7. CONSTRUCTION CONTRACT

TOPIC 7 CONSTRUCTION CONTRACT PROFESSIONAL PRACTICE 1.

Topic 7: Construction Contract Table of Content 1. Definition of contract 2. Standard form of contract; -Public Work Department (PWD) -Pertubuhan Arkitek Malaysia (PAM) -Construction Industry Development Board(CIDB) -International Federation of Consulting Engineers(FIDIC) 3. Contractual chain between parties involved in construction 4. Standard form of contract for nominated sub-contractor and nominated supplier involved in public and private 5. Usage standard form of contract used for a project.

A contract is a legally binding agreement between two or more parties that is enforceable by law. defines scope, roles, responsibilities, and rights of each party involved in a construction project. key tool for project delivery and define payment terms Protects all stakeholders involved in constructions Definition of Contract Topic 7: Construction Contract.

help in risk identification and allocation prevent disputes and ensures legal compliance control cost, time and quality sets performance benchmarks Important of Contract Topic 7: Construction Contract.

Principles Of Contract 1.Offer and Acceptance – Follow Contract Act 1950 (Check 1974) – Section 2(A), offer is the when the person making the propsal and stated to be his intention to do or abstain from doing something in order to get the agrrement of the parties. 2. Acceptance – Follow Contract Act 1950 (Check 1974) – Section 2(B), acceptance is the proposal submitted by the tenderer received and allowed by the party receiving the proposal was not subjected to any additional conditions.Conditional acceptance is invalid and unenforceable under the law of contract Topic 7: Construction Contract.

Principles Of Contract 3.Consideration – Consideration is a compensation element,blarney or ‘qiud pro quo” ie the provision of an article of value to any other goods which have comparable values. 4.Intent– Follow Contract Act 1950 (Check 1974) – Section 2(B), acceptance is the proposal submitted by the tenderer received and allowed by the party receiving the proposal was not subjected to any additional conditions.Conditional acceptance is invalid and unenforceable under the law of contract Topic 7: Construction Contract.

Principles Of Contract 5. The Purpose Of A Valid Contract In Law –Means the goal or purpose “ for which the contract is made”.The purpose of a contract must valid in law, if the contract is void and uneforceable by law. 6. Contract Bond Can Be Implemented– In general, each autjorized to make contracts.”Person” in accordance with the interpretation of contract law is a man or a corporation established by operation of law.Conditions on the ability of the person mest be adults (age og 18 years), understanding and not disqualified. Topic 7: Construction Contract.

Principles Of Contract 7. Willingness Of Parties To The Contract – According to the genaral rule, a contract is only valid if the contract is made freely and no pressure or coercion by any party.Willingness to be not free if there are factors such as duress, undue influence,fraud,misrepresentation and mistake of fact, Topic 7: Construction Contract.

Main Contract Used in Construction Projects A construction contract is a legally binding agreement between the Employer (Client) and the Main Contractor. It sets out the rights, responsibilities, obligations, and risks of each party involved in a construction project. In Malaysia, construction contracts are commonly based on standard forms of contract to ensure fairness, clarity, and consistency in project administration. Topic 7: Construction Contract.

(i) Public Works Department (PWD or JKR) Used for government projects involving building and civil engineering works. Main Types: PWD Form 203A (Rev. 2010) – For building works without quantities. PWD Form 203 (Rev. 2010) – For building works with quantities. Suitable for traditional procurement. Clear roles for contractor, employer, and S.O. (Superintending Officer). Incorporates provisions on variation, extension of time, liquidated damages, and certificates. Topic 7: Construction Contract Standard Forms of Contract.

Aspect PWD Form 203 (Rev. 2010) PWD Form 203A (Rev. 2010) Type of Contract Contract with Quantities Contract without Quantities Bill of Quantities (BQ) A Bill of Quantities is provided as part of the contract documents No Bill of Quantities is provided Basis of Contract Price Contract price is based on items measured in the Bill of Quantities Contract price is usually based on a lump sum or a schedule of rates Typical Use Commonly used for large-scale public sector projects Commonly used for small or simple projects Project Size Suitable for medium to large government projects Suitable for small or fast-track projects Level of Cost Certainty Higher cost certainty due to detailed quantities Lower cost certainty due to limited quantity details Suitability of Scope Suitable when the scope of work is clearly defined and detailed Suitable when the scope of work is simple or limited Common Users JKR, government ministries, public agencies, and GLCs Government agencies for smaller or urgent projects Usage in Malaysia The most widely used standard form for public sector projects in Malaysia Used in specific situations but less common Topic 7: Construction Contract (i) Public Works Department (PWD or JKR).

(ii) Pertubuhan Arkitek Malaysia (PAM) Commonly used for private sector building projects. Main Types: PAM 2006 (With Quantities), PAM 2006 (Without Quantities, PAM 2018 (latest version) Balances the interests of contractors and employers. Includes conditions for extension of time, interim payments, practical completion, and dispute resolution (e.g., arbitration). Topic 7: Construction Contract Standard Forms of Contract.

(iii) Construction Industry Development Board (CIDB) Developed for national use in both public and private sectors. Known as CIDB Standard Form of Contract for Building Works 2000 and 2022 editions. Covers employer, contractor, and nominated subcontractor responsibilities. Emphasis on dispute resolution via mediation, adjudication, or arbitration. Promotes best practices and supports the Malaysian construction industry master plan. Encourages project team integration and fair contract management. Topic 7: Construction Contract Standard Forms of Contract.

(iv) International Federation of Consulting Engineers (FIDIC) Used for international construction projects and engineering contracts. Main Types (Color-coded Books): Red Book – Construction (Employer-designed) Yellow Book – Plant and Design-Build (Contractor- designed) Silver Book – EPC/Turnkey projects Green Book – Short form of contract Gold Book – Design, Build and Operate Widely accepted in global infrastructure projects, including those funded by international agencies (e.g., World Bank). Topic 7: Construction Contract Standard Forms of Contract.

Contractual Chain between Parties Involved in Construction The contractual chain refers to the hierarchy of legal relationships among parties involved in a construction project. Role: The client is the project owner or initiator. They commission the construction project and are the party with the ultimate responsibility for funding, overseeing, and ensuring project delivery. Contractual Relationship: The client enters into a contract with the main contractor to deliver the project. The contract outlines the project scope, budget, timeline, and terms of delivery. Client/Employer Main Contractor Subcontractors Topic 7: Construction Contract Role: The main contractor is responsible for the overall construction of the project. This includes managing day- to-day operations, overseeing subcontractors, ensuring compliance with building codes, safety standards, and delivering the project on time and within budget. Contractual Relationship: The main contractor is engaged directly by the client through a formal agreement. They executes works as per contract Role: Subcontractors are specialists hired by the main contractor to carry out specific tasks within the project, such as mechanical, electrical, or civil engineering works. Contractual Relationship: Subcontractors have a contractual relationship with the main contractor (not the client). These contracts detail the scope of work, deadlines, and payment terms for the subcontractors..

Contractual Chain between Parties Involved in Construction The contractual chain refers to the hierarchy of legal relationships among parties involved in a construction project. Role: Suppliers provide the materials and equipment needed for the construction project. Contractual Relationship: Suppliers typically enter into a contract with the main contractor (or sometimes directly with the client). This contract governs the delivery, quality, and payment terms of the supplied materials. Role: Consultants, including architects, engineers, and quantity surveyors, play important roles in the design, planning, and cost estimation of the construction project. Contractual Relationship: Consultants are generally contracted by the client to provide design, advisory, and supervisory services. They might also help the client select the contractor and oversee the construction to ensure that it aligns with the agreed specifications. Suppliers Consultants Topic 7: Construction Contract.

Contractual Chain between Parties Involved in Construction Summary of the Contractual Chain in Malaysia: Topic 7: Construction Contract 1.Client (Employer): The project owner who contracts the main contractor. 2.Main Contractor: The party responsible for delivering the construction project. 3.Subcontractors: Hired by the main contractor to perform specialized tasks. 4.Suppliers: Provide materials and equipment needed for the project. 5.Consultants: Provide design, supervision, and cost management services. Each link in the chain is bound by contracts that outline rights, duties, and liabilities, ensuring that the construction project proceeds smoothly from conception to completion, with legal protections in place to address any disputes that may arise..

Standard Forms of Contract for Nominated Sub-Contractors and Nominated Suppliers Topic 7: Construction Contract.

Topic 7: Construction Contract.

Topic 7: Construction Contract.

Project Factor Recommended Government/Public Project JKR (PWD) Private Residential/Commercial Project PAM Large Industrial/Infrastructure with Government Influence CIDB International Project (foreign funding or partners) FIDIC Usage of Standard Form of Contract for a Project Topic 7: Construction Contract The selection of a standard form depends on several project factors:.

Benefits of Using Standard Forms: 1. Reduces Legal Disputes Standard forms help to reduce legal disputes because the terms and conditions are already clearly written and agreed by the industry. When all parties use the same standard contract, there is less confusion or misunderstanding about their responsibilities. This helps avoid arguments or court cases during or after the project. Topic 7: Construction Contract.

Benefits of Using Standard Forms: 2. Familiarity Among Industry Players Standard forms are commonly used in the construction industry, so most professionals such as contractors, consultants, and clients are already familiar with their contents. This makes it easier for all parties to understand the contract and carry out their duties smoothly without needing legal advice for every project. Topic 7: Construction Contract.

Benefits of Using Standard Forms: 3. Ensures Compliance with Industry Standards Standard contracts are prepared by professional bodies like PAM or CIDB, and they follow the rules and guidelines of the construction industry. Using these contracts helps ensure that the project follows the correct procedures, safety standards, and quality requirements that are expected in Malaysia. Topic 7: Construction Contract.