Implied Duties of the Employer (1)

Implied Duties of the Employer

Under Construction Contract & Their Limitations

 

Introduction

There are many factors which finally cause to a contractual dispute between two parties. Especially in construction contract which is a very complex yet not fully understood by one or both parties. One of these factors is the interpretation of implied terms in construction contract. Before we move further to discuss the implied duties of the employer under construction contract, it will be much better to know more about type of terms in a contract.

According to Oxford Dictionary of Law 7th Ed. (2009), implied term is a provision of a contract not agreed to by the parties in words but either regarded by the courts as necessary to give effect to their presumed intentions or introduced into the contract by statute (as in the case of contracts for the sale of goods). While express term is defined as a provision of a contract, agreed to by the parties, that is either written or spoken.

Moreover, if we look at the definition of contract in Contract Act 1950 s. 2(h) which stated “An agreement enforceable by law is a contract” and s. 9 which stated “So far as the proposal or acceptance of any promise is made in words, the promise is said to be express. So far as the proposal or acceptance is made otherwise than in words, the promise is said to be implied,” we can conclude that in Malaysia and other commonwealth countries which follow the Common Law, contract can be made in writing, in verbal ways or by conduct. Terms which are written or spoken expressly by both parties are considered as express terms, otherwise are implied terms. Even according to Common Law, a contract can be made orally. However this is not in the case of construction contract. Though it is already made in writing, there are still implied terms which need rule of interpretation. If both parties cannot settle their implied terms satisfactorily, this can end up in a contractual dispute.

Implied terms can be about conditions and warranties. Unfortunately we cannot find the definitions of these terms in the Contract Act 1950. But we can borrow the definitions of conditions and warranties from the Sale of Goods Act 1957 s. 12 which reads: “A condition is a stipulation essential to the main purpose of a contract, the breach of which gives rise to a right to treat the contract as repudiated, and a warranty is a stipulation collateral to the main purpose of the contract, the breach of which gives rise to a claim for damages but not to a right to reject the goods and treat the contract as repudiated.”

Implied terms also can be divided into 2 categories; i.e. implied rights and implied duties. From the above explanation, we can simply define an implied duty as a duty which is not expressly written or agreed under contract, but is still necessary for business efficacy. The scope of this essay will only discuss about the employer’s implied duties under construction contract.

 

Implied Duties of the Employer

There are some implied duties that should be done by the employer. These duties are important for the sake of the success of a project. Therefore it is necessary for both parties to have the knowledge of this kind of duty. Below are some implied duties of the employer under construction contract.

1.   Implied duty to cooperate

In the case of London Borough of Merton v Stanley Hugh Leach (1988) 32 BLR 51 it was held that, generally, if it is necessary for the employer to cooperate with the contractor, a term will be implied (in the absence of express terms) requiring the employer to do all that is necessary to allow the contractor to complete his work. In Hannen & Cubitts v WHTSO, it was conceded that the building owner would do all things necessary to enable the contractor to carry out the work. Also Lawton LJ in Martin Grant & Co Ltd v Sir Lindsay Parkinson & Co Ltd (1984) 29 BLR 31 (CA) said: “There is … by implication of law, an obligation to co-operate with one another”. And Humphrey Lloyd J in Floods of Queensferry said: “A term as to co-operation arises as a matter of law …”.

2.   Implied duty to obtain all necessary permits

As in the Canada case of Ellis-Don Ltd v The Parking Authority of Toronto (1978) 28 BLR 106, it was held that whether or not the employer has an implied duty to obtain all necessary permits will depend upon the particular terms of the contract and the circumstances of the contract.

3.   Implied duty to appoint competent consultants

In the case of Croudace Ltd v London Borough of Lambeth [1986] 33 BLR 20, it was held that an employer is under an obligation to appoint the architect/engineer to carry out the administrative functions under the contract and to appoint a replacement if the Architect/Engineer is unable to act. Furthermore, in London Borough of Merton v Stanley Hugh Leach (1988) 32 BLR 51, the employer also impliedly warrant that the architect/engineer is reasonably competent and will exercise reasonable skill, care and diligence in carrying out his duties under the contract.

This decision is similar with the case of Hiap Hong & Company Pte Ltd v Hong Huat Development Co (Pte) Ltd where the court held that it was an employer who entered into a construction contract with a contractor and therefore he owed an implied contractual obligation to the contractor to ensure the proper discharge by the architect of his certifying function. The case of Perini Corporation v Commonwealth of Australia also had held that a term must be implied into a construction contract binding the employer to ensure that the certifier under the contract. While in Russell v Sa da Banderra [1862] 13 CB (NS) 149, it was held that the employer is liable for delay caused by his representatives or agents.

In the case of Roberts v Bury Commisioners [1870] LR 5 CP 310 and Neodox v Swinton and Pendlebury Borough Council [1958] 5 BLR 38, it was held that if instructions, nominations, information, plans or details are required, then they must be supplied at reasonable times.

4.   Implied duty to give possession of site

Especially for construction contract, the employer has an implied duty to give the contractor such possession, occupation or use of site as is necessary to enable the contractor to perform the contract, as in the case of The London Borough of Hounslow v Twickenham Gardens Development (1970) 78 BLR 89. It is similar with the case of Freeman v Hensler (1900) where it was held that it is an employer’s duty (of co-operation) to give the contractor possession of the site within reasonable time to enable him to carry out and complete the work on the completion date. For a new project, the site should be given to the contractor within a reasonable time and with a sufficient uninterrupted possession to allow the contractor to perform his obligations, as in the case of Penvidic Contracting Co Ltd v International Nickel Co. of Canada Ltd [1975]53 DLR 748.

 

In Robert v Bury Commissioners (1870) LR 4 CP 755, it was held that outright refusal to give possession of site is a repudiatory breach. It is similar with the case of Carr v J.A. Berriman (1953) 89 CLR 327. While delay in giving possession of site is a breach of contract that entitles the contractor claim damages as in the case of Rapid Building Group v Ealing Family House Association (1984) 29 BLR 5 (CA).

In Milburn Services Limited v United Trading Group (UK) Limited (1995) 52 Con.L.R. 130, it was held that if a contract contains an “entire agreement” clause, this will not prevent the implication of a right to possession without clear words. While in The Queen in Rights of Canada v Walter Cabbott Construction Ltd (1975) 21BLR26, it was held that the employer is required to give possession of sufficient portions of the site of the work. The degree of possession or access that the employer provides varies with the circumstances. Generally for construction project, it will be more than the actual site on which the structure stands.

Moreover, in Canterbury Pipe Lines v Christchurch Drainage (1979) 16 BLR 76, it was held that the employer is under an implied negative duty not to revoke the contractor’s license to occupy the site otherwise than in accordance with the contract. The possession of site gives the contractor an irrevocable license to occupy the site until completion as in the case Hounslow LBC v Tickenham Garden Development.

5.   Implied duty to issue late certificates

In Cantrell and Another v Wright & Fuller Ltd, the issue was whether any certificate might still be issued even if the time for issuing it had already passed. The Court held that by necessary implication, the contract provided that any certificate might still be issued even if the time for issuing it had already passed.

6.   Implied duty of non-hindrance

In the case of London Borough of Merton v Stanley Hugh Leach Limited (1985) 32BLR51, it was held that a term will usually be implied in a construction contract (in the absence of express terms) that the employer will not hinder or prevent a contractor from performing his obligation under the contract or delay him in performing it.

In Glenlion Construction v The Guiness Trust [1987] 39 BLR 89, it was held that the employer/his representatives’ instruction should be given at such times and in such manner as not to hinder or prevent the contractor from performing his obligations under the contract.

7.   Implied duty of reasonable determination

In Renard Construction (ME) v Minister for Public Works, there was a case where the employer terminate the contract after concluding that the contractor was late and the contractor guilty of unsatisfactory work. This is similar with the case of Hughes Bros v Trustees of the Roman Catholic Church where the contractor was in financial difficulties. In both cases the Court emphasised the implied duty on the employer to act reasonably and honestly in forming the opinion that the contractor had failed to show cause why the contract should not be cancelled.

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