Contract Law for Construction Consultancy Agreements 2 [Slide - - PowerPoint PPT Presentation

Contract Law for Construction Consultancy Agreements

MWKA ONLINE TALKS

Speaker CHRISTINE TOH Partner Guest Speaker Ed Mun Founder of S.U.A Interior Moderator HANNAH PATRICK Senior Associate

Wed 17 June 2020 3:00pm (GMT +8) mwka.com/talks

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[Slide Title]

• Slide Content

○ slide content

Contract Law for Construction Consultancy Agreements

MWKA ONLINE TALKS

Speaker CHRISTINE TOH Partner Guest Speaker Ed Mun Founder of S.U.A Interior Moderator HANNAH PATRICK Senior Associate

Wed 17 June 2020 3:00pm (GMT +8) mwka.com/talks

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Christine Toh

• Partner in the Dispute Resolution

department in MahWengKwai & Associates

• Bachelor of Commerce/Bachelor
• f Business System (Monash

University)

• Bachelor of Law (University of

London) (Honours Second Class Upper Division)

• Called to the Malaysian Bar in

2014

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Ed Mun

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• 37 years as an Interior Designer
• Founded the Longest-Standing,

Proudly Malaysian, Independent Interior Design Firm

• S.U.A Interior, in 1989
• Widely recognised designer by

internationally renowned

• rganisations such as Samsung,

Hong Leong Bank, and Mary Kay.

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Talk Points

• Key elements of a legally binding contract
• CIPAA and Construction Consultancy Contracts
• Common issues in Design & Build construction contracts
• Tips on Managing a Design and Build Contract

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Key Elements of a Legally Binding Contract

What is a Contract?

• Contracts in Malaysia are governed by the Contracts Act 1950

(“CA 1950”)

• A contract is an agreement between two or more parties that

is legally binding between them

• Section 2(h) CA 1950:

○ “An agreement enforceable by law is a contract”

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How is a Contract formed?

• A contract can be formed:

○ Orally ○ By writing ○ By conduct ○ A combination of the above

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Key Elements

• Offer & Acceptance
• Consideration
• Intention to Create Legal Relations
• Certainty
• Legal Capacity

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Offer & Acceptance

What is an Offer?

• Section 2(a) CA 1950:

○ “An offer is when one person signifies to another his willingness to do or abstain from doing anything, with a view to obtaining the assent of that other to the act or abstinence”

• An offer can be made:

○ Orally ○ In writing ○ By conduct

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Requirements of an Offer

• Must be specific, clear and unambiguous
• Section 4(1) CA 1950:

○ “The communication of a proposal/offer is complete when it comes to the knowledge of the person whom it is made”

• Preliminary negotiations, options and display of goods,

advertisements and auctions are NOT offers

• Counter-offers does not amount to a contract, there must be

acceptance

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Termination of Offer

• Lapse of Time
• Revocation under Section 5 CA 1950:

○ “A proposal may be revoked at any time before the communication of its acceptance is complete as against the proposer, but not afterwards”

• Rejection
• Failure to fulfill a condition precedent
• Death/Mental Disorder

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What is Acceptance?

• Section 2(b) CA 1950:

○ “When the person to whom the proposal/offer is made signifies his assent … the proposal is said to be accepted”

• Acceptance can be signified:

○ Orally ○ In writing ○ By conduct

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Requirements for Acceptance

• It must be communicated and/or signified
• Absolute and unqualified
• Accepted within reasonable time
• Counter offers does NOT amount to an acceptance, it is a

rejection

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Consideration

Consideration

• Section 2(d) CA 1950:

○ “When at the desire of the promisor, the promisee has done or abstained from doing something … such act is called a consideration for the promise”

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Requirements of Consideration?

• Consideration need not be adequate, as long as it has some

monetary value

• Can come from a third party, not necessarily the offeree
• Consideration can be:

○ Executory (performed in the future) ○ Past (performed before the promise); ○ Executed (performed after the promise)

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General Rules of Consideration

• Section 26 CA 1950:

○ “Agreement without consideration is VOID, unless: (a) Made on account of natural love & affection between parties standing in near relation to each other; (b) To compensate for something done; (c) To pay a statute barred debt”

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Intention to Create Legal Relations

What is an Intent?

• Subjective, depends on the parties’ state of mind
• CA 1950 silent on this element, principles derive from English

common law

• As a general rule, there is presumed to be intention

commercial agreements, but not in domestic agreements (a rebuttable presumption)

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Certainty of Contract

What is Certainty?

• Section 30 CA 1950:

○ “Agreements, the meaning of which is not certain, or capable of being made certain, are void”

• Items such as price, time, language and subject matter must

all be certain and complete

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What is Legal Capacity

What is Legal Capacity?

• A party’s ability to enter into a contract
• Section 10 CA 1950:

○ “All agreement is contract if there made by free consent

• f the parties competent to contract”
• Section 11 CA 1950:

○ “Every person is competent to contract who is age of majority, sound mind and not disqualified from contracting” ○ The age of majority in Malaysia is 18

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CIPAA 2012 and Construction Consultancy Contracts

CIPAA 2012

• Construction Industry Payment and Adjudication Act 2012
• This Act came into effect on 15.4.2014
• To facilitate regular and timely payment by providing a

mechanism for speedy dispute resolution

• Adjudication under CIPAA only for disputes relating to

payment for work done, services rendered and/or materials supplied under the contract terms

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CIPAA 2012: Application and Non-Application

• CIPAA 2012 applies to:

○ Every construction contract made in writing relating to construction work carried out wholly or partly within the territory of Malaysia including a construction contract entered into by the Government

• CIPAA 2012 does not apply to:

○ Construction contracts by a natural person for any construction works for a building which is less than 4 storeys high and is wholly intended for his occupation

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Construction Contract - Section 4

• “construction contract” means a construction work contract
• r construction consultancy contract
• “construction consultancy contract” mean a contract to carry
• ut consultancy services in relation to construction work and

includes planning and feasibility study, architectural work, engineering, surveying, exterior and interior decoration, landscaping and project management services”

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Construction Works

• This means the construction, extension, installation, repair,

maintenance, renewal, removal, renovation, alteration, dismantling or demolition of: ○ Any building, erection, edifice, structure, wall, fence or chimney, whether constructed wholly or partly above or below ground level; ○ Any road, harbour, railway, cableway, canal or aerodrome; ○ Any electrical, mechanical, water, gas, oil, petrochemical or telecommunication work; or ○ Any bridge, viaduct, dam, reservoir, earthworks, pipeline, sewer, aqueduct, tunnel;

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Construction Works

• Construction works include (cont’d):

○ Any work which forms an integral part of, or are preparatory to or temporary for the works described above, including site clearance, soil investigation, improvement, earth moving, excavation, laying of foundation, site restoration and landscaping; and ○ Procurement of construction materials, equipment or works, as necessarily required for any of the works described above.

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Construction Consultancy Contracts

• Letter of Award
• Letter of Acceptance
• Agreed Purchase Orders
• Agreed Quotations

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CIPAA 2012: Essential Characteristics of CIPAA

• Provides an interim/temporary solution

Can be both inquisitorial and adversarial Procedure is summary Informal Short time frame A statutory procedure

Application of the CIPAA 2012

CIPAA 2012: Advantages

• Speedy
• Can commence CIPAA proceedings while works are still on-going
• Cheaper than litigation and arbitration - recovery of costs of

adjudication - AIAC, adjudicator, solicitors costs ○ Standard Fees or AIAC Recommended Fee Schedule

• Direct payment from Principal under Section 30 CIPAA 2012

○ Article: Getting Direct Payment from the Principal under Section 30 of the Construction Industry Payment and Adjudication Act 2012 (CIPAA 2012)

Common Issues in Design & Build Construction Contracts

Common Issues

• Lack of contract knowledge and implementation
• Many loopholes in the design and build processes that are not well

addressed

• The idea of “free proposals"

Tips on Managing a Design and Build Contract

Design & Build Process

• Engagement of service → request for proposal
• Client’s brief & design proposal → Letter of Intent & Bill of Quantity
• Confirmation of Award → Letter of Award
• Confirmation of all technical drawing and material specifications
• Site mobilization
• Project kick-off
• Site completion & audit
• Site handover → accompanied by official documents

Questions?

Upcoming Talks

Date Topic Speakers 3 July 2020 (Friday) Employee Misconduct and Domestic Inquiry Diana Cheak & Jasmine Wong 15 July 2020 (Wednesday) PENJANA - Short Term Economic Recovery Plan (ERP): Tax exemptions - RGPT and Stamp Duty Sarah Kambali & Marcus Leong 29 July 2020 (Monday) Drink Driving Offences in Malaysia Janessa Kok & Ryan Cheong

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