Construction Law I

Lecture 2

STANDARD FORMS OF
CONSTRUCTION CONTRACTS

Zulhabri Ismail

1
Synopsis
This lecture will discuss the following:-

 What are the standard forms of

construction contracts, advantages and
disadvantages?

 Parties involved in drafting of standard

forms
2
Synopsis (cont’d)
 Types of important standard forms of
contract used in Malaysia and abroad.

 Highlight on major differences between the

standard forms and their uses and selection.

3
The Rule of Thumb
All standard forms of contracts [express] must
be read and construed together with
common law principles [implied] and the
statutory provisions.

4
Forms of Contracts
 Standard forms
 Model forms
 Modified forms
 Ad hoc [because of situation / not planned in
advance]
 Bespoke [special made / according to needs
of individual project]
5
Procurement
Contract Types based on Method of Contract
Procurement (Harbans Singh, 2004):-
 Traditional General Contracts
 Management Contracts
 Construction Management Contracts
 Package Deal / Turnkey Contracts
 Build Operate and Transfer [BOT]
Contracts; and
 New Type of Contracts [i.e. PFI]
6
What is standard forms?
 These are in a printed form and published
by an authoritative body of the industry,
which body is recognised by both parties;

 The form set out the terms or conditions

on which the contract between the
parties are to be carried out;
7
What is standard forms? (cont’d)
 These terms or conditions are deemed to
be agreed and are not subject to further
negotiation and/or amendment; and

 The terms or conditions are generally

suitable for a wide range of common
projects or works.
(Harbans Singh, 2004)
8
Background
Historically, the initial set of Standard Forms were drafted by the
various government agencies for works in the public sector
i.e. earlier version of PWD form modeled on the RIBA
Form of Contract 1931, later revision 1983 and the latest
2007 .

Due to progress of development projects, many other

professional bodies published their own version of standard
forms to suit the current development and modernisation and
variation of procurement methods i.e. IEM was first
published in 1989 and PAM in 1969 (Lian, Im and Kheng,
2000).
9
Government / Public Sector
Public Works Department
 PWD Form 203A (Rev 2007)
 without quantities.
 with quantities.

 PWD Form 203N for Nominated Sub-

Contractors.

10
Government / Public Sector
Public Works Department (cont’d)
 PWD Form 203P for Nominated Suppliers.

 PWD Form DB/T for Design and Build

Turnkey Contracts.

11
Government / Public Sector (cont’d)
Construction Industry Development Board
 CIDB Form for Building Contracts 2000
Edition.

 Standard Proforma for Contract

Administration (For use in conjunction with
The CIDB Standard Form of Contract for
Building Works).

12
Government / Public Sector (cont’d)
 CIDB Standard Form of Sub-contract For
Nominated Sub-Contractor [Form CIDB.B
(NSC) / 2002] (To complement the Standard
Form of Contract for Building Works).

 Model Terms of Construction Contract for

Subcontract Work (2006) [CIDB / CICC].

13
Model Terms of Construction
Contract for Subcontract Work.
Intended to be used as part of a generally ‘stand
alone’ subcontract and not ‘back to back’ to
any one main contract.
The generic drafting style and flexibility mean it
can be used as subcontract terms with any
main contract whether a one-off contract
(bespoke & ad hoc) or published
“standard form” such as the PWD, PAM,
IEM, CIDB, FIDIC or JCT contracts. 14
CIDB Forms
CIDB published its own version of Standard
Forms for building works (main contract and
sub contract). But the question is do we need
another public sector standard form?

There is presumption that CIDB will replace

PWD Standard Forms?

15
Other Public Sector Forms
Some statutory bodies and public sector related
bodies utilise the PWD Standard Forms with
slight modifications and/or amendments.
 Drainage and Irrigation Department
(DID/JPS)
 Lembaga Pelabuhan Kelang (Port Klang
Authority)
 PETRONAS
16
Private Sector
PAM
 PAM 2006 (previously 1998) with quantities.

 PAM 2006 without quantities.

 PAM NSC 2006 to be used for NSC where

the main contract is based upon the above.

17
PAM
Origin
Rather than developing and drafting a new
standard form on its own, PAM in
collaboration with the ISM in 1969 adopted
1963 JCT Standard Form of Building
Contract (Reprinted 1968) with
modifications to be used for private sector
building works through traditional general
contracting contract procurement method 18

comprised:
PAM 1998
Usage
Essentially for
 Private sector projects

 Building works

 Contracts undertaken through Traditional

General Contracting Procurement

19
Private Sector
Civil Engineering works
 IEM Condition IEM.CE 1/89. Mainly for
Civil Engineering Construction (Second
Reprint 1994).
 IEM Condition IEM.CES 1/90. Sub-contract
for use in conjunction with the IEM Condition
(First Reprint 1994).

20
Private Sector
M&E works
 IEM Condition IEM.ME. For mechanical and
electrical work (First Edition 1994).
 Sub contract? [absent]

21
IEM Forms
Origin
Due to rigours/harsh and pitfalls of the
JKR/PWD forms and unsuitability of the
PAM forms for engineering and
infrastructure projects, construction
engineering professionals attempted to
employ UK engineering forms i.e. ICE,
IMECHE, IEE, JCT and FIDIC forms with
modifications.
22
IEM Forms
Origin (cont’d)
The “modifications” were subject to job specific
and ad hoc basis. Thus, leading to uncertainty,
inconsistency and leading to construction
disputes.

Due to that, IEM attempted to fill in the lacuna by

drafting their own Standard Forms started from
1989 for the traditional general contracting.
23
IEM Forms
Usage
 Private sector projects.

 Civil engineering, Mechanical and Electrical

works.
 Procured under the Traditional General
Contracting.

24
International Contracts
 FIDIC family
 JCT Family
 IEEE
 IMechE
 ECC
 PPC 2000

25
Why standard forms?
According to Nayagam and Pathmavathy (2005),
“Standard Form construction contracts
provide a basic legal framework identifying
the rights, obligations and duties of the
parties, establish the ambit of the powers and
duties of the contract administrator”.

26
Why standard forms?
 Most construction professionals are familiar
with their operation, limitations and drawback.
 Such familiarity leads to administrative and cost
efficiency.
 As there is a body of judicial pronouncement
accumulated over the years on standard forms,
there is some certainty in meaning.
 Savings in time and costs when standard forms
are used compared to the costs of drawing up
fresh contracts.
27
Why standard terms of Contract?
(CICC, 2006)
 It becomes more economical as there is no
need to draft new terms of contract every
time a contract is let out.
 It provides more certainty when tendering
[equal bargaining power].
 Familiarity makes it easier and quicker to be
priced.

28
Why standard terms of Contract?
(CICC, 2006)
 It creates the possibility of a more balanced
allocation of risk between the contracting
parties.
 There is a higher chance of avoiding
unwarranted disputes in court or arbitration.

29
Purpose (Robinson & Lavers)
To provide the basic legal framework
evidencing the legal relationship between the
parties i.e. identifying the rights, obligation
and duties.

To furnish a mechanism for regulating the

conduct of the commercial relationship
between the parties.
30
Purpose (Robinson & Lavers)
To put in place the administrative procedures
necessary to effect the legal and
commercial relationship between the parties
for achieving the purposes of the contract.

To establish the ambit of the powers and

duties of the contract administrators under
the contract between the parties.
31
Purpose
To make it short, according to Harbans Singh
(2004) “the purpose of the Standard Forms
are multifold governing not only legalities but
also mundane administrative issues to ensure
that both parties are able to discharge and
can actually discharge their side of the
bargain through full performance”.

32
Tujuan Borang Perjanjian Standard
(Nor Ainah, 2001)
 Mengandungi syarat-syarat perjanjian.
 Terperinci hak dan obligasi.
 Rangka asas perundangan, komersial dan
mekanisma pengurusan projek
berlatarbelakang amalan dan standard industri
binaan.
 Asas rundingan.

33
Advantages
The forms have been arrived at through a process of
negotiation between the various sectors of the
industry and as a result act as a compromise
between the various powerful interest group.

They have been widely adopted because experience

has shown that they facilitate the conduct of
trade (Schroeder Music Publishing Co v
Macaulay [1974] 1 WLR 1308) and have
addressed the common pitfalls and shortcomings.
34
Advantages (cont’d)
The forms satisfy the equitable principle
requiring that similar projects demand
similar contracts (Murdoch and Hughes,
2000).

Fair risk allocation to all the parties (Murdoch

and Hughes, 2000).

35
Advantages (cont’d)
Most such forms are time tested and
practitioners are aware of their
workability, limitations and drawbacks.
This familiarity leads to administrative and
cost efficiency and minimises possible
claims and disputes.

36
Conclusion

37
Thank You

38