Formation of Building Contract

Process

Invitations to tender Tender Letters of intent Estimation Quotation Letter of acceptance Incorporation of documents

Invitations to tender

An invitation to treat Open tender-To the public-advertisements in

newspaper/website.

By invitation-nominated contractor

Tender

Constitute as a proposal from the contractor.The acceptor shall be the client/employer

Belle River Community Are Inc v WJC Kaufmann Co.Ltd

Facts: The def submitted a tender for the plf’s projects. Due to serious error in calculation by the contractor, the tender was much lower than intended.The plf’s architect recommended acceptance but the def withdrew the tender.The plf sued the def.

CA: An offeree cannot accept an offer which he knows has been made by mistake and which afects a fundamental term of the contract. Price is obviously one such term…because of the mistake, is not the offer the offeror intended to make and the offeree knows that.

Estimation/QuotationNg Bros Construction v Kaolin (M)

Sdn.Bhd

Facts:The def wished to build an industrial complex at Tapah, Perak. They requested the plaintiff to submit a quotation. The plf sent the quotation and received a reply which stated inter-alia:…”Thank you for your quotation dated 15 December 1969. We are pleased to inform that we have accepted your quotation and therefore you may treat this letter as our official order to you…we would also be sending you at a later date an official contract agreement …”. Subsequently, the def decided to withdraw from the agreement.

Wah Hamzah J: “On acceptance of the quotation, there was a contract binding on both parties and any subsequent disagreement between the parties on any proposal to vary the terms of the contract did not affect the contract and the contract remains valid and binding.”

Methods of Procurement

Traditional System Alternative method-Design and build,

management contracting

Building Procurement-Traditional System

Bill of quantities (BQ) Bills of Approximate BQ Drawings and specifications Based on schedule rates-standard schedule,

ad-hoc schedule, previous contracts BQ

Bill of Quantities

Employer will normally appointed his architect and qunatity surveyor for the project.

The architect will prepare the drawing and specifications.

QS will prepare the Bill of Quantities based upon the drawings and specification.The qs will come to the estimated contract price.

The contractor will be invited to submit tender and those who come close/lower/ reasonable estimation to the employer estimation will be chosen.

Bills of Approximate BQ

Architect will prepare the drawing/specification-not finalized

The QS will prepare the BQ but not a conclusive one-only the unit rates-no pricing

Drawings and specification

No BQ is supplied to the contractor in the tender-normally small project

Contractor has to prepare estimation based upon the drawings and spec. only

Schedule rates

The tender contained the schedule rates in which contractor should based their tender estimation but tenderers are required to tender percentage additions or deductions to the the listed rates- similar to approximate BQ.

The schedule rates could be standard rates or ad-hoc schedule.

Building procurement-Alternative methods

Design and build-package deal (turn key-build, design, operate, maintenance-transfer or merely design, build and transfer)

Management contracting- involved subcontracting the whole project.

Letter of intent

Ayer Hitam Tin Dredging (M) Bhd v YC Chin Enterprise Sdn.Bhd.

The Resp negotiated to carry out a turn key project for the construction of low houses and shop houses for the app. The app later sent a letter to the resp which stated that they agreed to the proposals, subject to certain terms and conditions. In reliance of the letter, the resp appointed architects, engineers and surveyors and executed preliminary works on site. Following a dispute, the app instructed the resp to cease work and the resp claimed that there is a contract between them.

Supreme Ct (Ipoh): Per Edgar Joseph Jr. CJ:”There is no contract …A binding contract could be formed before an informal one was executed but usually the use of the expression ‘subject to contract' or a reference to a formal contract would negate the necessary intention to be bound at that point.”

Letter of Comfort

Klenwort Benson Ltd v Malaysia Mining Corporation Bhd.(1989) 1 ALL ER 785.

CASE Review Exercise 1Qn: Is there any difference between letter of intent

and letter of comfort?

Letter of Acceptance

Section 7(a): Acceptance must be absolute and unqualified.

Low Kar Yit& Ors v Mohamed Isa & Anor.

Per Gill J:”It is plain that a contract comes into existence where there has been an unqualified acceptance of a definite an unequivocal offer…”

Contract documents

PAM 2006-Clause 3.1 (a)- (f)

COMPARE WITH PWD 203A (Rev 1/2010)- clause 1.0 (b)

Incorporation of document

LoA Correspondences Instruction to Tenderers Form of Tender Conditions of contract Annexure to conditions of contract Specification and Drawings Schedule of Rates Appendices

Work Programme

• PAM 2006- clause 3.5-3.7

• PWD 203A (Rev 1/2010)- clause 12.0

Performance Bond and Performance Guarantee Sum

PWD 203A (Rev.1 /2010)- clause 13.1 (a) PWD 203A (Rev 1/2010)- clause 13(1)(b)

and 13(2) Rights of the Govt - PWD 203A (Rev

1/2010)- clauses 13.3 and 13.4 Refund/Release - PWD 203A (Rev 1/2010)-

clause 13.5 Forfeiture- PWD 203A (Rev 1/2010)- clause

13.6