Construction Law Assignment BQS Taylor's University

SCHOOL OF ARCHITECTURE, BUILDING AND DESIGN
BACHELOR OF QUANTITY SURVEYING (HONS)
Construction Law [LAW 63804]
Group Assignment
Group Members:
1. Chin Weng Lok 0323583
2. Ng Seng He 0323037
3. Pang Khai Shuen 0318423
4. Tan Kiah Chun 0324414
5. Welson Lum Wei Jiunn 0319514
Lecturer: Wong Chong Wei

TABLE OF CONTENTS
NO. TITLE PAGE
1.0 List of Assumptions 1
2.0 Questions 2
2.1 Any entitlement of an extension of time for the
Contractor due to the project was suspended with a
stop work order issued by a local authority.
2
2.1.1 Issues 2
2.1.2 Rules 2
2.1.2.1 Standard Contract Forms 2
2.1.3 Analysis 3
2.1.4 Conclusion 4
2.2 The Contractor currently facing challenges to
complete the project within the timeframe stipulated
in the contract:
4
2.2(a) Is it possible for the Employer to take over the
project and appoint a third party contractor to finish
the job without going as far as to determine the
Contractor’s employment?
4
2.2.1 Issues 4
2.2.2 Rules 5
2.2.2.1 Omission of Works 5
2.2.2.2 Termination for Convenience 6
2.2.2.3 Regularly and Diligently 7
2.2.3 Analysis 8
2.2.4 Conclusion 9
2.2(b) Is it possible for the contractor to claim loss and
expense from the Employer?
10
2.2.5 Issues 10
2.2.6 Rules 10
2.2.6.1 Concurrent Delay 11
2.2.7 Analysis 12
2.2.8 Conclusion 12
3.0 References 13
4.0 Case Law 16

1
1.0 LIST OF ASSUMPTIONS
1. All PAM 2006/PAM refer to PAM Contract 2006 With Quantities.
2. All PWD Form 203/PWD refer to PWD Form 203 (Rev1/2010).
3. All FIDIC 1999/FIDIC refer to FIDIC Red Book Conditions of Contract 1999.
4. For all situations, a valid and enforceable contract is assumed to exist.
5. The terms “employer” and “client” refer to the same party and are used
interchangeably.

2
2.0 QUESTIONS
2.1 Any entitlement of an extension of time for the Contractor due to the project was
suspended with a stop work order issued by a local authority.
2.1.1 Issues:
The main issue here is whether the contractor is entitled to extension of time due to a
stop work order issued by a local authority. Several key issues have to be addressed such as:
i. Whether the stop work order was issued due to a fault by the contractor, the client,
or due to neutral events.
ii. Whether the standard contract forms provide for the entitlement of extension of
time.
iii. Whether the contractor has complied with the precedence as stipulated in the
standard contract forms.
2.1.2 Rules:
The general rule is that extension of time can only be granted if the contract expressly
permits (Rajoo & Singh, 2012). Therefore, the presence of such clause is of substantial
importance. According to the principle of prevention, a contractual party cannot impose a
contractual obligation on the other party where he has prevented the other party to perform
the said obligation (Eggleston, 2009). Time can be set ‘at large’ if there are no contractual
provisions to extend the completion date due to a delay caused by the Employer.
2.1.2.1 Standard Contract Forms:
Clause 23.8(w) in PAM 2006 provides for the application of extension of time in the
event of “suspension of the whole of part of the Works by order of an Appropriate
Authority”, if it is not due to the contractor’s or NSC’s fault. While the stop work order may

3
be issued due to either the contractor’s or the Employer’s fault, Clause 4.0 of the above
contract transferred the risk of non-compliance with statutory requirements to the contractor,
by requiring a written notice given for any inconsistencies (Clause 4.2), and if no reply was
received, to proceed with the work to comply with the said requirements (Clause 4.3), and to
indemnify the Employer for any penalties arising out of non-compliance with statutory
requirements (Clause 4.4).
FIDIC 1999 provides a similar Clause 8.5, where if a delay was caused by some
“Authorities”, and if the i) delay was unforeseeable and ii) the contractor has complied with
the procedures laid down by the Authorities, an extension of time may be granted under
Clause 8.4(b). The compliance of the works with authority requirements is listed down as a
requirement for the application of extension of time, with no mention of the Employer’s
obligations.
PWD Form 203, however, in Clause 43.0 does not provide any provisions for
extension of time due to stop work order issued by a local authority. The most relevant
position available is Clause 50.0 references under Clause 43.1(c). In the 2007 revision of the
PWD Form 203, an officer named in the appendix may instruct the Contractor to suspend the
works. In the 2010 revision, however, the officer is replaced with the Superintending Officer
(S.O.). Similar to Clause 4.0 in the PAM 2006, Clause 21.0 of PWD Form 203 provided for
the transfer for risk of non-compliance to the contractor.
2.1.3 Analysis:
It can be assumed that the stop work order was issued due to either one of two distinct
reasons:
a) It was issued due to the Employer failing to obtain the necessary approvals before starting
work.
b) It was issued due to non-compliance of the Contractor which caused an accident to happen
on site.

4
For situation (a), the Contractor will be entitled to extension of time because the
issuance of stop work order was not due to the negligence, omission, default and/or breach of
contract by the Contractor.
For situation (b), the Contractor will not the entitled to extension of time because the
issuance of stop work order was due to the negligence, omission, default and/or breach of
contract by the Contractor.
At the same time, in the event of situation a), any concurrent delay by the contractor
should be taken into account when issuing an extension of time so as to allow the net time
extension for events not caused by the contractor.
2.1.4 Conclusion:
The Contractor will be entitled for an extension of time if the stop work order was not
issued due to his fault, vice versa.
2.2 The Contractor currently facing challenges to complete the project within the
timeframe stipulated in the contract:
2.2(a) Is it possible for the Employer to take over the project and appoint a third party
contractor to finish the job without going as far as to determine the Contractor’s
employment?
2.2.1 Issues:
Several items have to be clarified:
i. Define challenges, what kind of challenges, and what is the cause of such
challenges? Whether it is fault by the contractor.
ii. Completion within the stipulated time frame – does it affect the critical path?

5
iii. How severe is the delay? Is it severe enough to substantiate a breach of contract
by the contractor?
iv. Whether the employer may take possession and hire a 3rd
party to continue with
the works; Whether such action constitutes a breach of contract by the employer.
2.2.2 Rules:
In the absence of a default by the contractor, work awarded to the contractor can only
be removed by the employer through two methods:
a) Omitting the work, or
b) Terminating the contract for convenience
2.2.2.1 Omission of Works
Even though omission of work is a variation often provided in standard contract
forms, this power does not include having another contractor perform the omitted works
unless the contractual provisions clearly allows the employers to do so. In Gallagher v.
Hirsch NY App Division 467 (1899) 61 NYS 609, the court held that the term “omission”
means work that is not to be done at all, and not given to another contractor. This principle is
subsequently found in the classic case of Carr v JA Berriman Pty Ltd (1953) 89 CLR 327,
where the judge held that even though the employer was contractually allowed to omit works
from the contractor, the words used did not allow the employer omit the works for the
purpose of having them completed by another contractor. To quote Justice Fullagar: “The
words used do not, in their natural meaning, extend so far, and a power in the architect to
hand over at will any part of the contract to another contractor would be a most unreasonable
power, which very clear words would be required to confer.” Thus, such act by the employer
is a breach of contract. This case law is further confirmed in Commissioner for Main Roads
v Reed & Stuart Pty Ltd (1974) 131 CLR 178.
In a recent case, Abbey Developments Ltd v PP Brickwork Ltd (2003) EWHC
1987, the court held that the variation clause per se does not allow Abbey to take away the

6
works and give it to another contractor, even though Abbey had a bona fide dissatisfaction
with PP’s performance. The judge also made reference to Hudson’s Building and
Engineering Contract paragraph 4.202 where in the case of Tancred Arrol v The Steel
Company of Scotland Limited (1890) 15 App. Cas. 125, Mr. I. N. Duncan says: “It is self-
evident that the building owner must permit the contractor to carry out the whole of the work,
and that if he prevents the contractor from so doing, the owner will be in breach of contract
and liable for damages unless there is an applicable power to omit work in the contract.”
This restriction has been applied very strictly by the courts and is not subject to either a
degree test or a temporal test (MinterEllison, n.d.).
2.2.2.2 Termination for Convenience
A general rule to contract is that neither contracting parties can avoid carrying out his
duties under the contract unless a breach is committed by the other party. Therefore, if there
is no breach done by the contractor, the client has to allow the contractor to proceed with the
works and carry out his duty of paying the contractor according to the contract terms.
However, one such clause can be incorporated into the contract that allow the employer to
legally terminate the contract unilaterally, that is, a Termination for Convenience clause. By
invoking such a clause, if available, the client will not be considered breaching the contract.
An example of termination for convenience clause is Clause 52.0 of PWD Form 203,
Termination on National Interest. This clause allows the Government to terminate the
contract without disclosing any reason. While a clause of such nature is very likely to be
abused, the PWD Form 203 is a public works contract and the government is highly unlikely
to abuse their termination rights. On the other hand, if a private entity attempts to contract
with such a clause, the contractor will be able to negotiate for better terms, if not the
elimination of such a clause.

7
2.2.2.3 Regularly and Diligently
It is a common requirement in construction contracts, especially standard forms of
contract, for the contractor to proceed with the works “regularly and diligently”. This
provision can be found Clause 21.1 of PAM 2006, Clause 38.2 of the PWD Form 203, Clause
8.6 of the FIDIC Red Book 1999 provide for a mechanism for the Engineer to instruct the
Contractor to submit a revised programme to finish the Works within the Time for
Completion. (PAM & PWD)
The current view is that the obligation translates into “a continuous requirement to
carry out the works assiduously and to mobilise such resources as are necessary throughout
the contract period to ensure that the completion date and the quality of the works appear
reasonably capable of being achieved.” (Chow, 2012).
The definition of the term regularly and diligently from the courts varies from case to
case. In GLC v Cleveland Bridge and Engineering (1984) 34 BLR 50, the courts simply
interpreted the words as “get on with it”. A more substantial definition can be found in the
case of West Faulkner Associates v London Borough of Newham (1994) 71 BLR 1, Judge
Newey defined the “regularly and/or diligently” in the following terms: "contractors must go
about their work in such a way as to achieve their contractual obligations. This requires them
to plan their work, to lead and manage their workforce, to provide sufficient and proper
materials and employ competent tradesmen, so that the works are fully carried out to an
acceptable standard and that at all times. Sequence and other provisions of the contract are
fulfilled”.
However, in the Court of Appeal, Simon Brown LJ further commented on the term:
“Taken together the obligation upon the contractor is essentially to proceed continuously,
industriously and efficiently with appropriate physical resources so as to progress the works
towards completion substantially in accordance with the contractual requirements as to time,
sequence and quality of work”.
Thus, based on the judicial comments it means that the work must comply with the
time and quality requirements in the contract. One such approach in the standard forms of

8
contracts is the provision of a Works Programme (PAM Clause 3.5, PWD Clause 12.0,
FIDIC Clause 8.3).
2.2.2.4 Standard Contract Forms:
All standard forms of contract do not provide mechanisms for the hiring of third party
during the ongoing of construction works, therefore such action per se will amount to a
breach of contract by the employer.
Omission of works is provided in Clause 11.1(a) of PAM Contract 2006, Clause
24.2(a) of PWD Form 203, and Clause 13.1(d) of FIDIC Red Book 1999. It is important to
note that in FIDIC contract it is expressly stated that omission of work is allowed “unless it is
to be carried out by others”.
2.2.3 Analysis:
Assuming one of the standard forms of contract is used, a direct answer to this
question is no, it is not possible for the Employer to take over the project and appoint a third
party contractor to finish the job as such an act would be to omit the works in its entirety and
award it to a third party. Based on the rules established in case laws, this act will amount to a
breach of contract by the Employer as no such provisions are provided in the standard
construction contracts. However, such an action can be carried out if the project is awarded
with a bespoke contract with such a term incorporated into it.
In this specific scenario however, the Contractor is currently facing challenges to
complete the project within the timeframe stipulated in the contract, and thus there may be
other alternatives that can be pursued by the Employer.
Firstly, we need to ascertain the cause and severity of the Contractor’s delay, i.e. was
it caused by the Contractor’s own fault, and whether the extent of it was so severe that a
revised work programme is insufficient to mitigate the delay (PAM Clause 3.5, PWD Clause
12.4. FIDIC Clause 8.3). Referring to Abbey Developments Ltd v PP Brickwork Ltd

9
(2003) EWHC 1987, even though the client may be dissatisfied with the contractor’s
performance (as indicated by the contractor “facing challenges to complete the project within
the timeframe stipulated”), he is not legally entitled to terminate the contract solely based on
his dissatisfaction.
Therefore, assuming that the delay is caused by the contractor himself, and if the
extent of the said delay is such that a revised works programme will be able to accelerate and
finish the works on or before the completion date, the Employer shall adhere to the provisions
stipulated in the contract.
However, if the delay is so severe that allows for termination of the contract by the
employer (Clause 25.1(c) PAM Contract 2006, Clause 51.1(a)(iii) PWD Form 203A, Clause
15.2(c)(i) FIDIC Red Book 1999), and if the Employer decided not to invoke the termination
clause of the said contracts, a separate agreement may be arranged between the Contractor
and Employer to sought for a better alternative than determining the Contractor’s
Employment. One such arrangement is the hiring of a third party contractor by the Employer
to complete the works while keeping the contract alive.
This decision may be desirable for numerous commercial reasons. For the Contractor,
he may be able to avoid his bank guarantee from being called by the Employer, as this will
severely affect the company’s image in the industry. For the Employer, he may be able to
avoid costs of possible arbitration and litigation due to alleged wrongful termination claims
by the contractor.
2.2.4 Conclusion:
In conclusion, while it is not contractually correct to hire a third party to complete a
construction work, it may be done through separate agreement if the contractor is already in a
breach of contract.

10
2.2(b) Is it possible for the contractor to claim loss and expense from the Employer?
2.2.5 Issues:
i. Whether the challenges faced by the contractor is caused by the contractor
himself, neutral event, or the employer.
ii. Whether there is a concurrent delay. The term “challenges” used is in plural
form, indicating multiple challenges faced by the contractor. These challenges
my stem from different sources.
iii. Whether the standard forms of contract allow for such claims by the contractor.
2.2.6 Rules:
Generally, loss and expense claims can be defined as the rights of a contractor to
claim for direct losses and/or expenses that they are entitled to where the progress of works
are being materially affected by the default of the Employer.
In the classic case of Hadley v Baxendale (1854) 9 Ex 341, it was held that in the
event of a breach of contract, the innocent party is entitled for damages that either resulted
naturally from the breach or were contemplated by the contracting parties when the contract
was formed. The court in FG Minter Ltd v Welsh Health Technical Services Organisation
(1980) 13 BLR 1 later held that a claim for loss and expense is principally the same in nature
as damages defined in Hadley v Baxendale.

11
2.2.6.1 Concurrent Delay
Concurrent delay often refers to a period of time where two or more events have
occured and causing overlapping delay on the work progress under the contract. In the classic
case of Henry Boot Construction (UK) Ltd v Malmaison Hotel (Manchester) Ltd (1999)
70 Con LR 32, the Judge observed that "If there are two concurrent causes of delay, one of
which is a Relevant Event, and the other is not, then the contractor is entitled to an extension
of time for the period of delay caused by the Relevant Event notwithstanding the concurrent
effect of the other event". This approach became known as the “Malmaison Approach”, and
was later upheld by Walter Lilly and Company Limited v Mackay and DMW
Developments Limited [2012] EWHC 1773.
However, in the Scottish case of City Inn Ltd v Shepherd Construction Ltd [2003]
ScotCS 146, Lord Drummond Young held that in the case of concurrent delays, a claim for
prolongation costs need not automatically follow a claim for extension of time, and it is
necessary to apportion the prolongation costs suffered by the contractor by taking into
account the different causes of delay.
2.2.6.2 Standard contract forms:
Contractor may claim for the loss and expenses if they can prove there are defaults by
employer under PAM 2006 Clause 26.0 and Clause 24.0. Based on PWD form 203 (Rev
2010), Clauses 44.1 allow contractor to claim for his loss and expenses with rationality stated
under clauses 43.1(c), (d), (e), (f) and (h).
FIDIC allows for the claims of additional payment under Clause 20.1, subject to
several other clauses in the contract: Clause 1.9(b), 2.1(b), 4.7(b), 4.12(b), 4.24(b), 7.4(b),
8.9(b), 10.3(b), 16.4(c), 17.4(b), 19.4(b), & 19.6.

12
2.2.7 Analysis:
Without taking into consideration from the situation in Q2(a), the challenges have to
be clarified on whether it is caused by Employer, Contractor or Neutral Event. If the
challenges are caused by Employer, the contractor may claim loss and expense in accordance
to PAM contract 2006 and P.W.D. Form 203. FIDIC allows for loss & expense claims for
neutral events as well. However, the contractor has to adhere to the procedures as stipulated
in the contract, such as serving of notice to claim, or else he will waive his contractual rights
to claim. If this happens, the contractor can still resort to common law claims, even though it
will be much more difficult to prove his case.
On the other hand, if it is the contractor’s fault, he will not be entitled for claiming
loss and expense.
If the delay is caused by both the contractor and employer, the contractor may only
claim the loss and expense caused by the employer, and bear the remaining costs himself.
2.2.8 Conclusion:
The contractor will only be contractually entitled to claim for loss & expense if the
delay is caused by the employer and/or neutral events, and it has caused monetary
implications to the contractor.

13
3.0 REFERENCES
Buckles Solicitors. (n.d.). Regularly and diligently. Retrieved 9 June 2018, from
http://www.buckles-law.co.uk/site/library/new_construction_news_section/regularly-and-
diligently
Chow, K. F. (2012). Law and Practice of Construction Contracts. Singapore: Sweet &
Maxwell Asia.
Draper, M. (2012). Regularly and diligently. Retrieved 15 June 2018, from
http://www.sheridangold.co.uk/assets/depot/files/d016_regularly_and_diligently_sg.pdf
Eggleston, B. (2009). Liquidated Damages and Extensions of Time. United Kingdom: Wiley-
Blackwell.
Entrusty. (2005). What is Loss and/or Expense?. Retrieved 15 June 2018, from
http://entrusty.com/site/wp-content/uploads/2018/04/11.-What-is-loss-and-expense.pdf
Fenwick Elliott. (2003). Abbey Developments Limited -v- PP Brickwork Limited. Retrieved
12 June 2018, from https://www.fenwickelliott.com/research-insight/adjudication-case-
notes/abbey-developments-limited-v-pp-brickwork-limited
Hawkswell and Kilvington (n.d). Specialist solicitors to the construction and engineering
industries. Retrieved 14th June 2018 from http://www.hklegal.co.uk/2012/08/03/loss-
expense-conditions-precedent-and-global-claims/
Knowles, J. R. (2005). 150 Contractual Problems and Their Solutions. United Kingdom:
Blackwell Publishing Ltd.
Larry, W. C. Jr.. (n.d.). Termination for Convenience Clause. Retrieved 13 June 2018, from
http://www.kraftsoncaudle.com/cutsheets/terminationforconvenienceclause.pdf
Lim, C. F. (2011). The Malaysian PWD Form of Construction Contract. Malaysia: Sweet &
Maxwell Asia.

14
Longbottom, D. S. (2010). Concurrent Delays - Apportioning the Blame. Retrieved 16 June
2018, from http://www.adrpartnership.com/media/pdfs/ADR_Digest_Summer_10.pdf
MinterEllison. (n.d.). When is the variations power restricted?. Retrieved 8 June 2018, from
http://www.constructionlawmadeeasy.com/whenisthevariationspowerrestricted
Molloy, J. B. (1999). Can a Contractor Claim for Loss of Profit on Omitted Works?.
Retrieved 10 June 2018, from https://hkis.org.hk/ufiles/dis07.pdf
Murdoch, I. (2011). Concurrent delay after De Beers v Atos. Retrieved 15 June 2018, from
http://constructionblog.practicallaw.com/concurrent-delay-after-de-beers-v-
atos/?__lrTS=20180614033506296
Pannone. (2012). Concurrent Delay After Walter Lilly. Retrieved 15 June 2018, from
http://www.pannone.com/media-centre/articles/construction-articles/concurrent-delay-after-
walter-lilly
Pannone. (n.d.). Don’t like your current contractor? - A further look at termination.
Retrieved 10 June 2018, from http://www.pannone.com/media-centre/articles/construction-
articles/dont-like-your-current-contractor-a-further-look-at
Pugsley, J., Christopoulos, N., Utz, C. (2006). Drafting Effective Termination for
Convenience Clauses. Retrieved 8 June 2018, from
http://www5.austlii.edu.au/au/journals/AUConstrLawNlr/2006/39.pdf
Sundra, R., & Harbans, S. (2012). Construction Law in Malaysia. Malaysia: Sweet &
Maxwell Asia.
Swift, P. (2012). Proceeding regularly and diligently – what does this mean?. Retrieved 15
June 2018, from http://ramskillmartin.co.uk/article/proceeding-regularly-and-diligently-what-
does-this-mean/
Tan, P. I., Low, K. S., Sum, J. P. M., Chee, S. T. (2010). Handbook for PAM Contract 2006.
Malaysia: Pertubuhan Arkitek Malaysia.

15
Wallace, D. (1995). Hudson's Building and Engineering Contracts. United Kingdom: Sweet
and Maxwell.
William, C. L. Jr. (2002). Does Your Contract Contain A Termination For Convenience
Clause?. Retrieved 12 June 2018, from https://www.lhfconstructlaw.com/Articles/Does-
Your-Contract-Contain-A-Termination-For-Convenience-Clause.shtml

16
4.0 CASE LAW
Abbey Developments Ltd v PP Brickwork Ltd (2003) EWHC 1987. Available from:
https://simplymalaysia.files.wordpress.com/2011/10/abbey-developments-limited-v-pp-
brickwork-limited-ht-03-73-2003.pdf
Baker v Willoughby [1970] AC 467
Carr v JA Berriman Pty Ltd (1953) 89 CLR 327. Available from:
http://www8.austlii.edu.au/cgi-bin/viewdoc/au/cases/cth/HCA/1953/31.html
City Inn Ltd v Shepherd Construction Ltd [2003] ScotCS 146. Available from:
http://www.bailii.org/scot/cases/ScotCS/2001/187.html
Commissioner for Main Roads v Reed & Stuart Pty Ltd (1974) 131 CLR 178. Available
from: http://www8.austlii.edu.au/cgi-bin/viewdoc/au/cases/cth/HCA/1974/53.html
De Beers UK Ltd (formerly Diamond Trading Co Ltd) v Atos Origin IT Services UK Ltd
[2010] EWHC 3276
FG Minter Ltd v Welsh Health Technical Services Organisation (1980) 13 BLR 1
Gallagher v. Hirsch NY App Division 467 (1899) 61 NYS 609. Available from:
https://casetext.com/case/gallagher-v-hirsh
GLC v Cleveland Bridge and Engineering (1984) 34 BLR 50
Hadley v Baxendale (1854) 9 Ex 341
Henry Boot Construction (UK) Ltd v Malmaison Hotel (Manchester) Ltd (1999) 70 Con LR
32
John Doyle Construction Ltd v Laing Management (Scotland) Ltd [2004] BLR 295

17
Quinn v Burch Bros (Builders) Ltd [1966] 2 QB 370
Tancred Arrol v The Steel Company of Scotland Limited (1890) 15 App. Cas. 125
Tennant Radian Heat v Warrington Development Corporation (1988) 4 Const LJ 321
Walter Lilly and Company Limited v Mackay and DMW Developments Limited [2012]
EWHC 1773. Available from:
https://www.fenwickelliott.com/sites/default/files/julian_critchlow_-
_walter_lilly_and_company_ltd_v_gpc_mackay_and_dmw_developments_ltd.pdf
West Faulkner Associates v London Borough of Newham (1994) 71 BLR 1

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