This document discusses various types of building contracts and key cases related to payment terms. It addresses: - Lump sum contracts generally require completion of work before payment is due, while interim payments may be allowed. Substantial performance, not absolute compliance, is required. - Entire contracts require full performance as a condition of payment. If a party abandons work before completion, they cannot recover payment for partial work. - Case law explores exceptions, such as allowing partial payment on a quantum meruit basis if the client benefits from partial work, or deducting costs to remedy defects from final payment. - Standard form contracts must be interpreted in light of general contract law and precedent cases on conditions, warrant

1. Building Contract
• Generally, it is a lump sump contract:
(I) Contractor is required to complete the work
then only entitled to the payment.
(ii) The contract sum has been specified,
ascertained and agreed prior of the starting of the
work.
(iii) Increased or reduced amount of payment
is subject to the work done-variation.

2. Entire Contract
“An entire contract is one in which what is
described as complete performance by one
party is a condition precedent to the liability
of the other party.

3. Cutter v Powell
C was contracted to serve on a ship from Jamaica to
Liverpool for 30 guineas payable on completion. When the
ship was 19 days from Liverpool, C died. C’s widow sued
to obtain compensation for the work done by her husband
prior to his death.
Held: C was party to an entire contract, and as such was
only entitled to payment when he had finished that
contract. C’s widow was therefore entitled to nothing.

4. Bolton v Mahadeva
B was contracted to install a central heating
system for £560. The work was completed
but was done unprofessional. In fact it
caused damage worth £179 to the
defendant. Def refused to pay the plf.
Held : The contract had not been performed
substantially and the plf was not entitle to
the payment

5. Lump Sum Contract
A lump sum contract is not necessarily an entire contract.
In Hoenig v Issacs; Denning LJ held:
Where a contract provides for interim payments to be
made, for example as works proceeds, but for retention
money to be held until completion , the contract is usually
entire as to the retention moneys but not necessarily the
interim payments’.

6. Hoenig v. Isaacs
[1952] 2 All ER 176 Court of Appeal
The plaintiff is an interior decorator. He contracted to
perform decorative and furnishing work for the defendant,
Isaacs. The contract sum of £ 750 was to be paid "net
cash, as the work proceeds, and balance on completion".
The defendant paid £ 400 and proceeded to occupy and use
the furniture in the apartment. The defendant refused to
pay the balance on the grounds that certain work done and
articles of furniture supplied were defective. The plaintiff
claimed for the outstanding amount.

7. Held:
In a lump sum contract for work in which the sum is
payable on completion, the defendant cannot refuse to pay
because, even though the work is substantially complete,
there are small items which are not in compliance with the
exact specifications of the contract. The defendant is
obligated to make prompt payment of the contract sum less
an allowance based on the cost of completing the work or
correcting the defects. Even if complete performance of
the work in accordance with the specifications was a
condition precedent to payment, the defendant waives the
right to enforce such condition when he takes benefit of
the work by using the apartment and defective furniture.
At such time the defendant is obliged to pay the contract
price after making the above described deductions.

8. KP Kunchi Raman v Goh Brothers Sdn.
Bhd.
The plaintiff, entered into a labour only contract with the defendant
for the laying of water pipes between Mak Mandin and Prai, and
between Mak Mandin and Jalan Raja, Butterworth, including the
reinstatement of a cycle track. The plf claimed $11,656 as the
balance payable to him under the contract. The defendant counter
claimed for the repayment of $55,024 for unsatisfactory work
already completed, and failure to complete all items of contract
work, amounting to failure to complete the contract.

9. High Court: The contract was an entire contract, but the
doctrine of substantial performance should be applied.
Per Gunn Chit Tuan J: “.... considering the nature of the
defects, the cost of rectifying them and the balance of the
work undone. I was inclined to the view and found that in
all the circumstances of this case the plaintiff had
substantially completed the contract. For that reason I held
that the defendant was not entitled to repayment of the said
sum of $55,024 paid to the plaintiff who was entitled to
claim for any balance due to him for work done’. This
would have resulted in the plaintiff’s claim succeeding and
the defendant obtaining nothing. However, the defendant
was entitled to damages for the defective work and for
completing the contract, and since this entitlement exceed
the plaintiff’s claim, following Hanak v Green (1958), the
defendant was entitled to judgement for $6,047.

10. Building Contract
• The test for complete performance of the entire
contract is “substantial performance”-
Substantial performance is a question of fact. The
court shall consider:
(a) The nature of defects-must not fall short of
the required performance
(b) the cost to remedy the defect is not too
great as compared to the contract price.

11. H Dakin & Co.Ltd v Lee.
The app was a firm of builders who agreed to carry out
repairs to the resp’s house. The work carried out was not to
specification in three minor areas which could be remedied
at a relatively small cost.
Court of Appeal :The appellant is entitled to recover the
contract price less a deduction equal to the cost of
remedying the defects.

12. Abandonment of work
• If the party abandons the performance, he cannot
recover payment for the completed work .
Sumpter v Hedges
The plf was a builder. He had a contract to build
two houses and stables for the def for £565. He
did work valued at £333 and said he had to stop
because he had no more money. He had already
been paid partly. The def finished the building,
using materials which the plf had left behind. The
plf sued for the out standing payment.

13. Held: Where there is a contract to do work for a
lump sum, until the work is completed the price of
it cannot be recovered. Therefore the plaintiff
could not recover on the original contract. It is
suggested however that the plaintiff was entitled
to recover for the work he did on a quantum
meruit.
Per Bruce J : The plf had abandoned the contract.
As such he could get money for the value of the
materials but nothing for the work.

14. Quantum Meruit
• Remedy for partial performance:
Tong Aik (Far East) Ltd v Eastern Minerals & Trading.
The plf contracted to extract and supply the def 5000
tons of manganese ore per month. The plf did not
supply up to the said amount. The plf later claimed
$65000 from the def being the balance due under the
contract for the work done and supplied. The def
refused to pay and claimed that the contract is an entire
contract and that the plf had breach the contract. The
def counterclaimed for $800 000 for loss of profits and
penalties incurred by them

15. • Held: the def must pay the plf for all the ore
which had actually being produced and/or
transported to the stockpile.Even if the contract
was an entire contract, the plf could recover based
on quantum meruit for services actually rendered.
The def had opted to take the benefit of the work
done by the plf.

16. Standard Form building Contract
The contract must be read and understood in the
light of the general law as it is not self sufficient and
self contained documents.
As such the application of the general law of contract
and the case law are very important particularly to
interpret and to apply the clauses- For example to
interpret the effect of the clause either as a condition,
warranty, innominate or implied term.

17. Standard Form Building contract
• Insertion of std form of contract may be
agreed through:
• (I) Course of Dealing- Smith v South Wales
Switchgear Ltd
• (ii) Exchange of letters -Killby& Gayford Ltd v
Selincourt Ltd