Malaysian Construction Law

Azizan Supardi, 2014 ….. 1
UNIVERSITI TEKNOLOGI MARA QSM 507
‘Azizan Bin Supardi, Lecturer
Dip. QS (ITM), Adv. Dip. QS (ITM), MSc. Const. Contract Mgt. (UTM)
Centre of Studies for Quantity Surveying
Faculty of Architecture, Planning & Surveying
Universiti Teknologi MARA (UiTM)
40450 Shah Alam, Selangor Darul Ehsan, Malaysia
Tel: (+603) 5521 1532
Fax: (+603) 5544 4353
Mobile: (+6019) 299 5157
Email: aziza012@salam.uitm.edu.my

1 Introduction on the subject
2 Dispute Resolution: Overview
3 Ditto: Litigation and Arbitration
4 Ditto: Adjudication and Mediation
5 Ditto: Other Alternative Dispute Resolution (ADR)
6 Construction Contract: Element of contract, form and parties to a contract
7 Ditto: Terms of a contract and factors tending to defeat contractual liability
8 Ditto: Discharge of contract
9 Ditto: Remedies for breach of contract
10 Tort in Construction: Nature of tortuous liability
11 Ditto: Negligence and tresspass
12 Ditto: Nuisance and vicarious liability
13 Ditto: Occupier’s liability and strict liability
14 Revision
WEEK DESCRIPTION

1. Harbans Singh KS (2002), Engineering and construction contracts management, Singapore:
LexisNexis.
2. Abdullah, Nor Ainah (2001). Pengenalan kepada kontrak binaan. UiTM Shah Alam: Shah
Alam.
3. Cummins, Robert R, (1999). Tort law, London: Prentice Hall.
4. Lee, M.P. (2003). General principles of Malaysian law (4th ed.). Kuala Lumpur: Fajar Bakti.
5. Robinson N.M. et al (1996). Construction law in Singapore and Malaysia. Kuala Lumpur:
Malaysian Law Journal Sdn Bhd.
6. Uff, John (1999). Construction law (7th ed.). London: Sweet & Maxwell.
7. Wu, M.A. (1990). The Malaysian legal system. Kuala Lumpur: Longman Malaysia Sdn. Bhd.
8. Wu, M.A. and Vohrah, B (1990). Commercial law of Malaysia. Kuala Lumpur: Heinman
Educational Books Asia Ltd.
9. Xavier, Grace (2001). Law and practice of arbitration in Malaysia. Malaysia: Sweet &
Maxwell Asia.

PERCONTENTPERSOURCESPERENFORCEMENT
PER CLASSIFICATION
SUBSTANTIVE
LAW
PROCEDURAL
LAW
HISTORICAL
SOURCES
LEGAL
SOURCES
SOURCESOF
REFERENCE
CustomsTradeUsageAuthoritative
Opinions
INTERNATIONAL
LAW
PUBLIC
LAW
PRIVATE
LAW
Lawof
Contract
Lawof
Property
LawofTort
Commercial
Law
Constitutional
Law
Administrative
Law
CriminalLaw
Statute
LawReports/
Journals
Authoratative
Texts
Judgements
Unreported
Published
Syariah
Law
Written
Law
Unwritten
Law
Legislation
Subsidiary/
Delegated
Legislation
Customary
Law
Judicial
Decision
Applicable
English
Law
MCCLM 001

PERSOURCES
LEGAL
SOURCES
Unwritten
Law
Customary
Law
Judicial
Decision

MEDIATION
LITIGATION
ARBITRATION
ADJUDICATION
OTHER ADR

Root
Causes of
Disputes
Time/Cost
/ Quality
Inaccurate
design
information
External
Events
Inadequat
e contract
documents
Lack of
Profession
alism
Unrealisti
c tender
pricing
Internal
Disputes

How To Reduce/Settle Disputes?
PREVENTIVE
• Efficient risk
management
• New procurement
method
• Partnership
CORRECTIVE
• Litigation (legal
action)
• Arbitration
• Alternative dispute
resolution (ADR)

DISPUTE
RESOLUTION
METHODS?
NEGOTIATION
LITIGATION
ADJUDICATION
CONCILIATION
NUETRAL
EVALUATION
EXPERT
DETERMINATION
MEDIATION
ARBITRATION

•Most common in Malaysia- Parties
themselves attempt to resolve the dispute.
Resolution through agreement.
Negotiation
•Disputes are taken to courts(proceeding is
open to public). Resolution through court
judgement subject to appeal.
Litigation
•A formal, private and biding process.
Decision made is binding, and unlikely to be
appeal.
Arbitration
•Similar to arbitration, but decisions are
temporarily binding (before finally decided
by arbitration/court/agreement)
Adjudication
•Structured form of negotiation assisted by
a mediator. Settlement reached can only be
a decision if agreed by parties.
Mediation
•A private process involving an independent
expert with inquisitorial powers who gives a
binding decision.
Expert
determination
A
D
R

WHICHONETO
CHOOSE??

… like choosing the right club for the
right shot

LITIGATIONNEGOTIATION
 Most
Common
practice
Contractor are
likely to
surrender to the
will of employer
Settle with
narrow marginal
justice
 Contractors
have to wait and
suffer silently
until the
completion of the
construction
project.
WHAT ARE THE
MODERATE MIDDLE
OPTIONS??
?

Time & Cost factor
Effect of decisions
Litigation
Arbitration
Mediation
Conciliation
Negotiation
Binding Decision
Longer&
expensive
Expert
determination
Adjudication
Formality

Litigation
SESSIONS
COURT
?
SuperiorCourtsSubordinateCourts
FEDERAL COURTS
COURT OFAPPEAL
* Formerly known as the ‘Supreme Court’
SYARIAH
COURTS
HIGH COURT OF
MALAYA
HIGH COURT OF SABAH
& SARAWAK
SESSIONS
COURT
JUVENILE
COURT
MAGISTRATE’S
COURT
NATIVE
COURT
MEGISTRATE’S
COURT
PENGHULU’S
COURT
MCCLM 242

- Legally qualified judge
-Legal aid
- Suitable when there is legal complexity
Applicable of Judicial precedent
- Decision: binding & enforceable
-Appeal System
- Very public, cost & time
- Judges X familiar with technicality
- Complicated procedures
- No flexibility: date & venue
- Create hostility- damage relationship
- Limited International enforceability
Litigation

Why ADR?
• PRO
 Speed & Flexibility
 Control
 Cost
 Preserved business relationships
 Consensual – satisfactory
outcome
 Settlement is confidential and
privileged.
• CON
 No general disclosure of
documents/evidence
 Early disclosure of each party’s
case can be damaging
 Outcome is non-binding
 Sometimes use as a delaying
tactic.
 Can be prone to error and
unfairness.
 Uncertainty as to privilege of
disclosures in any subsequent
legal action
 Inequality of bargaining position
& representation

• Private proceedings- Avoid Unwanted PublicityPrivacy
• Parties can choose the time & venueConvenience
• May be quicker & less expensiveSpeed & Expense
• Parties may agree what procedure to useLess formal
• Less controversialPreserve Relation
• Parties can choose the arbitratorExpertise
• Award is final & binding-limited ground to set
aside awardFinality
• Easier to enforce arb. award internationallyInt. Enforceable
Why Arbitration ? (vs Litigation)

Criticisms
Rules of
Evidence
Lack of Law
Knowledge
Costs
Point
of law
Enforcement
Third
Party
Criticism Against Arbitration

• s.41
• Question of law
arising out of the
award
• To set aside the
award based on
s.37,
• To enforce
s.38,39- as a
court judgments.
• Interim measures
• Appoint &
Remove
Arbitrators
• Evidences &
Witnesses
• s.10- stay of
proceeding
Enforce
Arbitration.
Agreement
Support the
Process
Point of
law-
To consider
challenges
& to
enforce
ArbitrationandRoleof
theCourt

• Must be made “in writing”.
Arb.Agre. “In
writing”?
Shall be in
writing
Arbitration
clause? Refer to
form of contract?
Signed
document?
Exchange of
communications
in writing?
To submit
disputes to
arbitration
Exchange of
written
statements
Arbitration Agreement

Appoint
Arbitrator
1st Meeting-
decide on?
Deliver Claims
& Defence etc.
Submit &
Exchange
documents
Exchange of
reports / Expert
witnesses
Oral hearings?
Documents
only?
Hearing Award
Arbitration
Procedure

AppointinganArbitrator/Tribunal
• Can be agreed in the contract, or power to appoint given to
institutional bodies (e.g.: PAM, ISM)
1. In Building Contract
• Parties are free to agree on the procedure to appoint
arbitrator/tribunal.
2. By Agreement (s.13 (2)
• Where parties fails to agree on procedure/ to appoint
3. Appoint by KLRCA
• If KLRCA fails to appoint arbitrator, can go to High Court
4. Appoint by High Court
ByAdHoc
Asper
Clause

S.12
Number of
Arbitrator?
International
3 Arbitrator
Each party
appoint 1, and
the 2 arbitrator
will choose
another 1
Domestic
1 Arbitrator

Who?
Qualification
specified by
parties’
agreement
Independent &
Impartial
Int. Arbitration-
Other
nationalities of
the parties

Powers&DutiesoftheArbitral
Tribunal
Arbitrator Duties
Act
independently &
Impartially
Find facts
Considered all
the arguments
Apply the law
Make an Award

Grounds for
removal?
s.14
Impartially or
Bias
Not the
qualifications
agreed
s.16
Failed to
properly conduct
the proceeding
Act with
unjustifiable
delay
Removal & Termination of
Arbitrator

Bases for
challenge?
Jurisdiction
(s.18(7), S41)
Proceedings
Irregularities
(s37)
Question of
law (s42)
Challenges to
the Award
Arbitration

PAM: Adjudication

Mediation?
Parties engage a mediator who is an
impartial third party
The mediator assists the parties to
negotiate their own solution to the
dispute.
The parties can agree on whether the
mediator should consult them
separately, jointly or both.
Cannot compel the parties to reach a
settlement although the mediator may
take a very persuasive approach.
Conciliation?
Parties appoint a neutral 3rd party call
conciliator.
The conciliator takes a more proactive
role than a mediator.
Will issue a non-binding
recommendation in the event where
settlement is not reached during the
conciliation process.

Mediation Process
Appoint
mediator
1st Meeting-
brief statement
Conduct meeting-
Parties present their
cases
Joint/Separate
sessions with the
parties
Mediator draft
agreement based on
parties proposals
Termination of
Mediation. Settled?
Or No?
If No settlement
can proceed to
Arbitration/ Court

PAM: Mediation

An Agreement between the parties- usually part
of standard form of contract
Usually three members and established at the
commencement if a project-even before disputes
arise.
The board members will conduct routine visits on the
site. (good working relation & familiarity)
When dispute arises, either party may refer it to
the DRB which in turn will give its decision
within short period of time.

The decision or the DRB have binding effect
(with no rejection within prescribed time)
unless one of the parties dissatisfied with the
decision.
If dissatisfied, can then refer the disputes to
arbitration (if so provided under the contract)
or to litigation.
The arbitrator/ court will consider the dispute
and not the decision of the dispute board. (not
an appeal, but a fresh start)

‘DAB’instandard
forms:• FIDIC 1999 at sub-clause 20 creates a 3-step procedure if disputes
arises:
Clause 20.2 : Dispute be submitted first to a DAB.
Clause 20.4 : The DAB to give a reasoned decision within 84
days after the dispute has been submitted to it. If either party is
dissatisfied, it has 28 days to express its dissatisfaction and ask
for arbitration. If there is no notice of dissatisfaction, the decision
is binding and the parties must give it effect, unless and until it is
revised in an amicable settlement or by arbitration.
Clause 20. 6 : Parties must try to settle the dispute amicably
before reference to arbitration is made. If not settled, dispute
is sent to international arbitration .

Refer to S.O.
Mediation
Arbitration
Dispute Resolution under CIDB 2000

CIDB 2000

PWD 203A (2007)
Establish dispute
Officer named in Appendix to Decide in 45 days

PERENFORCEMENT
PER CLASSIFICATION
INTERNATIONAL
LAW
PRIVATE
LAW
Lawof
Contract

Employer/Client
Design team/Consultant
Builder
Architect Quantity
Surveyor
Structural
and Civil
Engineers
Services
Consultants
Interior
Designers
Landscape
Architects
Project
Managers
Contractor
Domestic
Sub-
Contractors
Nominated
Sub-
contractors
Nominated
Suppliers
Domestic
suppliers
Local
Authorities
Artists and
tradesman
Clerk of
works
Superintending Officer
S.O.’s or Engineer’s
Representatives
RecommendationThesameposition(PAM)
Agent
(CIDB & PWD)
Assist
Assist
Nominated Sub-contract Standard Form of
Contract
Main Contract
Standard Form of
Contract
Memorandum of
Agreement
Foreman or
Site Agent
MCCLM 041

ELEMENT
TERM
DISCHARGE
FIRM OFFER/
PROPOSAL
UNQUALIFIED
ACCEPTANCE
CONSIDERATION
VALID/ENFORCEABLE
AGREEMENT
+
+
INTENTION TO
CREATE LEGAL
RELATION
CERTAINTY OF
TERMS
LEGAL
CAPACITY TO
CONTRACT
FREE CONSENT
LAWFUL OBJECT
AND
CONSIDERATION
PHYSICAL/
LEGAL
POSSIBILITY
EXPRESS IMPLIEDVS
CONDITION WARRANTYVS
BY PERFORMANCE
BY FRUSTRATION
BY AGREEMENT
BY BREACH
REMEDIES
Quantum Meruit
Special
Relief Damages
MCCLM 011

ELEMENT
FIRM OFFER/
PROPOSAL
UNQUALIFIED
ACCEPTANCE
CONSIDERATION
VALID/ENFORCEABLE
AGREEMENT
+
+
I offer to build your home for a fee of
RM100,000.00 in 1 year time.
I accept your offer and I will
pay accordingly and
periodically.
Then, the consideration.

Opentenderevaluationandassessment
Prepare preliminary tender list from
own records or advertise
Send preliminary enquiry to tenderers
if they are interested to tender
Receive replies and prepare select
tender list
Send out tender invitation
Tender documents - clarify queries,
organise pre-tender meetings or visits
Receive tenders - priced
documents/Bills of Quantities
Open tenders
Evaluate tenders - check priced
documents/Bills of Quantities,
prepare report
Select contractor - based on
predetermined criteria
Notify successful contractor
Notify unsuccessful contractors
Activitiesofasimpleselectivetendering
Pre-Qualification of
contractor
a) Compliance with conditions
of tendering
b) Technical evaluation
- Contractor’s organization
- Experience/technical expertise
- Work load
- Contractor’s resources
- Quality control/assurance plans
- Health and safety procedures
- Disputes
c) Financial status
- Financial standing
- Bonding capacity
d) Tender price
- Arithmetical errors
- Pricing errors
- Pricing levels and methods
- Basic material prices
- Basic plant and labor rates
e) Completion time
All methods of
tendering
Activities of an
open tendering
Advertise
MCCLM 073

INSTRUCTION TO TENDERER
FORM OF TENDER
GENERAL SUMMARY
PRELIMINARIES
PREAMBLES
SPECIFICATIONS
BILLS OF QUANTITIES
APPENDICES
BasedonDrawings
andSpecifications
SCHEDULE OF WORKS
APPENDICES
* Schedule of rates
LETTER OF ACCEPTANCE
FORM OF CONTRACT
CONTRACT DRAWINGS
TENDER DRAWINGS
TENDER NOTICE
Included as a sample for Tender Table Document
BasedonBillsofQuantities
Include:
Conditionoftendering
Include:
ArticleofAgreement
ConditionsofContract
AppendicestotheConditions
PRELIMINARY DRAWINGS ?
•Particulars of Contractors
•Related Schedules
•Basic Material & Labour
•Samples of Insurances
•Architectural
•Civil and Structural
•Mechanical and Electrical
•Architectural
•Civil and Structural
•Mechanical and Electrical
MCCLM 066 Related PAM 98 Clauses --- MCCLM 066

Quotation
ELEMENT
FIRM OFFER/
PROPOSAL
UNQUALIFIED
ACCEPTANCE
CONSIDERATION
VALID/ENFORCEABLE
AGREEMENT
+
+
Estimat
e
MCCLM 011
Letter of
Invitation
Tender
Notice
Offer?

ELEMENT
FIRM OFFER/
PROPOSAL
UNQUALIFIED
ACCEPTANCE
CONSIDERATION
VALID/ENFORCEABLE
AGREEMENT
+
+
Letter of
Intent
MCCLM 011
Battle of
Forms
Counter
Offer
Subject to Contract

ELEMENT
FIRM OFFER/
PROPOSAL
UNQUALIFIED
ACCEPTANCE
CONSIDERATION
VALID/ENFORCEABLE
AGREEMENT
+
+
INTENTION TO
CREATE LEGAL
RELATION
CERTAINTY OF
TERMS
LEGAL
CAPACITY TO
CONTRACT
FREE CONSENT
LAWFUL OBJECT
AND
CONSIDERATION
PHYSICAL/
LEGAL
POSSIBILITY
MCCLM 011

FIRM OFFER/
PROPOSAL
UNQUALIFIED
ACCEPTANCE
CONSIDERATION
VALID/ENFORCEABLE
AGREEMENT
+
+
INTENTION TO
CREATE LEGAL
RELATION
CERTAINTY OF
TERMS
LEGAL
CAPACITY TO
CONTRACT
FREE CONSENT
LAWFUL OBJECT
AND
CONSIDERATION
PHYSICAL/
LEGAL
POSSIBILITY
MCCLM 011
Undue
Influence
Misrepresentations
Mistake
Fraud
Coercion
Free Consent
ELEMENT

ELEMENT
TERM
FIRM OFFER/
PROPOSAL
UNQUALIFIED
ACCEPTANCE
CONSIDERATION
VALID/ENFORCEABLE
AGREEMENT
+
+
INTENTION TO
CREATE LEGAL
RELATION
CERTAINTY OF
TERMS
LEGAL
CAPACITY TO
CONTRACT
FREE CONSENT
LAWFUL OBJECT
AND
CONSIDERATION
PHYSICAL/
LEGAL
POSSIBILITY
EXPRESS IMPLIEDVS
CONDITION WARRANTYVS
MCCLM 011
Certainty of Terms

ELEMENT
DISCHARGE
FIRM OFFER/
PROPOSAL
UNQUALIFIED
ACCEPTANCE
CONSIDERATION
VALID/ENFORCEABLE
AGREEMENT
+
+
INTENTION TO
CREATE LEGAL
RELATION
CERTAINTY OF
TERMS
LEGAL
CAPACITY TO
CONTRACT
FREE CONSENT
LAWFUL OBJECT
AND
CONSIDERATION
PHYSICAL/
LEGAL
POSSIBILITY
BY PERFORMANCE
BY FRUSTRATION
BY AGREEMENT
BY BREACH
MCCLM 011

ELEMENT
DISCHARGE
FIRM OFFER/
PROPOSAL
UNQUALIFIED
ACCEPTANCE
CONSIDERATION
VALID/ENFORCEABLE
AGREEMENT
+
+
INTENTION TO
CREATE LEGAL
RELATION
CERTAINTY OF
TERMS
LEGAL
CAPACITY TO
CONTRACT
FREE CONSENT
LAWFUL OBJECT
AND
CONSIDERATION
PHYSICAL/
LEGAL
POSSIBILITY
BY PERFORMANCE
BY FRUSTRATION
BY AGREEMENT
BY BREACH
REMEDIES
Quantum Meruit
Special
Relief Damages
MCCLM 011

PERENFORCEMENT
PER CLASSIFICATION
INTERNATIONAL
LAW
PRIVATE
LAW
LawofTort

Nature of Law of TortEveryone owes a duty of care to potentially anyone
YOU
Action NOT
Performed
(Omission)
Intentionally or
Unintentionally
Action
Performed
Intentionally or
Unintentionally
Professional,
Neighbor,
Civilian,Selle
r Buyer etc.
Injury/ Loss
OTHER
Act or
Omission By
Others
Causing
Injury and
Loss

PARTIES
INVOLVED
The phrase often
applied to the
liability of
professional
advisers (in contract
or tort) tp rovide
advice of a certain
standard
Professional
Negligence
Use resonable skill and care
appropriate to someone of
his calling
The standard of care
is the same of that
of other professional
men
THEIR
DUTIES
InTort
InContract
Thebreachofdutyalleged
arisesindependentlyof
obligationunderthecontract
Thebreachofdutywillbeon
thebasisthatprofessionaldid
notexercisedueskillandcare
incarryingouthisduties
underthecontract
Implied
Expressed
It may be tort even though there may
happen to be in a contract between the
parties, if the duty in fact arises
independently of the contract
In Memorandum of Agreement
MCCLM 085

Who Wants to Claim in Tort?
WHOEVER
Passers-by, outsider, visitor, public.. Trespassers?
that suffers
DAMAGES, LOSS, INJURY
DEFECTIVE
BUILDING
HAZARDOUS
ENVIRONMENT
ACCIDENTS
FAULTY
DESIGN
OPERATION
MISHAP
INTERFERENCE GENERAL
NUISSANCE

NEGLIGENCE TRESSPASS NUISANCE
OCCUPIER’S
LIABILITY
STRICT
LIABILITY
VICARIOUS
LIABILITY
MCCLM 113

Defences:
Volenti non fit
injuria OR
contributory
negligence
Result: Injury
& Financial
Loss
Reason: Lack
of reasonable
care or
conduct
Proving: Not
actionable per
se, must be
proved
NEGLIGENCE

Duty
Breach
Causation
Harm reasonably foreseeable; proximity
between parties; should have been
contemplated; fair and reasonable to impose
a duty
Defendant has fallen below the standard of
care appropriate to the duty owed to the
claimant
Defendant’s act or omission caused the
damage suffered by claimant and damage is
foreseeable
Three Part TestLIABILITY IN NEGLIGENCE

Breach of the Duty of Care
Careless
Behaviour
Omission
Not doing something which a
reasonable man would do in
circumstances where to act is
owed
Act
Doing something reasonable
man would not do
BREACH
WHO IS THE REASONABLE MAN?

DIRECT
INTERFERENCE
UNAUTHORISED
TRANSGRESSION
AIRSPACE
UNDERGROUND
OF
TRESPASS
CONCIOUS
DECISION TO
ENTER
PROOF OF
DAMAGE: NOT
REQUIRED
CHARGE
UPON
ENTRY
PERSON GOODS
LAND

Negligence v Nuisance
Negligence Nuisance
Protection
of rights
over land
Protection of
personal
rights
Concerns over duty of
care
Rules of causation
Remoteness of damageRemedies:
Mostly
Damages
Remedies:
*Injunctions &
Damages

UnlawfulIndirectInterference
Private Nuisance
Physical
Damages
Defendant’s Conduct
Effect of the Interference
Nature of the
Interference
Duration of the
Interference
Character of the
Neighbourhood
Continuous
Nature
Single
ActUnreasonable&Substantial
Causing Damages Such As
Damages to a Person’s
Enjoyment
Damages to
Property
Encroachment
General
Annoyance

Vicarious Liability
• Under Master - Servant concept;
Employer has right to control work of his
employee (Hewitt v Bonvinn, 1940)
Employee carrying out work under company’s
name (as in an architect design is named under
the company’s name, and not his own)
Employee is acting upon instruction from the
employer (in the course of his employment)

Occupier’s Liability
What are premises?
• Building, land spaces,
vehicles
• Fixed or movable
structures on which is
occupied for purposes
What is an occupier?
• Tenant, primary worker
or owner-occupier
• A person who has
sufficient control over
the premises

STRICT
LIABILITY
Damage
Suffer Damages
Prior to TortA person who
has interest in
Land
Damage: Water
flowing to
landmine
Harm to Land,
Not personal
Injury
Element
Defendant
rightful
occupier
Ryland v Fletcher (1868) HL
Single Act
Who Can Sue?
Who Can be Sued?
Ryland v
Fletcher
Non-natural
accumulation
‘Escape’
from D’s
Land to
P’s LandShould Have Been
Contemplated
Foreseeable
Culprit
Escape
Unreasonable
Party:
Owner/
Controller of
the Culprit

Malaysian Construction Law

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