Implied Duties of the Employer (2)

How about in PAM, CIDB and PWD?

Implied Duties

PAM

CIDB

PWD

Co-operate

·

·

·

Obtain all necessary permits

·

·

·

Appoint competent consultants

·

·

·

Give possession of site

·

c. 6.1.a

c. 38.2

Issue late certificates

c. 26.1.b

c. 6.1.e

·

Non-hindrance

·

c. 6.1.d

·

Reasonable determination

c. 25.1 & 3

c. 44.1 & 2

c. 51

Note

· ” mark means that there is no such express provision regarding to the employer duties, and therefore it indicates the employer’s implied duties.

PAM 2006

Clause 25 (sub clause 1 and 3) describes the right of the employer to determine the employment of the contractor in such events of contractor’s defaults.

Clause 26.1.b clearly states that if the employer interferes with or obstructs the issue of any certificate by the architect, it will entitle the contractor to determine his own employment due to the employer defaults.

CIDB 2000

Clause 6.1.a expressly states that the employer shall give the contractor right of access to and possession of the site in accordance with clause 17.2.

Clause 6.1.d expressly states that the employer shall not obstruct or interfere with the performance of the contract but the contractor, except where expressly provided in the contract.

Clause 6.1.e expressly states that the employer shall not interfere with or influence or obstruct the issue of any certificate by the Superintending Officer under the contract.

Clause 44 (sub clause 1 and 2) expressly states the events of default by the contractor which entitles the employer the right to determine the employment of the contractor under the contract.

PWD 203 (Rev. 2007)

Clause 38.2 clearly describes the contractor shall be given the possession of site on or before the “date for possession” stated in the Letter of Acceptance.

Clause 51 (sub clause 1 and 2) clearly describes the events of default by the contractor which leads to the right of the government (employer) to reasonably terminate the contract.


 

The Limitations

From the above employer’s implied duties, there are some limitations which need to be considered. First, in order to comprehend our understanding on implied terms, we must come back to see the decision in BP Refinery (Westernport) Pty Ltd v Hastings Shire Council which stated that for a term to be implied, there are some condition which must be satisfied:

(1)  It must be reasonable and equitable

(2)  It must be necessary to give business efficacy to the contract so that no term will be implied if the contract is effective without it

(3)  It must be so obvious that ‘it goes without saying’

(4)  It must be capable of clear expression

(5)  It must not contradict any express term of the contract

 

The limitation to the above employer’s implied duties are as follows.

  1. In Appleby v Myers [1867] LR 23 CP651, it was held that the employer does not impliedly warrant the fitness of the site.
  2. In Porter v Tottenham Urban District Council [1915] 1 KB 776(CA) and LRE Engineering v Otto Simon Carves [1981] 24 BLR 127, it was held that the employer does not impliedly warrant that there will be no wrongful interference by third parties.
  3. In Leslie & Co Ltd v The Mangers of the Metropolitan Asylums District [1901] 68 JP 86 (CA), it was held that the employer (in the absence of fraud or collusion) is not responsible for delay caused by nominated subcontractor.
  4. In Mona Oil Equipment Co v Rhodesia Railways, Devlin J said: “I can think of no term that can properly be implied other than one based on the necessity for co-operation. It is no doubt, true that every business contract depends for its smooth working on co-operation, but in the ordinary business contract, and apart, of course, from express terms, the law can enforce co-operation only in a limited degree to the extent that it is necessary to make the contract workable. For any higher degree of co-operation the parties must rely on the desire that both of them usually have that the business should get done.” It means the employer’s implied duty to co-operate is still leaving a question mark over the extent of the co-operation itself. This is similar with the case of Bernhard’s Rugby Landscapes Ltd v Stockley Park Consortium Ltd (No 2) where Llyod J noted: “The degree of co-operation that is required depends in each case on the obligation undertaken and not on what is reasonable…”.
  5. Although the employer has an implied duty to appoint nominated subcontractor or supplier (if necessary under contract), there is no such liability of the employer for the performance of the nominated subcontractor or supplier. As in the case of Young & Marten Ltd v McManus Childs Ltd [1969] 1 AC 454 (HL), the employer had nominated the supplier of certain materials. In accepting that, the contractor ought to be strictly liable for deficiencies in quality of those materials, and not the employer.

 

Conclusion

From the above description, we can define an implied duty as a duty which is not expressly written or agreed under contract, but is still necessary for business efficacy. Regarding to the above cases, there are at least 7 implied duties of the employer under construction contract. By knowing these employer’s implied duties, it will help both employer and contractor to get a better understanding of their distribution of rights and duties.

Despite the above employer’s implied duties, there are also some limitations for the practice of these duties. It is mainly because the implied duties are also depended on other relevant circumstances. In this paper, I found 5 limitations of the employer’s implied duties practice.

And lastly, I would like to end this paper with a quote taken from Barque Quilpue Ltd v Brown, where the Court said: “There is an implied contract by each party that he will not do anything to prevent the other party from performing a contract or to delay him in performing it. I agree that generally such a term is by law imported into every contract”.

 

References

Statutes referred to:

Contracts Act 1950. s. 2 and 9.

Sale of Goods Act 1957. s. 12.

Books referred to:

Simanjuntak, R., 2011. Hukum Kontrak. Teknik Perancangan Kontrak Bisnis. Jakarta: Kontan Publishing.

Ying, L. Cen, 2007. Principles of Implied Terms in Construction Contracts. M.Sc. Universiti Teknologi Malaysia.

Articles/Presentations referred to:

Steensma, A., 2009. Implied Obligations of Non-hindrance and Co-operation in Construction Contracts.

Yaakob, J., 2012. Implied Duties of Employers and Contractors MBG 1244. Johor Bahru: Universiti Teknologi Malaysia.

Yaakob, J., 2012. Possession of Site MBG 1244. Johor Bahru: Universiti Teknologi Malaysia.

Websites referred to:

http://www.atkinson-law.com/library/article.php?id=147

Books referred to as bibliography:

Murdoch, J. and Hughes, W., 2008. Construction Contracts – Law and Management, 4th Ed. New York: Taylor & Francis. (p. 171-174).

Beatson, J., 2002. Anson’s Law of Contract, 28th Ed. Oxford: Oxford University Press. (p. 145-151).

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.