, fabrication or workmanship. It has been demonstrated in the case of Equitable

166 Rajoo.S(1999). The Malaysian Standard Form of Building Contract (The PAM 1998 Form), 2nd ed., Malayan Law Journal Sdn.Bhd.

81

Debenture Assets Corporation Ltd v. Morgan Branch Roberts and Ors. (1984) 2 CLD 10-

01.

Furthermore, PAM 1998 Clause 23.7(vii) provides that for the architect to grant

extension of time to the main contractor in respect of delays on the part of nominated

subcontractor or nominated suppliers, but this does not affect the fundamental principle.

With reference to that, the employer cannot bring a contractual claim directly against

nominated subcontractor because there is no privity of contract. Besides that, the way in

which the employer must pursue a claim against the nominated subcontractor is through

suing the main contractor for breach of the main contractor. In turn, the main contractor

sues the defaulting by nominated contractor. This event may also caused delay in the

construction work.

3.8.10 Delay to rectify damages

In general, a main contractor’s responsibility for a nominated subcontractor’s

work is most likely to arise in respect of failure to comply with required standards of

workmanship or the quality and fitness for their purpose of any materials supplied.

It has been already noted that, apart from any express terms in a building contract,

it is the contractor’s implied obligation to build in a workmanlike manner with materials

that are of good quality and fit for their intended purpose. Nevertheless, while the

obligation as to the fitness of materials only arise where the employer has relied on the

skill judgment of the contractor and will therefore be excluded where a subcontractor is

nominated, the obligation as to quality is strict and will therefore normally remain

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intact.167With reference to the above discussion, PWD203A clause 28, PAM 1998 clause

27 and CIDB clause 40 laid down the list of obligations for nominated subcontractor.

Clause 27.2 (i) provides that the nomination subcontractor must carry out and complete

the subcontract works in every respect to the reasonable satisfaction of the contractor and

the architect and in conformity with all reasonable directions and requirements of the

contractor.

Normally, the nominated subcontractor is still liable for making good of his

defects. In addition to that, the subcontractor’s liability to remedy defects is worded to

keep him in step with the main contractor as a similar liability to any liability of the main

contractor.168 Most subcontracts such as in PWD 203N Clause 18 (a) to (c), PAM 1998

Subcontract Form Clause 10.2 to 10.4 and CIDB.B (NSC)/2002 Clause 21 included the

provision in relation to the defects in subcontract works.

For that reason, the main contractor may ask the nominated subcontractor to carry

out rectification works for the defective. In addition to that, the nominated subcontractor

has to complete the rectification works within due date. The problem arise is when the

nominated subcontractor has delayed in carrying out the work due to many of defective to

be done. In was held in the case of Wesminster CC v. Jarvis, the delay occur in this

construction due to rectification work was not consider as delay on the nominated

subcontractor. For this study purposes, it has been proven that delay can be occurred by

rectification of the defective works.

167 Young & Marteen Ltd v. Mcmanus Childs Ltd (1969) 1 AC 454. 168 Turner,D.F.(1994). Building Contract- A Practical Guide, 5th. Ed., Longman Scientific&Technical,UK.

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3.8.11 Default by The Main Contractor

The failure of the main contractor to pay regularly for the substantial completion

may effect to the progress of the nominated subcontractor. Another problem occurs when

the main contractor determine subcontract without reasonable reason. It has been

established in the case of Engineering Construction (PTE) Ltd v. Ohbayashi –Gumi Ltd

(1986) 1 MLJ 218. In this case, the plaintiff was a nominated subcontractor of the

defendant and claimed that the termination of their employment by the defendant was

wrongful. The defendant alleged that the plaintiff was lack of progress and delay in

completion and claims damages. However, the plaintiff argued that the delay was due to

defendant wrongfully withholding payment. It was held the defendant had wrongly

terminated.

Thus, this case has proven that this circumstance also caused to delay in

nominated subcontractor’s work.

3.9 Summary

Most of construction project will rely on subcontractor. There are several ways to

delegates the works to the subcontractor. The process of distinguishing of right and

obligation can be done through subcontracting are namely as assignment, nominated

subcontract and domestic subcontract. The parties involved commonly are the employer,

main contractor, nominated subcontractor and domestic subcontractor. All of them have

been bound in a contractual relationship. A nominated subcontractor plays an important

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role in construction especially for the works that requires highly expertise and specialties.

Under construction contract, there have a standard forms for the nominated subcontractor

to be incorporated with the main contract. It consists of PWD 203N, PAM 1998

Subcontract and CIDB.B (NSC)/2002. With reference to that, it also has been provided a

clause in relation to delay and extension of time. Delay in nominated subcontracting

works has also considered as a significance cause to delay in construction. There are

several circumstances that contribute to delay in nominated subcontractor and their

implication to the main contractor whereby it has been elaborated in this chapter.

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CHAPTER 4

COMMON CIRCUMSTANCES CAUSING DELAY IN NOMINATED

SUBCONTRACTING

4.1 Introduction

It has been decided that the objective of this study is to identify circumstances

which caused delay in nominated subcontractor’s work. Hence, this chapter will highlight

the issues gathered from cases that caused nominated subcontractor unable to proceed

their work within specified time. Discussion will be conducted according to

circumstances that have been highlighted in chapter 3. However, only six (6) common

circumstances will be discussed which will be supported by relevant cases. In addition to

that, the achievement of the objective and the analysis of data collection will be presented

in further details.

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4.2 Analysis of Cases

The legal cases which are related to this study have been assembled in order to

achieve the objective of this study. Most of the relevant cases reported in Malayan Law

Journal have been collected through Lexis Nexis databases. With reference to that, there

is no limitation in terms of time frame, as long as it has not been overruled by higher

court and established as good law.

Basically, this analysis is based on cases which have been selected in connection

with delay caused by nominated subcontractor. The relevant cases to this research are

limited even though there are long list of cases dealing with delay, extension of time as

well as liquidated damages. Initially, 100 cases have been found but only 24 cases were

relevant to subcontract. Finally, there were only 10 relevant cases that have been

investigated in this study. In relation to this, numerous keywords have been used for this

process. For instance, delay in subcontract, delay caused by nominated subcontractor,

delay in building contract, extension of time in building contract, default by nominated

subcontractor and default by main contractor.

4.2.1 Number of cases within time frame

As has been mentioned above, only 10 cases have been investigated in order to

achieve the objective of this study. These cases are divided into 4 main categories

according to the year cases were decided (refer to Table 4.1). Table 4.1 shows that from

year 1970 to 1979, 2 cases have been reported relating to delay in nominated

subcontractor’s work. However, only 3 cases have been reported from 1980 to 1989 and

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1990 to 1999. It has been noted that only 2 cases were reported within year 2001 to 2007.

In other words, 60% of the cases studied are within the year of 1980 to 1999 (refer Figure

4.1). Thus, it can be concluded that nominated subcontractor played a vital role in

construction industry.169 The analysis on the number of cases has shown that

subcontracting method has become a norm in construction industry. This is due to the

fact that during such period of time, the construction industry is expanding.170

Table 4.1 : Number of Cases Within Time Frame

Source : Cases from Malayan Law Journal

Period of Time No. of Cases

1970 – 1979 2

1980 – 1989

3

1990 – 1999

3

2000 – 2007

2

Total

10

169 Arditi,ASCE,M. & Chotibongs,R.(2005). Issues in Subcontracting Practice, Journal of Construction Engineering and Management, Volume 131, 866-876 170 Asem,M.,Malak,A.,Member,A.,ASCE & Hassanein,Z.(2001). Asphalt Works Subcontracting Disputes in Large Construction Programs, Journal of Performance of Constructed Facilities, Volume 15.

88

Figure 4.1 : Number of Cases Within Time Frame


20%

30% 30%

20%

10%

30%

50%

1970 – 1979 1980 – 1989 1990 – 1999 2000 - 2007

Year of Case

No.

of C

ase

4.2.2 Types of Nominated Subcontractor according to specialisation

In general, nominated subcontractors profess various skills and specialisation. In

reference to this, ten (10) cases have been categorized based on their expertise as

presented in Table 4.2 and Figure 4.2. The categorization are based according to scope of

work such as Mechanical and Electrical (including air conditioning, lift, sewerage

system, electrical works and ventilation), Furniture and Equipment and Building works.

Table 4.2 shows that the highest number dealing with this problem is nominated

subcontractor who are expert in mechanical and electrical works. It can clearly be stated

that 70 % or 7 cases out of 10 cases related to delay in mechanical and electrical works. It

can also asserted that only 2 cases or 20% deal with furniture and equipment experts.

However, only one case is related to the nominated subcontractor who is an expert in

building works. The observation shows that, most of the arguments of delay comes from

89

mechanical and electrical works. It could be due to the long duration of completion,

complexity of the process, highly skill and expertise required and costly. 171

Table 4.2 : Types of Nominated Subcontractor and the Number of Cases


Type of Nominated Subcontractor No. of Cases

Mechanical and Electrical 7

Furniture and Equipment 2

Building Works 1

Total 10

Figure 4.2 : Type of Nominated Subcontractor and the Number of Cases


70%

20%

10%

0%

20%

40%

60%

80%

Mechanical and Electrical Furniture and Equipment Building Works

Type of Nominated Subcontractor

No. o

f Cas

e

171 Arditi,ASCE,M. & Chotibongs,R.(2005). Issues in Subcontracting Practice, Journal of Construction Engineering and Management, Volume 131, 866-876

90

4.2.3 Causes of Delay

Delay is the most common problem in construction projects. There are many

reasons why delay occurs. One of the reasons is delay caused by nominated

subcontractor.172 In actual fact, there are several causes that may contribute to delay in

nominated subcontracting. Thus, this study has categorized the causes into 2 major

groups as demonstrated in the following Table 4.3.

Table 4.3 : Causes of Delay


Causes of Delay No. of Cases

Employer 5

Main Contractor 5

Total 10

Table 4.3 indicates that the main contractor is one of the contributors in causing

delay in nominated subcontracting. Based on this study, it is shown that 50% out of cases

studied are in respect to delay in nominated subcontracting caused by main contractor.

The problems could be due to bad site management, improper planning, inadequate

experience, mistakes during construction and improper construction methods.173 Besides

that, the problems where the nominated subcontractor is unable to complete their

172 S.Alkass, M.Mazerolle & F.Harris(1995). Construction Delay Analysis Techniques, Shool of Construction,Engineering and Technology,University of Wolverhampton,UK.14,375-394 173 A.M.Odeh & H.T. Battaineh.(2002) Causes of Construction Delay:Traditional Contracts, International Journal of Project Management.20, 67-73

91

subcontract works within specified time has also been caused by the employer. Thus,

another 50% of the cases studied proved that the employer has contributed to delay in

nominated subcontracting.(Refer to Figure 4.3)

Figure 4.3 : Causes of Delay


50% 50%

0%

10%

20%

30%

40%

50%

60%

Employer Main Contractor

Causes of Delay

No.

of C

ase

4.3 Circumstances Causing Delay in Nominated Subcontracting

Basically, projects can be delayed for a large number of reasons.174 Normally,

most of the previous studies that have been conducted focused on reasons or causes for

delay in main contract. Delays in nominated subcontracting are very seldom

acknowledged and the ways to improve are also seldom discussed,175 but it is a

significant cause to delay the construction project. In addition to that, delay on the part of

nominated subcontractors will entitle the main contractor to obtain an extension of time.

174 Kumaraswamy,M.M & Chan,D.W.M. (1996). Contributors to Construction Delays, Construction Management and Economics.The University of Hongkong, 16,17-29. 175 Arditi,ASCE,M. & Chotibongs,R.(2005). Issues in Subcontracting Practice, Journal of Construction Engineering and Management, Volume 131, 866-876

92

Thus, this study will focus on delay in nominated subcontracting in order to define

circumstances that contribute to delay.

Furthermore, after reviewing the nature of delay in construction as well as delay

in subcontract in the previous chapter, this chapter will identify and analyse the

circumstances which will render delay in nominated subcontractor’s work and their

implication to the main contractor. Those circumstances are based on decided cases and

provision that have been provided in the standard form of contract.

4.3.1 Circumstances No.1 – Delay in Nominated Subcontractor’s Work Due to

Late Payment

Most of building contracts provide for payment by installment as the works

proceeds normally against an architect’s certificate. In relation to this, failure to make

payment when due does not normally amount to a repudiation of the contract, nor entitle

the contractor to repudiate the contract.176 In addition to that, an employer’s obligation to

pay the main contractor is determined by the payment arrangement envisaged in terms of

the underlying contract. In practice, the most common payment arrangement is one where

work is certified and paid progressively according to the value of work completed

through a series of interim payment or progress payment.

Furthermore, the primary obligation upon the employer is to give the main

contractor the sum of money which forms the consideration for the contract. Money must

be paid promptly and fully unless there are specific reasons for withholding it. All these

176 Smith,V.P. & Furmston,M.(1987). A Building Contract Casebook, BSP Profesional Books.

93

events explain the employer’s obligation on payment for the main contractor. The

question that now must be considered is regarding to payment for completion of

nominated subcontractor’s work and the nominated subcontractor’s right against the main

contractor.

It is worth being mentioning here that the payment rights of a nominated

subcontractor are to be found exclusively within the terms of subcontract. However,

nominated subcontractor’s demand to be paid is frequently challenged by the main

contractor on the ground that the subcontractor is guilty of delay, defective work or other

breach of contract.177 Due to these circumstances, it can lead to a slow progress of

subcontract work mainly in nominated subcontracting. It has been pointed out that

timeliness of payments affects many nominated subcontractors, for whom receiving

delayed payments from their main contractor is caused by friction between the two

parties. The nominated subcontractor may delay in their progress of work due to the late

payment and expose to payment clauses of ‘pay when paid’ and ‘pay if paid’. This can be

illustrated in the case of Alliance (Malaya) Engineering Co. Sdn.Bhd. v. San

Development Sdn.Bhd. (1974) 2 MLJ 94. In this case, the plaintiff was a nominated

subcontractor. The defendant was a main contractor. In this contract, the plaintiff was a

specialist in kitchen and medical equipment. The defendant contracted to build for the

Sarawak Government, a General Hospital in Kuching. The plaintiff and defendant

entered into two subcontracts, one for the supply and installation of kitchen cabinet and

the other for the supply and installation of medical equipment. The defendant alleged that

there has been a delay in plaintiff’s performance and that he is failed to supply the cabinet

and equipment accordingly. One of the issues that arose was related to the defendant’s

refusal and withholding of the progress payment due to the nominated subcontractor.

This case highlighted that the money had been paid by the employer to the main

contractor but half of the payment for nominated subcontract works were still outstanding

and thus the employer withholding it without reason. The court allowed the plaintiff’s

appeal to claim for the money due.

177 M.John & Hughes.W. (2000). Construction Contracts-Law and Management, 3rd ed.,Spon Press

94

Basically, many nominated subcontract contained a provision to the effect that the

main contractor would become liable to pay the nominated subcontractor not when the

relevant sum has been certified by the architect, but only when the main contractor has

actually received the money from employer. This provision is known as “pay when paid”

clauses, which are inserted in the subcontract for two main purposes.178 The first is to

protect the main contractor’s cash flow. This occurs because the main contractor will

merely act as a channel payment between the employer and the subcontractor and will

thus be in no danger of having to finance the subcontract work. The second purpose

which is less obvious is to make the nominated subcontractor carry the risk of the

employer becoming insolvent. This will happen in circumstances where the employer’s

insolvency occurs after subcontract work has been certified, but before the main

contractor has been paid for it. However, most of the standard forms of subcontract

stipulate that specific periods of time for payments to subcontractor which is normally

reached through by negotiation. According to the above case, it shows that, the clause in

relation to pay when paid has not been applied for the payment purposes. Thus, the main

contractor has no right to hold the money by relying on that reason.

This has also been established in the case of Ryoden (M) Sdn Bhd v. Syarikat

Pembenaan Yeoh Tiong Lay Sdn.Bhd. (1992) 1 MLJ 33. In this case, the main contractor

was the defendant and the plaintiff was a nominated subcontractor. One of the problems

in this case is when the delay occurs in nominated subcontractor’s work due to the late

payment by the main contractor. The problem arose when the defendant wrongly

withholds one of the progress payment and he also relied on “pay when paid” clauses

which is not applicable. In this contract, they successfully applied summary judgment in

respect of the unpaid amounts. The main contractor appealed against this judgment,

arguing that the plaintiff would be paid until they themselves have received the certified

sums from the employer. The court considered two clauses in the subcontract which

provided that the nominated subcontract shall be deemed to have notice of all the

178 Arditi,ASCE,M. & Chotibongs,R.(2005). Issues in Subcontracting Practice, Journal of Construction Engineering and Management, Volume 131, 866-876

95

provisions of the main contract and required the nominated subcontractor to observe and

conform with all provisions of the main contract so far as they were applicable to the

subcontracts work and were not inconsistent with the express provisions of the

subcontract. However, the court decided that these clauses did not apply to the

subcontract. In these circumstances, the court further held that the payments for the

subcontract works were regulated only by the payments terms of the subcontract and

these provided that the subcontractor’s right to be paid within 14 days from the main

contractor’s receipt of any certificate issued by the architect.

Nevertheless, in the above case, it is clearly stated by Clause 10 of the subcontract

that the defendant as the main contractor agreed, subject to and in accordance with the

main contract, where from time to time to apply to the Director of Public Works for

certificates of payment of the amount which at the date of the application fairly

represented the value of the nominated subcontract works, and within 14 days of the

receipt by them of such certificates aforesaid to pay the nominated subcontractors the

amount certified to be due in respect of the nominated subcontract works and any

authorized variations thereof less the due proportion of retention money(10%) retained by

the employer. It has also been provided in PAM 98 Subcontract Clause 11.3, which says

that;

PAM 98 Subcontract

Clause 11.3 – Contractor’s Obligation to Pay the Subcontractor

Within fourteen (14) days of the receipt by the Contractor of any certificate or

duplicate copy thereof from the Architect the Contractor shall notify and pay to

the Subcontractor the total value certified therein respect of the Subcontract

Works and in respect of any authorized variations thereof and in respect of any

amounts ascertained under Clause 9.4 hereof less:-

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i) Retention Money, that is to say the proportion attributable to the

Subcontract Works of the amount retained by he Employer in

accordance with the Main Contract and

ii) The amounts previously paid.

Thus, due to the above clause, if it is incorporated in the subcontract, thus the

main contractor shall pay the nominated subcontractor accordingly based on his work

done. The main contractor who refused to implement it accordingly will lead to a breach

of contract. It could be said that this problem is similar to the case of Antara Elektrik

Sdn.Bhd. v. Bell & Order Bhd. (2002) 3 MLJ 321., whereby the argument in this case is

related to payment whether it should follow the “pay when paid” clause or payment

should be made after 14 days of the receipt the certificate. In addition to that, the

nominated subcontractor also failed to procede their work due to the main contractor

wrongfully withholding their payment. It also has been demonstrated in the case of

Engineering Construction (Pte) Ltd. Ohbayashi-Gumi Ltd (1986) 1 MLJ 218 and

Mahkota Technologies Sdn.Bhd. v. BS Civil Engineering SdnBhd. (2000) 6 MLJ 505. In

these circumstances, what can the nominated subcontractor do if the main contractor still

refused to make a payment? It can be suggested that, based on the following principle the

problem may be overcome. In the decision before the Illinois Court of Appeal, a

subcontractor was held entitled to suspend his work following the principal

subcontractor’s failure to make monthly payments. This has been illustrated in Watson v

Auburn Iron Works (1974) 318 NE 2d 508. Besides that, PAM 1998 Subcontractor

Clause 11.7 and CIDB.B (NSC)/2002 Clause 29.2 provide that the subcontractor have the

right to suspend work upon failure. But it was silent in PWD 203N and does not have any

other provision that can be related to this part. It has been stated that, if the main

contractor fails or neglects to make payment of any amount due to the nominated

subcontractor and he continues for 14 days or more, the nominated subcontractor may

give notice of his intention to suspend the work. In addition, if the main contractor

continues such default for 14 days after the receipt of such notice, the nominated

subcontractor may suspend wholly or partly the execution, Clause 29.2(i) asserts that the

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time for completion of the subcontractor works shall be extended by the contractor by

such suspended period.

Therefore, according to the above case, this study determines that the nominated

subcontractor is unable to carry out their subcontract work due to the circumstances

which are caused by late payment. It also shows that, without proper progress payment

and regular payment the subcontract work cannot be completed within specified time in

the subcontract. It also asserts that, the principle of clause “pay when paid” where the

main contractor is only liable to pay the nominated subcontractor for work performed

under subcontract after the main contractor had been paid for the same work by the

employer is not practical. Thus, delay in nominated subcontractor’s work may give an

entitlement to the main contractor for an extension of time but not for such circumstances

which delay has been caused by the main contractor. In other words, the main contractor

should liable for any damages on account of the delay.

4.3.2 Circumstances No.2 - Delay in Nominated Subcontractor’s Works Which

Was Caused By Main Contractor’s Default.

As a general principle of law, failure to pay on time what is due under a contract

will not normally be treated as a sufficient breach to justify the other party in terminating

that contract. 179 Besides that, problems may arise when the main contractor wrongly

terminate the nominated subcontractor. Due to this, delay in nominated subcontract

works could be caused by this type of circumstances.

179 Carr v. JA Berriman Pty Ltd (1953) 89 CLR 327

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The principle can be illustrated in the case of Engineering Construction (Pte) Ltd

v Ohbayashi-Gumi Ltd (1986) 1 MLJ 218. In this case, the plaintiff was a nominated

subcontractor for sewerage treatment works stage 1 and stage 2. The defendant was a

main contractor. The argument was based on wrong termination by the main contractor in

respect of lack progress of nominated subcontract works. Therefore, the nominated

subcontractor was unable to proceed the subcontract work within time prescribed. The

defendant alleged that the plaintiff had done unsatisfactory works, and also lack in

progress. The problem became more critical when the defendant was not satisfied with

the progress of work of the aluminum works. Due to that, the employer had started to

impose the liquidated ascertained damages (LAD) against the defendant. The judge found

that, the main reason for the delay occurred on the part of the plaintiff’s work including

aluminum works was due to the main contractor’s wrong termination on the nominated

subcontractor. Thus, he could not proceed with the subcontract works as required. Thus,

the main contractor also failed to make duly payment according to subcontract as agreed

by both parties.

With reference to this case, the main contractor has to follow the subcontract

agreement that has been agreed by both parties. One of the terms of the agreement that

has been highlighted is monthly progress payment and final payments should be done

within 14 days of submission of claims. Thus, it is clearly stated that to pay the

nominated subcontractor as in the contracts is the main contractor’s obligations.

In addition to that, there is a provision that can be referred in PAM 1998

Subcontract Clause 20.1 which asserts that:

if before the date of practical completion of the subcontract works the main

contractor shall make default in one or more of the following respects:

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i) without reasonable cause he wholly or substantially suspends the carrying

out of the main contract works; or

ii) without reasonable cause he fails to proceed with the works so hat

reasonable progress of the subcontract works is seriously affected; or

iii) without reasonable cause, he fails to make payment to the subcontractor

for a period of one (1) month or longer from the date of suspension of

work by the subcontractor pursuant to clause 11.7

then the subcontractor may give the main contractor notice by registered post or

recorded delivery specifying the default or defaults.

Thus, based on the above provision the nominated subcontractor has the right if

the delay due to default of main contractor. Besides that, there is also a provision in PAM

1998 Subcontract Clause 20.2 which provides an option to the nominated subcontractor

to proceed or to determine his own employment under the subcontract. Other alternative

to obtain the payment, it could be suggested that the nominated subcontractor can refer to

PAM 1998 Clause 27.4. It is refers to limited provisions for direct payment to the

nominated subcontractor by the employer of amount previously certified but not paid by

the contractor. This alternative can help to prevent delays on a project in the event the

main contractor either fail to make regular payments to nominated subcontractors or fail

to pass on to the subcontractor’s money when certified to them.

On the other hand, other issue which has been demonstrated in the case of Woh

Hup (Pte) Ltd & Anor v. Turner (East Asia) Pte Ltd. (1987) 1 MLJ 443 shows that the

delay in nominated subcontractor which deals with the default of the main contractor is

when the employer withholds the payment to the main contractor due to termination of

the employment by the main contractor. Thus, the nominated subcontractor may not

proceed their works and non payment was due to them. It was held that the plaintiff was

entitled to obtain his claims.

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In view of the above, this study highlight that the progress of the nominated

subcontractor’s work can be impeded by the default of the main contractor in carrying out

the project. In other words, this circumstance is considered as a cause of delay in

nominated subcontractor’s works. Due to this, it has been clearly shown that the main

contractor is not entitled to obtain any extension of time for this type of delay. In fact, the

main contractor may be liable for damages on the employer as well as nominated

subcontractor because the delay has created by him and it is not be covered under any

relevant events in the contract. Default by the main contractor may be brought to an end

of the contract.

4.3.3 Circumstances No.3 – Delay on the Part of the Nominated Subcontractor’s

Work Has Been Caused By Late Possession of Site.

In construction contract, there are numbers of employer’s obligation which has

been set out. The most important obligation is to give the possession of site or access to

the main contractor. However, this study will only refer to nominated subcontractor. It

has been mentioned earlier in the chapter 3, the problems may arise in respect of delay in

giving site possession to start work. In addition to that, the employer is regarded to have

committed a breach of contract if he fails to give timely possession of site.180

Consequently, to ensure that time will not to be set at become at large in the event of late

hand over of site to the nominated subcontractor, most standard forms of contract

expressly includes this event as one of the grounds for time to be extended.181 Without it,

any deferment of possession of site will contribute to breach of contract and will set the

time at large as has been established in Freeman & Son v. Hensler (1900), 64 JP 200. It

was held that, it was an implied term of the contract that the contractor would be given

180 Fong,C.K. (2004). Law and Practice in Construction Contract, 3rd ed., Sweet & Maxwell Asia. 181 Turner,F.D.(1990). Building Contract Disputes-Their Avoidance and Resolution, Longman Scientific and Technical,UK

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possession of the site immediately. The agreement between the parties had waived that

obligation and had substituted a reasonable time clause, therefore the plaintiff was

entitled to damages for the loss which he had sustained by reason of the delay.

However, in PAM 98 there is no specific provision in relation to this event. But under

Clause 23.7(xi), the clause can be activated as an alternative to solve this problem. It

stipulates that, if the main contractor alleges that there has been an act of prevention or

breach of contract by the employer, the architect can continue to administer the contract

and grant of extension of time as and when he considers these as appropriate.182

In view of the above discussion, the case of Thamesa Designs Sdn Bhd & Ors v

Kuching Hotels Sdn.Bhd. (1993) 3 MLJ 25 can be referred to, where four appellants were

the nominated subcontractors. The respondent was the employer. The appellants were

appointed in respect of supply and install of furniture and fittings to the respondent. As a

result of non payment for works done, the appellants sued the judgment debtor and

obtained judgment for a total of outstanding balance which had remained unsatisfied.

Furthermore, they then proceeded with garnishee actions against the respondent, the

employer of the judgment debtor, to garnish the retention money in the hands of the

respondents, which was due to the judgment debtor under the contract. Consequently, the

garnishee orders were served on the respondents.

The respondent alleged that there was no money to be paid because the retention

fund had been utilized to pay for the rectification of defects. He also claimed for

liquidated damages (LAD) to account for 36 days delay in completion of the works. The

appellant challenged the validity of the final certificate in respect of the imposition of 36

days liquidated damages. The judge found that, the facts showed that the employer

handed over the site late which led to delay on the contractor to complete the works and


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this affected to the nominated subcontractor’s works. Therefore, the employer should not

be entitled to claim for liquidated damages under the said contract because by his

omission to give possession of the site in time. Due to that, the time for completion

becomes at large and there was no date from which the damages could be assessed.

With reference to the above case, it could be said that the main contractor

normally is entitled to exclusive possession of the entire site, but the degree of possession

to be given depends on the circumstances of the site. It has been highlighted in the case of

London Borough of Hounslow v. Twickenham Garden Developments Ltd. (1970) 7 BLR

81. In addition to that, the employer must also give the main contractor a sufficient

degree of possession to permit the execution of the work unimpeded by others. A case of

The Queen in Right of Canada v Walter Cabott Construction Ltd (1975) 21 BLR 42 has

cited that Cabott contracted with the Crown for the erection of the hatchery building. The

contract was one of six contracts for the project as a whole. The work required fewer than

two of the later contracts interfered with Cabott’s work because they encroached on the

site. One of the latter contracts was awarded to a third party, but Cabott successfully

tendered for another to mitigate the effects of that contract on its work. Cabott claimed

damages for breach of implied terms relating possession of site. It was held that Cabott’s

claim succeeded. The Crown was in breach of contract by denying Cabott part of the site

of the work. A clause of the contract provided that there were implied terms to make

ready an appropriate working space which it is fundamental to a construction contract.

However, where the delay in giving site possession is so serious as to evince an

intention by the employer not be bound by the contract, it would seem that a case could

be made to treat the contract as at an end. In has been cited in Carr v. JA Berriman Pty

Ltd. (1953) 27 ALJR 273. There is different situation when the main contractor brought

an action for damages instead of bringing the contract to an end. This has been proven in

the case of Freeman v Henser (1900) 64 JP 260 (CA).

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With reference to the above circumstances, it could be said that it is essential for

an employer to give possession of the site to the main contractor as well as nominated

subcontractor within the stipulated date in the contract.183 It also has been asserted in

PWD203N Clause 11(a) that the main contractor shall from time to time make available

to the nominated subcontractor such part of the site and main contract works to enable

them to execute the subcontract works in accordance with this subcontract. However, it

could be said that the permission to access the site still depends on the employer.

Based on the observations from the above cases, this study has identified the

circumstances which can delay the performance in nominated subcontracting. One of the

causes of the delay which may occur from this circumstance is when the employer is late

in giving site possession to the nominated subcontractor. If there are provisions for this

circumstances in the contract, the nominated subcontractor is therefore entitled to obtain

an extension of time. Nevertheless, normally this provision does not provide such event

that may entitle the nominated subcontractor as well as the main contractor to an

extension of time. Under PWD203A Clause 43(g) which is interrelated with Clause 38(d)

asserts that the nominated subcontractor should carried out the work in extended time

when time is set to become at large and completed the works within reasonable time. In

addition to that, PAM 1998 Clause 23.7 (xi) also provides that the architect can issue an

extension time or fix a new completion date in the event which delay is caused by any act

of prevention or breach of contract by the employer. For that reason, the employer may

not be entitled to claim liquidated damages in the absence of provision that provides for

late possession of site in the contract.

183 Fong,L.C. (2004). The Malaysian PWD Form of Construction Contract, Sweet & Maxwell Asia,Malaysia.

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4.3.4 Circumstances No.4- Delay in Nominated Subcontractor’s Work Due to The

Failure of the Employer to Supply Materials And Goods

Basically, PWD 203A Clause 43(k), PWD 203A Clause 23.7(vii) and PWD 203A

Clause 24.1(p) provide that, the date of completion can be extended in circumstances

where the delay is on the part of nominated subcontractor on their work. According to

that, the clauses also allow the main contractor to secure time extension and avoid

damages when a nominated subcontractor has defaulted in the manner stated.

Furthermore, most of the building contract forms (PWD 203A,PAM 1998 and

CIDB 2000) have stipulated that the additional usefulness to the contractor in the event of

delay on the part of the nominated subcontractors where it has been caused by similar

reasons as set out, for instance in PAM 1998 Clause 23.7(i) to 23.7(xiii) except clause

23.7(vii). Due to this, it benefits the main contractor because he would be given an

extension of time for completion date under a construction contract.

There are several causes which constitute delay which are considered in

construction contract and one of them is caused by the employer. Delay caused by the

employer consists of delay in the supply of materials and goods which has been agreed to

supply for the works,184 any act of prevention and breach of contract.185 As a result, the

contractor is not liable for any liquidated damages for the delay in completion of the

works. Problems arise when the nominated subcontractor delays his work in respect of

this event, but the employer insists to claim for any damages. Thus, there was a

circumstance where the employer had imposed liquidated damages to the nominated

subcontractor for the delay in completion of the works within specified time. In

Lightweight Concrete Sdn.Bhd. v. Nirwana Indah Sdn.Bhd.(1999) 5 MLJ 351, the

184 Clause 23.7(ix), The Malaysian Standard Form of Building Contract (The PAM 1998 Form) 185 Clause 23.7(xi), The Malaysian Standard Form of Building Contract (The PAM 1998 Form)

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defendant was a developer of a project. The plaintiff was appointed as nominated

subcontractor by a subcontract agreement. In this case, the nominated subcontractor’s

obligation was to design, manufacture, supply, delivery and installation of the pre-

finished pre-cast concrete panel with granite slabs. The defendant argued that the

plaintiffs delayed and only completed the work on 20 March 1993 instead of 30

September 1992. In addition to that, the plaintiff agreed that they completed this stage on

20 March 1993. However, the plaintiff highlighted that, delay in completion occasioned

by the neglect of the defendant itself in failing to secure sufficient and timely supply

granite to the plaintiff in order for the plaintiff to make the pre-cast granite panels.

Furthermore, the defendant argued that the plaintiff was responsible for the supply

and delivery of the granite required for its pre-cast granite panels. The defendant relied

heavily on the first agreement dated 30 May 1992 which the main contractor and the

plaintiff, where in the first recital described the subcontract works as design, supply,

delivery and installation of pre-cast concrete panels pre-finished with granite slab. Based

on this, the defendant argued that it was the duty of the plaintiff to have sourced the

supply of granite in sufficient amount to thwart any delay. The Judge found that, the

agreement spelled out that the supply by the plaintiff was only limited to completed

panels and slabs and not to supply of raw granite. In addition to that, the decision made

was based on the agreement between the defendant and the supplier of the granite for this

project. The defendant argued further that, the delay also had been caused by the supplier

to supply the granite. However, the decision shows that the supplier was under the control

of the defendant. Thus, the plaintiff cannot be held responsible for the delay.

With reference to the above case, initially, the employer contended that the delay

was caused by a nominated contractor in carrying out the works. Usually, a nominated

subcontractor has to be liable for liquidated damages for any extended time in completion

of the works if the default was caused by himself. The nominated subcontractor was also

ordered to indemnify the main contractor against the liabilities in respect of the

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subcontract works as those for which the main contractor is liable to indemnify the

employer under main contract.186 Basically, Section 74 of Contract Act 1950, provides

that when a contract has been breached, the party who suffers is entitled to receive

compensation for any loss or damage caused to him which naturally arose in the usual

course of things from the breach. In addition, such compensation is not to be given for

any remote and indirect loss or damage sustained by reason of the breach. Furthermore, it

has been highlighted that, under common law the remedy for breach of contract is an

action for damages. The innocent party is entitled to claim for financial amount which

would compensate him for the loss incurred as a result of the breach committed by other

party. In the case of late completion or delay, the employer is entitled to claim in

liquidated damages calculated according to the stipulated time in the contract. It has been

demonstrated in Robinson v Harmon (1848) 1 Exch 850 at 855, Teoh Kee Keong v.

Tambun Mining Co. Ltd. (1968) 1 MLJ 39 and Tham Cheow Toh v. Associated Metal

Smelters Ltd. (1972) 1 MLJ 171.

In addition to that, the defendant alleged that the plaintiff was late in completion

due to the failing to secure sufficient material (granite) for wall paneling within

appropriate time. The defendant then added that the plaintiff should be responsible to

supply the granite according to contract between the nominated subcontractor and the

main contractor. With reference to that, the defendant has wrongly interpreted the

contract. In fact, the granite should be supplied by the supplier based on agreement

between the defendant and his supplier. However, the material has been delayed in

delivery to site due to his supplier.

In a building contract, the circumstances that caused delay due to failure by the

employer to supply materials and goods in appropriate time has been provided under list

of events in the contract (PAM 1998 Clause 23.7(ix), PWD 203A is silent on this) which


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give entitlement to the nominated subcontractor an extension time in the subcontract. It

must be noted that there is no express provision in the conditions to allow for the

possibility of the works being carried out using materials and goods which are to be

supplied by the employer. However, such circumstances do in reality exist and if there is

a delay which are caused by the employer in supplying the materials and goods, the

contractor should be entitled to an appropriate extension of time. Thus, the delay in this

case has been caused by the employer in supplying the materials and goods specifically

granite and as a results the nominated subcontractor should be entitled to an appropriate

of extension of time.

To recapitulate, according to the above case, this study identify that the delay in

nominated subcontractors can be caused by the circumstances which the employer fails to

supply materials and goods in an appropriate time. Thus, the nominated subcontractor is

not liable for the delay. This study has also considered the implication of the delay to the

main contractor whether he is entitled to be granted an extension of time or to be liable

for damages. As an implication that has been determined from this case, it can be said

that the main contractor is entitled to an extension of time due to this circumstances if it

effected the whole schedule of the project in the main contract. In addition to that, for

those contracts which are based on Clause 23.7(ix) of PAM 1998, the entitlement of

extension of time can be given to the main contractor. Besides that, in order to be able to

claim for an extension of time under this provision, it must be proved that the contractor

could not have reasonably unforeseen such at the date of tender.

4.3.5 Circumstances No.5 – Delay In Nominated Subcontractor Due to the Late

Instructions

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In general, an employer’s failure to issue plans, drawings and other information

necessary for the execution of the works and at the proper time is a breach of contract by

the employer, through the agency of the architect unless the express terms of the contract

stated otherwise.187 The late instructions which was referred to was by PAM 98 Clause

23.7(vi) and include any instructions which empowers the architect. In addition, to enable

the works to proceed properly, it is normally necessary for the architect or engineer to

issue instructions or additional drawings during the course of the works. Thus, most of

the extension o time provisions provide for time to be extended where the architect or

engineer fails to issue these instructions or drawing in a timely manner.188

The problem arises when the main contractor is unable to proceed their work

under main contract in time due to the delay caused by the nominated subcontractor in

nominated subcontract works which is a consequences of the nominated subcontractor

delayed in their works in respect of insufficient or late of instruction by the architect or

employer. It has been demonstrated in the case of Shen Yuan Pai v. Dato’ Wee Hood

Teck (1976) 1 MLJ 16. According to this case, the plaintiff was the main contractor. The

defendant was the employer. By a contract in writing dated 16 November 1965, the

defendants contracted with the plaintiff for the construction of an Office Building at

Thompson Road, Kuching. The problem arose when the plaintiff claimed that he had not

received payment from defendants due to delay in the completion of the construction

work.

Furthermore, regarding the agreement that has been agreed by both parties, it

shows that the date of completion of the contract was 31 March 1966. However, the time

had been extended for specific reason. On the other part of this case, the plaintiff had

187 Smith,V.P. & Furmston,M.(1987). A Building Contract Casebook, BSP Profesional Books. 188 Fong,C.K. (2004). Law and Practice in Construction Contract, 3rd ed., Sweet & Maxwell Asia.

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raised the question of specialist installations with the architect and had reminded the

latter that the specialist works had to be completed by first week of February 1966 in

order to allow him to complete the work by the agreed time. Moreover, until certain

period of the construction, the plaintiff informed that the work cannot be completed by

the completion date given in respect of delay in specialist work. Thus, the plaintiff asked

for an extension of time where a minimum period was eight weeks. However, the

plaintiff still failed to complete the works due to the inability of specialist to commence

their work by that extension period.

For that reason, the architect sent a letter to the defendant to inform that due to the

lack instructions and directions have resulted in the work cannot complete on time. The

defendant replied the letter and informed that there was no suggestion from the architect

for that problem. It seems that the defendant put the duty on the architect to propose any

suggestion to prevent the delay. However the judge found that the delay occurred was

due to default of the defendant in the fulfillment of their own part of the contract.

The above case can relate to the provision in the standard form of contract. In

PAM 98 Clause 23.0, it has been asserted that the main contractor has to give notice to

the architect and specify the cause of delay which affects the progress. Besides that, the

main contractor must also indicate the relevant event causing the delay with sufficient

information given. In the case, the plaintiff sent a notice and relevant information to the

architect on the causes of delay which is due to the delay on the specialist works. Clause

23.1 stipulates that the contractor’s notice of delay is essential before the architect is

obliged to consider whether an extension of time might be appropriate. However, the

failure to give notice, if the contractor knows he is delayed or will likely be delayed, will

be breach of contract on his part. As a result, no extension of time is to be given on the

account of those circumstances.

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However, it could be argued that, the problem arose when the architect lack in

giving the instruction and direction to the main contractor as well as nominated

subcontractor. In addition, the problem became worse when the employer failed to

exercise his power in order to take action on the problem caused by nominated

subcontractor in specialist works. Besides that, failure by the architect to properly

exercise the power to extend time, where any delay to completion is caused by the

employer or those for whom he is responsible in law, relieves the main contractor from

his liability to pay damages. Dodd v. Churton (1897) 1 Qb 562 cites that where the time

for completion becomes at large, that is the contractor’s obligation is then to complete

within a reasonable time. See also the case of Holme v.Guppy (1838) 2 M & w 387 &

Wells v. Army & Navy Co-operative Society (1902)86 LT 764.

In addition, the judge also pointed out his point which is according to Halbury’s

Laws of England and it could be concluded that, in the event that any breach of contract

and reason for variation works ordered by the employer is not in the contract, and

contract clearly stated that the contractor shall take risk for prevention by such extra

works, the employer then cannot insist upon completion by the date fixed, but only for

completion within a reasonable time. For that reason, the judge decided that the delay

was solely due to the defendant’s default. Thus, because of the breach of the contract, the

plaintiff has to proceed the work in reasonable time.

It could be said that, the employer is in breach of his obligation to supply timely

instruction for the execution of works. In the leading case of Roberts v Bury

Commissioners (1870) LR 5 CP 310, Blackburn and Mellor LJJ stated in their judgment

that there is an implied obligation on the part of the employer and their architect to supply

plans and necessary particulars for the execution of the works within a reasonable time

and a breach of this implied obligation would entitle the main contractor to a cause of

action in damages.

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In view of the above case, this study has derived the circumstances which have

caused to delay in nominated subcontract works. Due to the late instruction by the

employer as well as architect, it can be resulted in the completion of subcontract works

and a breach of contract. In practice, most of the contracts do not prefer to provide a

clause which enabling the employer or his agent to fix the new completion date after the

employer has caused delays to the contractor’s progress. The defendant therefore is not

entitled for the damages incurred. The same principles has been applied in the previous

circumstances where the main contractor is entitled to extension of time or may only

allowed to carry out the works within reasonable time.

4.3.6 Circumstances No.6 – Delay in Completion of the Subcontract Works Due to

the Failure of Main Contractor to Provide Amenities And Facilities

In general, the main contractor is responsible to undertake numerous obligations.

A part of the obligation is to provide facilities for the nominated subcontractor to proceed

with the subcontract works. Besides that, as has been highlighted previously in the case

of nominated subcontracting, a main contractor has to provide a sufficient of site for the

nominated subcontractor to carry out nominated subcontract work. In addition to that, the

main contractor must also consider the condition of the site whether the facilities and

amenities has been ready for the nominated subcontractor to carry out the subcontract

works without any disruptions.

Nevertheless, the problem arises when the main contractor fails to provide

necessary amenities and facilities for the purpose of the subcontract works. Due to this,

the nominated subcontractor may not commence their works in accordance with the work

programme and most probably it may lead to delay in completion.

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It has been presented in the case of the CSK Electrical Co. Bhd. v. Regional

Construction Sdn. Bhd. (1987) 2 MLJ 763, the plaintiff was nominated subcontractor for

the execution of electrical works under the main contract. The defendant was the main

contractor. One of the issue which has been highlighted in this case is when the main

defendant failed to pay to the plaintiff in full amount due to the late in completion in

nominated subcontract works. However, according to the judgment by Robert CJ, the

delay has been caused by the failure of the plaintiff to obtain some of the necessary

electrical equipment. As a result the plaintiff was unable to complete the subcontract

works according to completion period. The judge found that the plaintiff’s order was

agreed because of the delay caused by the defendant. As an implication, the defendant

was liable for the damages if it affected the main contract.

In practice, most of the standard form of contract mainly building subcontract has

set out the provision whereby the main contractor is responsible to provide the facilities

for the purpose of the nominated subcontract works. It has been clearly stated in PAM 98

Subcontract Clause 15, which says that:

PAM 98 Subcontract-Clause 15.1

Contractor to provide amenities and facilities if so required in main contract

“if and so as it is so provided in the main contract (but not otherwise) the

contractor shall supply at his own cost all necessary water, lighting, watching,

site security, allocation of space for storage and accommodation, rubbish

clearing and attendance for he purposes of the subcontract works, subject as

aforesaid the subcontractor shall make all necessary provision in regard to the

said matters and each of them.”

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In addition to that, CIDB.B/(NSC) 2002 has been expanded by the Clause 8.1 of:

CIDB.B/(NSC) 2002 Clause 8.1

Utilities provided by the contractor

b) where such utilities are supplied by the contractor then the nominated

subcontractor shall pay the contractor for the consumption of the same in

connection with the subcontract works.

c) subject to sub-clauses 8.1 (a) and (b) above, the nominated subcontractor shall

at his own cost make provision of all utilities necessary for he proper execution of

the subcontract works.

Furthermore, there is a principle which can be referred to and it has been derived

from the case of Pigott Construction Co. Ltd. v. W.J. Gowe Ltd (1961) 27 DLR (2d) 258,

CA Ontario. The plaintiff was the contractor and the defendant was the nominated

subcontractor. One of the plaintiff’s obligations was to supply equipment necessary to the

subcontractor. The contractor failed to provide temporary heating as required in the

contract. As a result of the failure by the contractors, a number of trades could not

proceed with the work in the buildings under construction. The Ontario Court of Appeal

held that failure to provide heating prevented the subcontractors, in the depth of the

Canadian winter, doing the work at all. Thus, the contractor was held liable to the

subcontractor for the cost of providing subcontractor’s own heating equipment.

Thus, it could be said that to provide all the facilities to the site is a main

obligation for the main contractor in construction. It has been proven in the above case

that, where the delay occurred is due to failure of the main contractor to provide the

required facilities in time and therefore the nominated was unable to proceed their

subcontract works as has been stated in the contract. As a result, the main contractor is

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responsible for the damages which caused in the event of delay in nominated

subcontracting.

In view of the above discussion, it can be concluded that the nominated

subcontractor cannot complete the subcontract works within the completion period if the

condition of the whole site including all facilities are still not ready to be commenced. In

short, this circumstance is considered as a cause of delay in nominated subcontracting.

Consequently, the nominated subcontractor is entitled to obtain extension of time in such

event, but the main contractor should liable for any damages for the employer and

nominated subcontractor.

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CHAPTER 5

CONCLUSION AND RECOMMENDATIONS

5.1 Introduction

This is the final chapter which summarizes the finding of the research in

accordance with the research objective. Problems encountered during the research as well

as recommendations for future research are also discussed in this chapter.

5.2 Summary of Research Findings

In general, the objective of this research has been achieved through the

documentary analysis of law journals. By carrying out this research, six (6) circumstances

have been identified which causes delay in nominated subcontractor’s work and their

implication to the main contractor. The findings are summarized in Table 5.1 and Table

5.2.

116

Table 5.1 : Analysis For Circumstances Which Causes Delay In Nominated Subcontractor’s Work and Their Implication to The Main

Contractor

Party in dispute Item Circumstances Cause of delay

MC & NSC MC & E NSC & E

1 Circumstances No.1 Delay in nominated subcontractor’s work due to late payment.

Main Contractor √

2 Circumstances No.2 Delay in nominated subcontractor’s works which was caused by main contractor’s default.

Main Contractor √

3 Circumstances No.3 Delay on the part of the nominated subcontractor’s work which has been caused by late possession of site.

Employer √

4 Circumstances No.4 Delay in nominated subcontractor’s work due to the failure of the employer to supply materials and goods.

Employer

√

5 Circumstances No.5 Delay caused by nominated subcontractor due to the late instructions.

Employer √

6 Circumstances No.6 Delay in nominated subcontractor’s work due to the failure of main contractor to provide amenities and facilities.

Main Contractor √

117Table 5.2 : Analysis For Circumstances Which Causes Delay In Nominated Subcontractor’s Work and Their Implication to The Main

Contractor

Item Circumstances Cause(s) of Delay Implication to The Main Contractor

1

Circumstances No.1 Delay in nominated subcontractor’s work due to late payment. Discussed in the court case of:

• Alliance (Malaya) Engineering Co. Sdn.Bhd. v. San Development Sdn.Bhd. (1974) 2 MLJ 94

• Ryoden (M) Sdn Bhd v. Syarikat Pembenaan Yeoh Tiong Lay Sdn.Bhd. (1992) 1 MLJ 33

• Antara Elektrik Sdn.Bhd. v. Bell & Order Bhd. (2002) 3 MLJ 321

• Engineering Construction (Pte) Ltd. Ohbayashi-Gumi Ltd (1986) 1 MLJ 218.

• Mahkota Technologies Sdn.Bhd. v. BS Civil Engineering SdnBhd. (2000) 6 MLJ 505

• The main contractor refused to pay the progress payment to the nominated subcontractor as stated in the contract

• Repudiatory breach by the main contractor. • The main contractor is not entitled to

obtain any extension of time. • The main contractor is liable to pay

damages to the employer

2

Circumstances No.2 Delay in nominated subcontractor’s works which was caused by main contractor’s default. Discussed in the court case of:

• Engineering Construction (Pte) Ltd v Ohbayashi-Gumi Ltd (1986) 1 MLJ 218.

• Woh Hup (Pte) Ltd & Anor v. Turner (East Asia) Pte Ltd. (1987) 1 MLJ 443

• The main contractor has wrongly terminated the employment of nominated subcontractor and withhold progress payment without reason

• In CIDB 2000 Clause 24.1-not allow any extension of time due to main contractor’s default

• Repudiatory breach by the main contractor • The main contractor is not entitled to

obtain any extension of time • The main contractor liable to pay damages

to the employer • The nominated subcontractor also have

rights to be compensated

118Table 5.2 : Analysis For Circumstances Which Causes Delay In Nominated Subcontractor’s Work and Their Implication to The Main

Contractor

Item Circumstances Cause of Delay Implication to The Main Contractor

3

Circumstances No.3

Delay on the part of the nominated subcontractor’s work which has been caused by late possession of site. Discussed in the court case of:

• Thamesa Designs Sdn Bhd & Ors v Kuching Hotels Sdn.Bhd. (1993) 3 MLJ

• Failure of the employer in giving the possession of site within appropriate time

• CIDB 2000 Clause 24.1(i) - a ground that entitled the main contractor to an extension of time.

• PWD 203A Clause 43(g) - a part of ground that allows the main contractor to be given extension of time.

• PAM 1998 Clause 23.7 (xi) - Act of prevention or breach of contract by employer.

• Breach of contractor by the employer – the main contractor entitled to get extension of time.

• Time is set to become at large, the employer has no right to be compensated. Since no new completion date has been provided, the main contractor has to proceed the work within reasonable time.

4

Circumstances No.4

Delay in nominated subcontractor’s work due to the failure of the employer to supply materials and goods. Discussed in the court case of:

• Lightweight Concrete Sdn.Bhd. v. Nirwana Indah Sdn.Bhd.(1999) 5 MLJ 351

• The employer fails to deliver material in time

• PAM 1998 Clause 23.7 (ix) provides such ground which give entitlement to the main contractor to obtain an extension of time.

• The nominated subcontractor is also entitle to an extension of time on account of this delay.

• The employer is not entitled to be compensated for any damages due to the delay caused by his own fault.

119

Table 5.2 : Analysis For Circumstances Which Causes Delay In Nominated Subcontractor’s Work and Their Implication to The Main

Contractor

Item Circumstances Cause of Delay Implication to The Main Contractor

5

Circumstances No.5

Delay caused by nominated subcontractor due to the late instructions. Discussed in the court case of:

• Shen Yuan Pai v. Dato’ Wee Hood Teck (1976) 1 MLJ 16

• The employer lack of giving instruction and direction to the main contractor

• PAM 1998 Clause 23.7 (xi)-act of prevention or breach of contract by employer will allow the architect to give an extension of time to the main contractor.

• In the absence of the provision, time for completion becomes at large, thus the main contractor’s obligation is then to complete within a reasonable time.

• Therefore, the employer is not entitled for the damages incurred.

6

Circumstances No.6

Delay in nominated subcontractor’s work due to the failure of main contractor to provide amenities and facilities. Discussed in the court case of:

• CSK Electrical Co. Bhd. v. Regional Construction Sdn. Bhd. (1987) 2 MLJ 763

• The main contractor not provides facilities as has been required in the contract

• PWD 203N Clause 5- a provision for the main contractor to provide necessary facilities for the purpose of subcontract works.

• The main contractor is liable for the damages incurred to the nominated subcontractor as well as to the employer.

• The nominated subcontractor may be entitled to obtain extension of time.

120

5.3 Problems Occurred When Conducting This Study

There are some constraints in conducting this study. The first is the time in doing

this study is very limited and thus the scope of this study is quite limited. Besides that,

the cases that related to this study is also limited. It is because most of the cases in

associated with nominated subcontractor are not recorded and thus it has to be searched

within Malayan Law Journal. Thus, this limitation led to less cases being found to

support the findings, especially those decided in Malaysia court. If more time is given,

most probably the circumstances illustrated will be more comprehensive and thorough.

5.4 Further Studies

The following is a possible topic that related to this research recommended for

future research:

a) The entitlement of extension of time due to concurrent delay -The objective of

this research is to determine the circumstances of concurrent delays in

construction and the entitlement of extension of time to the main contractor.

121

5.5 Conclusion

As a conclusion, there are many causes of delay in construction. Causes of delay

can be further detailed into delay caused by owner/employer, delay caused by designer,

delay caused by contractor, delay caused by subcontractor and delay not caused by party

to the design and construction process. Delay can be categorized as excusable, non-

excusable, compensable, non-compensable and concurrent delay. An excusable delay

gives entitlement the main contractor to be granted extension of time and not liable for

damages. Delay on the part of the nominated subcontractor is considered under this type

of delay. Further to this, there are circumstances that may cause the completion period of

nominated subcontract work become delay. This study has also determined six (6)

circumstances, which may contribute to delay in nominated subcontractor’s work. In

addition to that, based on these causes of delay, this study has identified the implications

to the main contractor whether they should be entitled an extension of time or to be

liable of damages. This study could be considered as guidance to the parties in

construction industry in reducing and preventing of delay in construction.

122

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