It is common for employers, particularly in large construction projects, to appoint another party, such as an architect or engineer, to act as administrators for their construction contracts. As an example, under the PAM Contract, an architect is appointed by the employer to administer the progress of the project such as the issuance of variation orders, assessing extension of time applications and determining the contractor’s loss and expense claims.  Although these administrators have wide and encompassing powers under the contract in acting for the employer, there are limits to it and one of them is concerning the waiver of condition precedents. 

KL Eco City Sdn Bhd v Tuck Sin Engineering & Construction Sdn Bhd & Anor [2020] 1 LNS 2234 is a High Court case concerning the construction of a link bridge connecting KL Eco City and Mid Valley City, where part of the link bridge collapsed in November 2016. This case was bifurcated into 2 tranches. The issue to be determined in the first tranche was who caused the collapse of the link bridge. The second tranche was to determine the issue of delay in the works of the link bridge and the termination of the contract. This article focuses on the waiver of the condition precedents regarding the delay in the works. 

Brief Facts

  • The contract between the parties was a PAM Contract. Under Clause 23.1(a) of the PAM Contract, the contractor must submit a written notice of intention to claim for extension of time (“EOT”) within 28 days from the delaying event.
  • The first defendant, Tuck Sin Engineering & Construction Sdn Bhd (“Tuck Sin”), the main contractor in the construction of the link bridge, submitted 3 EOT applications to the architect. However, Tuck Sin submitted their EOT applications after the 28 days required in the PAM Contract.
  • Notwithstanding the late submission of the EOT application, the architect granted a total of 19 days’ EOT to Tuck Sin. 
  • Later, KL Eco City Sdn Bhd (“KLE”) imposed RM1,050,000.00 liquidated damages on Tuck Sin for the delay on the project. 
  • During the trial, KLE took the position that Tuck Sin should not be entitled to any EOT whatsoever due to non-compliance of the PAM contract.
  • Tuck Sin argued that neither KLE nor the architect insisted on the strict compliance of clause 23.1 of the PAM Contract. In this regard, Tuck Sin asserted that there was a waiver on the compliance of clause 23.1 of the PAM Conditions of Contract either by KLE by itself or through its architect. 

Court’s Findings

The Court acknowledged that Tuck Sin did not fulfil the requirements under clause 23.1, which was fatal to Tuck Sin’s entitlement to any EOT, since parties must abide by the condition precedents in the contract which is well within their contemplation and capability. 

The Court further decided that generally, the architect did not have either actual or ostensible authority to waive the condition precedent as set out under clause 23.1 of the PAM Conditions of Contract. Unless it is provided in the contract, the architect as an agent of the employer does not have the authority to waive the employer’s contractual rights in respect of condition precedent such as the notice requirement. 

Therefore, the Court held that the architect’s decision in granting the 19 days of EOT is not binding unless accepted by KLE. In this case, KLE did accept or ratified the architect’s decision to grant EOT to Tuck Sin, because their claim for liquidated damages of RM1,050,000.00 already takes into account the 19 days of EOT. Therefore, the total amount of EOT that Tuck Sin was entitled to is 19 days and KLE’s liquidated damages claim was allowed.

Key Takeaways

Parties must comply with the specific condition precedents in their contracts. The Courts will be strict in upholding the bargains reached between parties.

Even though a party may have an administrator to manage the contract on their behalf, it does not automatically mean that this administrator can waive compliance with conditions precedent. That being said, an administrator’s waiver can bind a party if that party by conduct accepts or ratifies that waiver. 

Although the above High Court case merely deals with the notice requirement in respect of the extension of time clause, it can be interpreted that this principle will extend to other conditions precedents (e.g.: loss and expense clauses).

***

This article was written by Sean Ferdinand Ng (Associate) from Donovan & Ho’s employment law practice. 

Donovan & Ho is a law firm in Malaysia, and our employment practice group has built a reputation for providing strategic employment advice to local and global organisations.  Our team of employment lawyers provide advice on employment law and industrial relations including review of employment contracts, policies and handbooks, advising on workforce reductions, and managing dismissals of employees for poor performance or misconduct. We also represent clients in unfair dismissal claims and employment-related litigation. Have a question? Please contact us.

 

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