UNIVERSITI TEKNOLOGI MARA

LAW FOR CONSTRUCTION CEM583

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CADANGAN MENDIRIKAN SEBUAH PEJABAT DAN MAKMAL 3 TINGKAT, DI ATAS

LOT 15834 MEDAN BAYANLEPAS, BAYAN LEPAS TECHNOPLEX, MUKIM 12,
KAWASAN PERINDUSTRIAN BAYAN LEPAS, DAERAH BARAT DAYA, PULAU PINANG

LAW FOR CONSTRUCTION

CEM583

AMMIRUL SAFFUAN BIN SUHAIMI

2018265216

Faculty of Civil Engineering

Universiti Tecknologi MARA Cawangan Pulau Pinang, 13500,
Permatang Pauh, Pulau Pinang
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Table of Content
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Task 1: Introduction
This chapter review about the building infrastructure “Cadangan Mendirikan
Sebuah Pejabat Dan Makmal 3 Tingkat, Di Atas Lot 15834 Medan Bayan Lepas, Bayan
Lepas Technoplex, Mukim 12, Kawasan Perindustrian Bayan Lepas, Daerah Barat Daya,
Pulau Pinang”. The contract period of this project was set on 25 January 2008 until 24
October 2008 which 9 months from the date of commencement.

This project involving the contractor from Nakano Construction Sdn. Bhd. The
company located at 345 J, 2nd Floor, Bangunan Kelab Gelugor, Jalan Sultan Azlan
Shah,11700 Penang. The value of this project was based on the contract sum. The
Contract Sum shall be in the amount of RM70,600,000.00 (Ringgit Malaysia: Seventy
Million and Six Hundred Thousand Only).

Few laws of construction need to be referred for better flow of work on this
infrastructure project. Contractor should have 9 basic element of the contract in the
project which is (a) A clear or firm offer or proposal, (b) An acceptance of the
offer/proposal, (c) Intention to create legal relations, (d) Consideration, (e) Certainty,
(f) Capacity, (g) Consent, (h) Legality and (i) Possibility.
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Task 2 : 9 Basic Elements of Contract

(a) A clear or firm offer or proposal

A firm offer is an offer that will remain available for a certain period of time
or until a certain time or occurrence happens, after which it is unable to be
withdrawn. As general rule, all deals are valid, including those offers that
purport to be irrevocable on their face, at any time prior to acceptance. The
figure (a) below shown the firm offer of the Nakano Construction Sdn. Bhd
from Majlis Bandaraya Pulau Pinang.

Figure (a) firm offer/proposal

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(b) An acceptance of offer/proposal

Offering and acceptance are widely accepted as necessary conditions for the
establishment of a contract, and a typical approach in contract law is to examine their
operation. Established in the 19th century, the offer and acceptance formula describes
a moment of creation where the parties are of one mind. In this case, the company
have been accepted by the client and being invited to proceed the construction for
Bayan Lepas Technoplex, Mukim 12, Kawasan Perindustrian Bayan Lepas, Daerah
Barat Daya, Pulau Pinang. An acceptance of offer can be seen below in figure (b).

Figure (b) An acceptance of offer/proposal

(c) Intention to create legal relations

As we all know, the intention to creating legal relations is part of the
contractual elements. Intention to establish legal relations is characterized as
an intention to enter into a contract or contract that is legally binding. One of
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the necessary elements in the creation of a contract is the intent to establish

legal relations. That is because the intention to develop legal ties consists of a
party's readiness to recognize the legal sequences of the agreement being
entered into. In order to establish legal ties, any contracting party's motion
must have the requisite intention of entering into a legally binding contract. In
this contract, the company had made the legal binding with the client in order
to create their relation towards the project. Both of the company needs to sign
the letter of legal binding contract. The figure (c) below shows the example of
their legal contract letter.

Figure (c) legal binding letter

(d) Consideration
Consideration is an important factor in the law of contracts, a benefit that must
be negotiated between the parties, which is the basic reason for a party to enter
into a contract. Consideration must be of importance (at least for the parties)
and traded by the other party for the results or assurance of performance (such
performance itself is consideration). One consideration (thing given) is
exchanged for another consideration in a contract. The client has accepted the
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proposal from the Nakano Construction Sdn. Bhd and invited them to fulfill
the needs by the client. As the exchange, Nakano company will construct the
building for the client and get paid for their work. This consideration give both
of them benefits.

(e) Certainty

The cost of certainty for this project have been provided in the contract sum of the
document which is RM 70,6000,000.00 for the Nakano company to build the
building. The Contract Sum shall be a fixed lump sum based on the contract
drawings and specifications. No additional claims for time or expense will be
entertained in the event of discrepancies, conflicts and/or divergences in the
drawings and specifications. All such discrepancies, conflicts and/or divergences
shall be resolved by reference to the Architectural Drawings and are deemed to
have based on your lump sum price on achieving the construction of the works in
compliance with the Architectural Drawings. The whole of the Works shall be
completed within Nine (9) months from the Date of Commencement, that is to
say, the Date of Completion shall be 24 October 2008. The company shall be
liable for Liquidated and Ascertained Damages (L.A.D.) at the rate of
RM20,000.00 (Ringgit Malaysia : Twenty Thousand Only) per day in the event
the whole of the Works is not completed by the Date of Completion; or in the case
where an extension to the Date of Completion has been granted under the terms
and conditions of the Contract, by the said extended Date of Completion.

(f) Capacity
The ability or competence to establish with another party a binding contract and/or
legal agreement. The contractor has criteria in joining the binding contract. The
contractor can fulfill all the task given by the client in completing the task.
Nakano company may have these criteria which make the client accept their
proposal to form legal binding contract.
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(g) Consent
They will use a contract when two parties choose to enter into an arrangement,
which would specify the rights and obligations of both parties. In a contract,
several significant elements exist, including consent. In simple terms, consent
is the appreciation of the arrangement that the parties have. In the contract, all
parties must willingly give their consent. Consent will not be deemed
voluntary or sincere if there are such mistakes, or if one party tries to cheat or
intimidate the other. Based on the agreement been made, the Nakano company
must free consent to the contract which mean all the agreement made by them
are free consent of parties competent.

(h) Legality

The contract the have been made by both company and client create a legality for
the them in order to get what they need. An agreement happens when an offer is
made by one party to other and that offer is accepted. In this case, the contract
agreement has been written to avoid from any fraud.

(i) Possibility

In this contract, all the performance of the Nakano company must be achieved to
avoid from any impossibility during the contract period. The company shall
follow the contract document and correspondences. The figure (h) shown the list
of the document that Nakano company should provide for their performance.
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Figure (h) the contract document and correspondences

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Task 3: Court Case

3.1 Prosecutor/judge and Defendant

In this case, View Esteem (appellant) is a real estate developer who awarded Bina
Puri (defendant) a construction contract amounting to RM185 million as a
construction service apartment contractor known as Regalia Service Apartments. In
2014, in compliance with the Payment Act and Construction Industry Adjudication
2012 (CIPAA Act) for claims outstanding payments amounting to RM23 842 507.28,
respondents started proceedings against the appellant. The appellant did not pay
outstanding payments amounting to RM23 842 507.28 in relation to progress claims
no. 28 paid. The adjudicator granted the respondent claims amounting to RM15 459
856.06 along with the advantages and costs of the proceedings. The appellant
appealed to the high court (prosecutor) to set aside the decision and to adjourn the
execution of the judgments of the adjudicator. The defendant has made a counter
motion to set aside the appeal court's review request and apply to enforce the
adjudicator's decision. On September 11, 2015, in accordance with the provisions of
section 28 of the CIPAA Act, the high court refused the appellant's application and
allowed the application to implement the respondent's adjudication decision as a court
decision. An appellant who is dissatisfied with the decision then appealed to the
appeal court. In its judgment, the appellate court dismissed the appeal filed by the
appellant on 22 August 2016 and upheld a decision reached by the high court.

3.2 Mistake Made/ Case Facts

1. The appellant's application to challenge the decision Adjudicator and apply for
previous hearings for adjudication declared irrelevant as referred to in section 41 of
the CIPAA Act for action beyond the jurisdiction of the adjudicator;

2. Application by the appellant to set aside or delay enforcement of the decision to

adjudicate under sections 15 and 16 of the CIPAA Act; and
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3. Application by the respondent in compliance with section 28 of the CIPAA Act to

file and execute adjudicator decisions as a judgment jury.

3.3 Sentence imposed by the judge on the offender

The high court in the context of exercising review power the judiciary has agreed and
agreed with the decision adjudicator. The wise judge also rejected the application the
appellant to declare that the adjudication proceedings as invalid and void. In addition,
the application of the party the appellant to set aside the adjudication decision was
dismissed and the respondent's application to enforce the decision adjudicators have
been allowed.

3.4 Court for the case

In this case, the high court and appeal 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. The Court of Appeal is an
appellate court of the judiciary system in Malaysia. It is the second highest court in
the hierarchy below the Federal Court. 

3.5 Act used for the Case

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.
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Task 4: Discussion

In this study, the Construction Industry Payment an Adjudication act, 2012

(CIPAA) was used for court case. This This Act is intended to provide a quick,
prompt and cost-effective dispute resolution process for the construction industry's
payment disputes. These applicability and non-applicability of payment disputes for
adjudication was specifically set out by CIPAA which is:

1. Application: The Act extends to all building contracts in which written agreements
are concluded to carry out projects entirely or partially within the territory of
Malaysia, regardless of whether the contract is concluded with the government or
with a private party.

2. Non-Application: In respect of any building which is less than four storey high
entered into by a natural individual who is entirely intended for his profession, the Act
does not extend to any construction contract.

According to the earlier project in task 2, the construction of the building is less
than four storey high which it is in the category of non-application. The Act does not
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, the act CIPAA can be applied according to the acceptance letter of
proposal. In the acceptance letter of the proposal, it already state the liquidated and
ascertained damages (L.A.D) which is employer may have actual damages or loss in
the event if contractor fail to complete by the date of completion or any 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 each of parties.
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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 eb 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.

In the case fact above, showing that the client does not have the consent criteria
which lead to the cheating in the project. Probability for the case happen again in task
2 is lesser because both parties already create an agreement where if one of the parties
cheated, they may get punishment according to the act. This shows that CIPAA 2012
works well and that payment disputes can be resolved through simple and
uncomplicated adjudication procedures as soon as possible. CIPAA has clearly helped
to improve cash flow and control payment behavior in the Malaysian construction
market. It has therefore proven beneficial in improving the condition of the
construction industry in Malaysia.

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
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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: Explore and Propose

Task 6: Conclusion

Task 7: References & Appendices

Court Case

Majid, S., Dato, L. W. N., Mahmud, S. R. I., Bekir, A. B. U., & Clj, T. (2019). Ulasan
Kes-VIEW ESTEEM SDN. BHD. LWN BINA PURI HOLDINGS BHD. [2016] MLJU
411. November 2012, 184–189.
Contract Document
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