In the construction industry, a construction project is usually awarded by a employer to a suitable contractor through tendering process, which may involves several tenderers who have been prequalified by consultant/s. Often, the successful tenderer or contractor is usually the lowest, if not second lowest in tender price, which is derived from a breakdown of priced items, usually in a bills of quantities (BoQ), which formed part of the tender documents.
The common notion in the industry, is that the tender price when agreed between an employer and a contractor, which forms the awarded contract price, is a reasonable and feasible sum. However, competitive pricing and uncertainties in resources, economy and other risks, often make it difficult for the successful contractor to carry out and complete the construction project profitably. Consequently, some contractors resort to relying upon pricing strategy, variations and/or loss or expenses claims, to maintain and/or enhance profitability of their construction projects.
In order to ensure a fair and reasonable pricing regime and practice, many employers employ consultants, usually quantity surveyors, to prepare tender documents and conduct tender exercises. Thereafter, they undertake to review and rationalise or adjust prices and rates contained therein, normally without changing the tender/contract sum, prior to awarding the construction project to the successful contractor. Such rationalised or adjusted prices and/or rates can then be appropriately applied to corresponding variation works during progress of the construction project.
In this article, BK Entrusty aims to provide readers with a better understanding of the practice of rationalisation of prices and/or rates in the construction industry by the following contents:-
- Definition of rates rationalisation;
- Importance of rates rationalisation;
- Timing and criteria for rates rationalisation;
- Standard forms of contract (relevant clauses);
- Case Law;
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“Global claim” or “composite claim” or “rolled-up claim”, as is often called is used to describe a claim for time extension, loss and/or expense or damages arising from a number of different causes, which may be interrelated and/or difficult to isolate or particularise into their respective cause and effect.
In the past, such claims seldom succeed due to the interrelated events, usually with only few or no contemporaneous records available to support them. In the assessment of any entitlement to any claims, whether additional time and/or money, it has always been grounded on “cause and effect” principle by establishing the causal linkages, supported by the relevant documentary evidence, which global claims often lack.
In order to succeed, the claimant or Contractor, in making such claim against the Employer, must be able to show the connection between the events for which the Contractor is neither responsible nor culpable for but was made to suffer or incur additional time, loss and/or expense or damages as a consequence of the events concern.
Since global claims often lack the causal linkages and relevant supporting documents, many such claims have ended up in tribunals or courts for their review and decision. In the past, the paths to such legal recourse have been rather bumpy and uncertain, until lately.
In this article, BK Entrusty aims to provide readers with an appreciation and understanding of global claims by eliciting the past and recent case law and decisions concerning such claims, including the recent landmark case of Walter Lilly v MacKay as decided by Justice Akenhead, the judge in charge of Technology and Construction Court (“TCC”) in London, who had provided some interesting and important ruling on several pertinent issues in construction law.
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In the construction industry recently, the issues of “fit for purpose” and “suitability” have become increasingly controversial and are subjects of dispute between the contracting parties. Unfortunately, many contractors and sub-contractors have either misunderstood or did not appreciate the contractual and/or legal implications of such undertaking and liability when they enter into a contract with such term/s, either expressly stated or implied into the contract when they choose to propose alternative design under traditional/conventional contracting method or system.
In common law, there is an implied warranty that the goods shall be fit for such purpose for which they are required and that the buyer had relied on the seller’s representation of the goods suitability, unless expressly disclaimed, excluded or modified.
Such warranty of fitness for purpose, whether implied or expressly stated, can be found in some construction contracts that require the Contractor to undertake some form of design liability such as in Design and Build contracts and those contracts with optional or alternative design provision.
In this article, BK Entrusty aims to provide readers with a better understanding of the terms Fitness for Purpose and Suitability, by answering the following:-
- What is Fit for Purpose?
- What is the difference between Fit for Purpose and Suitability for Purpose?
- Is fit for purpose and/or suitability stated in Malaysian forms of building/construction contract?
- Is Fit for Purpose applicable to contractors who undertake shop or production drawings?
- Is the Contractor responsible to ensure that the nominated sub-contract works are fit for its purpose?
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The construction industry is always known to be a complicated and fragmented industry, where external factors that are beyond the control of the parties involved or are independent of the construction works, can cause problems to the progress and/or cost of the work. Risk is one of these external factors that can pose significant threats and uncertainties to the construction project. Foreseeable risks can be tackled through the proper application of risk management. However, the same cannot be said for unforeseeable risks. Are force majeure clauses the answer to address this problem?
In this article, we aim to provide an understanding of force majeure and its application in tackling these unforeseeable risks. Although force majeure clauses are common in standard forms of construction contracts, they are frequently misunderstood by the Malaysian contractors due to the rarity of such events happening in Malaysia. However, this clause is pertinent, particularly for construction projects outside of Malaysia.
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The construction industry has often been described as a high risk industry due to various complexities and difficulties involved in the construction of building and engineering projects. The risks involved may stem from many sources, one of which is the risk associated with unexpected or unforeseen ground conditions on project sites. This is usually where things can go wrong, without the proper understanding, appreciation and management of such risk. Whilst the geo-technicalities associated with ground conditions can be rather complex and often uncertain, the contractual risk associated with it can be a mystery and often cause miseries to many contracting parties, contractors and sub-contractors, in particular.
In this article, BK Entrusty aims to provide readers in unravelling such mysteries by providing an understanding and appreciation of the contractual risks associated with ground conditions, especially on the risk allocation due to adverse ground conditions and contractual and legal remedies available to the contracting parties affected by such unfortunate circumstances.
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