UNIVERSITI TEKNOLOGI MARA

LAW FOR CONSTRUCTION CEM583

0CT-FEB 2021

LAW FOR CONSTRUCTION

CEM583

MUHAMAD AFHAM BIN AB LATIF

2018402992

Faculty of Civil Engineering

Universiti Tecknologi MARA Cawangan Pulau Pinang, 13500,
Permatang Pauh, Pulau Pinang
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INDIVIDUALASSIGNMENT CEM583

Task 1: Project Information

Infrastructure project : elevated water tank

Project name : projek pembinaan telaga tiub, tangki air Menara dan pemasangan paip utama
temangan, machang, Kelantan

Developer : kementerian pembangunan luar bandar

Contractor :

 Kreatif Mahir Sdn.Bhd

 Gemilang Kreatif Sdn bhd

Consultant firm :

 WMN Dunia Runding Sdn Bhd

 Perunding Wangsa Sdn Bhd
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Task 2: 9 basic elements of the contract in the project

a) A clear or firm offer or proposal

Based on Section 2(a), Contract Act 1950 mentions when one person indicates to another his
willingness to do something, he needs to propose to receive the consent of the other party to
the act. The offer is an indicator of the offeror's willingness to enter into a legally binding
contract. Its terms must imply, either directly or indirectly, that it will become binding on the
offeror as soon as the offeree has approved it. A firm offer is an offer that will be valid for a
certain period or until a certain time or event has occurred, during which it cannot be withdrawn.
Figure (a) below shows a clear or firm offer or proposal of Kreatif Mahir Sdn. Bhd. from Ministry
of Rural Development.

Figure (a): a clear or firm offer or proposal of Kreatif Mahir Sdn. Bhd. from Ministry of Rural
Development.
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b) An acceptance of the offer/proposal

Based on Engineering Contract Dictionary, an offer indicates a willingness on the part of a party
to be bound by an obligation. If a bid is accepted, the contract will be binding. Section 2(b) of the
Contracts Act 1950 also mentions that if the person to whom the proposal is made shall express
his consent to it, the request is considered approved. A proposal, if approved, becomes a
pledge. Offering and approval are generally agreed upon as the required conditions for creating
a contract, and a current approach in contract law is the review of their service. Founded in the
19th century, the offer and acceptance process defines a moment of development in which the
parties are of one mind. Figure (b) below shows an acceptance of the offer or proposal from the
Ministry of Rural Development to Kreatif Mahir Sdn. Bhd.

Figure (b): An acceptance of the offer or proposal from Ministry of Rural Development to Kreatif
Mahir Sdn. Bhd

c) Intention to create legal relations

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The project's essential elements in the project are all parties must indicate their intention to
enter into a legally binding agreement. The binding contract can be in an express form in which
the acceptance is made in words. For example, in oral or written. It also can be in an implied
form in which the acceptance is made other than in words. For example, by conduct, etc. A
solely social or domestic relationship is not a contract. The intention to create a legal
relationship is defined as the intention to enter into a legally binding contract or agreement. The
aim to create legal relationship is one of the necessary elements in the establishment of a
contract. It is because the desire to establish legal relations consists of a willingness on the part
of the party to accept the legal sequences of the agreement entered into. In order to create legal
relations, any party to the contract must have the requisite intention of participating into a legally
binding agreement. In that contract, the company made a legal agreement to the client in order
to establish their partnership with the project. Both parties must sign the letter of a legally
binding contract. Figure (c) below shows the intention to create legal relations between the
Ministry of Rural Development and Kreatif Mahir Sd. Bhd.

Figure (c): The intention to create legal relations between Ministry of Rural Development and
Kreatif Mahir Sd. Bhd.
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d) Consideration

The parties must make a contribution to the validation of the pledge of the other. Consideration
is the price at which the pledge of the other is desired. Even so, this price does not have to be in
terms of money. In the event that the commitment is not backed by consideration, the promise
will be a mere promise and will not be enforceable by statute. In addition, consideration must be
both actual and legal. Based on engineering contract dictionary, consideration also can be
define as anything given, executed or borne by one party in exchange for an action or improper
action by another party. It must have a valid meaning or legal meaning. According to Section
2(d) of the Contracts Act 1950, if by the will of a promise, a promise or a promise has been
made, or has not been made, or agreed to do, or has not been made, an act or abstinence or a
promise shall be referred to as a consideration of a promise. The consideration or subject-
matter of the agreement shall be lawful, except it is prohibited by law, it is of such a type that it
would defeat any law if it were allowed to do so, it's a scam, and the court finds that it is
unethical or contrary to public policy. The client, Ministry of Rural Development, approved a
proposal from the Kreatif Mahir Sdn. Bhd and welcomed them to meet the needs of the client.
As an agreement, Kreatif Mahir Sdn Bhd is going to build a building for the client and get paid
for their work. This consideration is of benefit to both of them.

e) Certainty

Certainty can be refers as the terms of the contract must be certain or capable of being
concluded. The cost of certainty for this project was included in the contract amount of
document RM 4,268,883.00 for the Kreatif Mahir Sdn Bhd to build an elevated water tank
(EWT), a pump house, a pipeline, a compact substation and a suction tank. The contract sum is
a fixed lump sum based on the contract drawings and requirements. No extra time or cost
requests shall be granted in the event of inconsistencies, disputes and/or differences in
drawings and specifications. All such variations, disputes and/or differences shall be resolved by
reference to the architectural drawings and shall be considered to have been decided on the
basis of your lump sum price on the achievement of the construction of the works in accordance
with the architectural drawings. The entire work shall be done within seventeen (17) months
from the date of commencement. The date of completion of the work shall be 22 September
2020. The Company shall be liable for Liquidated and Guaranteed Damages (L.A.D.) in the
event that the whole Works is not finished by the Date of Completion or, in the event that an
extension to the Date of Completion has been given under the terms and conditions of the
Contract, by the said extended Date of Completion.
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f) Capacity

According to Section 11 of the Contracts Act 1950 mentions that any person is competent to
enter into a contract who is of the age of majority according to the law to which he or she is
subject and who is of a sound mind and is not excluded from contracting by any law to which he
or she is subject. Ability or competence to enter into a legal contract and/or legal agreement
with another party. The contractor has conditions for entering into a binding contract. The
contractor will execute all the tasks assigned to the client in the completion of the job. Kreatif
Mahir Sdn. Bhd. do have certain conditions that make it possible for the client (Ministry of Rural
Development) to approve their request to enter into a legally binding contract.

g) Consent

Based on Section 14 of the Contract Act 1950, the parties must enter into a contract with free
consent. The consent must not be gained through force, deceit, duress, etc. According to the
dictionary of law, consent is not based on compliance with or intentional acceptance of the
course of action. It is not necessarily applicable if it is obtained through force, deceit or undue
influence. If consent is obtained through either of these defects, the contract is not legitimate. In
basic terms, consent is the recognition of the contract that the parties have in place. Both
parties must voluntarily give their consent to the contract. Consent would not be considered
voluntary or genuine if such errors are made, or if one party attempts to deceive or threaten the
other. On the basis of the agreement, the Kreatif Mahir Sdn. Bhd. must give its free consent to
the contract, which means that all the agreements have been entered into

h) Legality

The contract must be concluded within the scope of the law, its purpose or consideration must
not be unlawful. According to Section 10(1) of the Contracts Act 1950 mentions that all
agreements shall be contractual if they are made by free consent of the parties responsible for
the contract, for legal consideration and for a lawful purpose, and are not hereby expressly
rendered null and void. The agreement that both the contractor and the client have entered into
provides the lawfulness for them in order to get what they need. An agreement is reached when
an offer is made by one party to another and the offer is accepted. In this situation, the contract
was drawn up in order to prevent any fraud.

i) Possibility

The contract must be both physically and legally enforceable. Based on Engineering Contract
Dictionary mentions that the contracts that cannot be executed are void and unenforceable. A
contract that should have existed at the time it was made, but then became impossible due to a
series of events that occurred. Originally valid but can be found invalid. Based on this contract
case, all the quality of the Kreatif Mahir Sdn. Bhd. must be accomplished in order to prevent any
impossibility during the contract period. The contract document and correspondence shall be
followed by the company.
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0CT-FEB 2021

Task 3 : Court Case

3.1 prosecutor/judge and defendant

The Defendant, Grandstep Development Sdn Bhd is the developer of a hill slope
development known as “Proposed Housing Development on Lot 1287, Seksyen 14, Bandar
Ampang, Daerah Hulu Langat, Selangor Darul Ehsan (“Project”). The Defendant on 21
February 2011 issued its letter of appointment to the Plaintiff, WEA Engineers & Associates
Sdn Bhd. Pursuant to the Appointment Letter, the Plaintiff carried out civil and structural
engineering consultancy services as required by the Defendant. The services were provided in
conjunction with the other consultants appointed by the Defendant including DMP Architects
Sdn Bhd, Juruasli Planning & Consultancy and Jurukur Bahan Bersatu. The Plaintiff
consequently by letter dated 13 October 2014 issued two interim payment invoices for civil and
structural engineering services rendered, but the defendant did not pay the required amount.
The Plaintiff was displeased with the Defendant’s failure to settle the aforementioned proforma
invoices in full, leading to the plaintiff to appeal to the high court (prosecutor) to set aside the
decision and to adjourn the execution of the judgments of the adjudicator.

3.2 mistakes made/ case fact

1) The Plaintiff contended that it is entitled to the sum in all its three invoices sent to the
Defendant as claimed plus a further RM36,093.75, but the defendant did not pay in full.

2) On the other side, the Defendant contended that the Plaintiff’s claim is grossly excessive.
According to the Defendant, the Plaintiff did not complete the services as contracted due to the
Plaintiff’s own termination of the provision of the civil and structural engineering consultancy
services pursuant to the Appointment Letter.

3) The Defendant contended that the action was instituted in afterthought 3 years after the
conclusion of the adjudication proceedings between them pursuant to the Construction Industry
Payment and Adjudication Act 2012. This is due to the Plaintiff’s excessive desire for more
money.

3.3 Sentence imposed by the judge on the offender

For the foregoing reasons and in the absence of an offer to settle pursuant to Order 22B of the
Rules of Court 2012, the High Court enter judgment for the Plaintiff in the sum of RM177,927.56
inclusive of 6% GST (if applicable) and interest of 5% per annum thereon from 24 October 2018
till full realization and costs of RM90,000.00 subject to 4% allocator.

3.4 court of the case

In this case, the high court were referred as the prosecutor for the case. The high
courts in Malaysia are the third-highest courts in the hierarchy of courts, after the Federal
Court and the Court of Appeal

3.5 Act used for the Case

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Construction Industry Payment and Adjudication Act 2012 (CIPAA) was used for this case court.
This Act 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. This Act does not apply to a construction contract entered into
by natural person for any construction work in respect of any building which is less than four
storey high and which is wholly intended for his occupation.

Task 4: Discussion

According to the earlier project in task 2, the construction of the building is more than four
storey high which it is in the category of application. The Act Construction Industry Payment and
Adjudication Act 2012 (CIPAA) does extend to that construction project. Referring to the firm
offer/proposal that has been submitted by contractor to the client, the contractor need to follow
the rule of contract that have been state by the contract document tender to avoid from the case
re-occurring in future. Client also need to fulfill the payment after the work done by the
contractor.

Next, according to the approval letter of proposal, the CIPAA act will be applied. In the
letter of approval of the proposal, the liquidated and determined damages (L.A.D) already
suggest that the employer will have real damages or injuries in the event that the contractor fails
to complete them by the date of completion or other extension. The client can apply the act of
CIPAA in order to not paying the contractor if they not fulfill the task. This court case can be
avoided by the contractor if they follow the contract law. Therefore, probability of the case fact
re-occurring in future may happen if both parties do not create the legal relationship in the
project. Legal relation for project is compulsory in create trust between each of parties.

The consideration in this case, based on the court case in task 3, the client and contractor
may not follow the agreement law in promising the objective towards the contract document. In
order to maintain the legal contract between client and contractor, the consideration for both
parties must be fulfilled. From that, potential of the case facts re-occurring can be avoided. Next,
to avoid the case happen in task 1 and 2 project, both parties need to signed contract for
agreement to accept the certainty of the project. This certainty in legal contract give benefit for
both parties. If the certainty not been followed, the action by high court can be issued referring
to the Act CIPAA 2012.

In the contract agreement, the client has set the conditions under which the contract bidder
must have the characteristic features of the project. the bidder must have all the equipment to
perform the assigned task also the client must qualify with the agreement. if the contract is not
qualified, this can cause problems in continuing the task. Qualification is very important because
it is able to reduce problems while carrying out tasks. Refers to the case that occurs in task 3,
the client who has problems with the capacity of a project where the client may not be able to
provide adequate payment to the contractor. Capacity is important because both qualified
parties can produce an effective development. One of the companies can be blamed and
punished under the act.
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In the case fact above, showing that the client does not have the consent criteria which lead to
the failure to pay the exact amount according. In task 2, both parties have performed legality to
create the document contract. So, potential of the case such in task 3 to happen low because
the project has written and signed contract. In the Act of CIPAA have been state that, both
parties need to have legal contract in order to create the perfect contract document. In task 3,
probability of court case happen during the period is because their legality between each other
are not been made or created. Therefore, possibility for the case to happen also higher if they
do have legality in contract. In the contract document have been state that all the requirement
needs to be perform by the Nakano company to achieve the standard of contract. If they not
following the instruction of tendering, they may have potential to recreate the same mistake.
Thus the high court can sentenced them under the Act of CIPPA 2012 if the client make a report
on their negligence.
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Task 5: Remedies and Recommendation

Based on task 3, we can see that there is a dispute between the plaintiff and the defendant
where the plaintiff claimed that the defendant did not perform the payment accordingly to the
plaintiff. On the other hand, the defendant claimed that the plaintiff demand too much payment
even though they did not perform the work fully. To prevent this from happening, a clear or firm
offer or proposal should be written in detailed so that there is no misunderstanding happened
between both parties. Based on Section 2(a), Contract Act 1950 mentions when one person
indicates to another his willingness to do something, he needs to propose to receive the consent
of the other party to the act. The offer is an indicator of the offeror's willingness to enter into a
legally binding contract. Its terms must imply, either directly or indirectly, that it will become
binding on the offeror as soon as the offeree has approved it. A firm offer is an offer that will be
valid for a certain period or until a certain time or event has occurred, during which it cannot be
withdrawn. The defendant should point out the work that the plaintiff should cover so the work
will be carried out by the plaintiff accordingly.

Every party involved in any project must have a high level of accountability within themselves.
There is a great deal of finger pointing when project failures occur. Nothing decreases morale
more than when people blame others. Individuals must, however, be held responsible in a
manner consistent with time, quality, and cost expectations for completing their tasks.

Other than that, both parties should make an agreement where if any of the party broke the
agreement, they will be fined. This can prevent the party from breeching the contract as they will
faced loss if they did not follow the agreement accordingly. According to the contract act 1950,
an agreement will be void if any of the party breech the contract.

Task 6: Conclusion

In conclusion, we can see that contract is an important element in a project. Contracts provide a
written document that outlines the full understanding of the business relationship and scope of
the work so that no one can claim any misunderstandings later down the road. They specify
exactly what rights are being purchased and what rights you're retaining. They're binding and
legally enforceable. As well as preventing misunderstandings about scope, time, cost and
quality, it also means that there is a culture that means the project manager doesn't just get
work dumped on them with no expectations of an analysis phase or further work.

From the task 3 that have been carried out above, we can learn from the mistakes that the
company made. First, there is a misunderstanding between the parties that lead to the lawsuit.
To prevent this from happening, a clear offer and proposal should be written in detail to avoid
any misunderstanding during the project work in progress.
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In task 4, as we compared both court case and the contract in task 2 and task 3, we can do an
analysis of the flaws of the contract and predict the possibilities of the problems occur in task 3
to happen again in task 2. From the analysis that have been made in task 4, we can conclude
that with a weak firm proposal, certainty, capacity and certainty in these contract elements, the
problem will likely to happen again.

Task 7: Appendices