UNIVERSITI TUNKU ABDUL RAHMAN Name: _____________________________ Faculty: Faculty of Engineering & Science Course: B.Sc.

(Hons) Quantity Surveying Year/Semester: Mixed Group Session: Test No.2 Q1. If the contractor delays completion but no effective non-completion certificate is issued by the architect under a PAM 2006 contract, will this mean that the employer loses his right to deduct liquidated damages? [15 marks] Answer: May 2011 Unit Code: Unit Title: Lecturer and Tutor: Date: UEBE 3723 Contract Administration 1 Mr. Lim Chai Chai 19th August 2011

Under PAM 2006, the architect must evaluate the necessary extension of time within the time given under the contract after the contractor has submitted such a request or other necessary additional information required by the architect. Failure to evaluate the necessary EOT shall prevent the architect from issuing the certificate of non completion which is mandatory for the imposition of any LAD by the employer. This is not the case here as the current situation is that the contractor is already under the delay status and the contractors EOT entitlements are exhausted. If this is true, this does not mean that the right of the employer to deduct LAD is extinguished. The failure to issue the necessary certificate of non completion means that the employer cannot do such deduction now but after the date when CNC is issued, the employer right is maintained. This is a case of deferment on the imposition of LAD and not extinguishing such right due to the forgetfulness of the architect.
Q2. Define `time at large'. How does it affect the employer's entitlement to levy liquidated damages for late completion? [5 marks] Answer:

`Time at large' means there is no time fixed for completion or the time set for completion no longer applies. Where this occurs the contractor's obligation is to complete work within a reasonable time. There may also be circumstances which arise rendering a completion period fixed by the contract as no longer operable, again rendering time at large. An example is where a delay is caused by the employer and the terms of the contract make no provision for extending the completion date due to delays by the employer.
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Q3.

ABX Sdn Bhd a developer has just awarded a contract to PiCon Sdn Bhd where PAM 2006 contract conditions formed part of the contract documents. The developer is asking the Architect of the project to explain the concept of contractual claims and the relevant clauses applicable to the staff. If you are the Architect, how would identify and provide a brief description to ensure the developers staff is aware and can recommend the necessary additional budget for the project. You are required to identify and explain any four (4) of them. [20 marks] Answer: The triggers for Contractual Claims under PAM 2006 are as follows: 1.0 - Discrepancies in or divergences between documents Due to the complexity of building contract documentation, the contracts make provision for what is to happen if there are discrepancies in or divergences between documents. The document consists of the followings: The contract drawings The contract bills Any architects instruction other than a variation instruction Any drawings or document issued by the architect. Under PAM 2006 Clause 1.4, this is the responsibility of the architect to issue all relevant information for the work. The contractor is entitled to EOT if there is any delay on the part of the architect under PAM 2006 Clause 23.8(g) but no such right to claim for loss and expense by the contractor. 2.0 Compliance with statutory requirements Clause 4.1 of PAM 2006 requires the contractor to comply with, and give all notices required under statutory requirements as defined therein. If compliance involves a change from what is set out in the contract documents this is to be treated as a variation. Under PAM 2006 Clause 4.3 the architect must then issue instructions within seven (7) days after being notified by the contractor. 3.0 Problems with materials Clause 6.1 of PAM 2006 states that all materials and goods shall be of the respective kinds and standards described in the contract bills. Sometimes this is not possible for good reason. It is not sufficient for goods and materials to be more expensive than you expected or on longer delivery. They must be genuinely not procurable by any means open to you. A good reason is that, while available at the time of tender, they are no longer available for reasons entirely beyond your control. You must send to architect a letter if the specified materials are not in fact procurable. YOU CANNOT SUBSTITUTE GOODS OR MATERIALS WITHOUT AN ARCHITECTS INSTRUCTION. In general, you have an absolute obligation to provide the goods and materials which you have contracted to provide and so the words so far as procurable are a valuable protection for you. 4.0 Information necessary for the works PAM 2006 Clause 3.3 and 3.4 requires the architect to provide you without charge, two copies of such drawings or details as are reasonably necessary either to explain and amplify the contract drawings or to enable the contractor to carry out and complete the works in accordance with these Conditions. 2

He must do this as and when necessary in order to enable you reasonably to meet the completion date. If you want to preserve your entitlement to EOT and/or reimbursement of loss and/or expense in the event of late delivery of this information, you must have specifically applied for it in writing at a date which itself is reasonable (neither too early or too late in making the application), having your obligation to complete. The required application has to be made from time to time during the course of the works for specific items of information. It is advisable to give a date so that the architect may be in no doubt as to your requirements. The date stated must be realistic having regard to your programme. 5.0 - Instructions by Architect The architects powers to give you instructions are strictly limited. PAM Clause 2.1 requires you to comply only with those instructions issued by the architect which the contract conditions specifically empower him to issue. Only the Named Architect has the power to issue instructions under PAM. You must not act upon any directions/instructions from anyone else, e.g. a consulting engineer or even the employer himself, nor must you allow any of your sub-contractors to do so. Clause 2.2 of PAM 2006 requires architects instruction (AI) to be issued in writing. 6.0 - Variations In the absence of a variations clause, the architect would have no power requiring you to make any changes to the work you have contracted to do. The nature of building projects is such that a variations clause is inevitable. However PAM 2006 Clause 11.0 while appearing to be very wide in terms, in fact limits the architects power considerably. The architect can order a variation only if what he does proposes falls within the definition set out in Clause 11.0 and still leaves the scope and nature of the work (as defined in the contract documents) substantially unaltered. 7.0 - Work done by others (Works to be carried out directly under the employer) Clause 29 of PAM 2006 cover the situation where the employer wishes to carry out work, or have it carried out, while your contract work is still proceeding. If you have been given adequate notice in the contract documents of the kind of work which is to be done by others you must allow it to be carried out and will be deemed to have made all appropriate allowances in the contract sum. If, however, the employer wishes to introduce work of which you have not been notified, or which is not adequately described in the contract documents, he must seek your permission, which must not be unreasonable withheld. Any necessary extensions of time and additional cost to you can be dealt with under the appropriate Clauses of PAM 2006. Q4. An assignment was given to the students to determine their understanding on the issues and related clauses applicable for a proper administration of the contract under PAM 2006. You are required to identify and briefly explain the issue related to interim progress payment. [20 marks] Answer: The progress payment certificate is issued by the Architect and it is to record when the contractor has met a contractual obligation and also triggers the transfer or entitlement of monies between the employer and the contractor as in clause 30.0 The architect is required by Clause 30.1 to issue Interim Certificates after a payment application is made by the contractor. His failure to do so is a breach of contract for which the employer is liable. 3

If the employer failed to pay the contractor on the due date, it is a breach of contract entitling the contractor, subject to notice, to determine the contract under Clause 26.1(a). If the contractor did not invoke the right as described above, the employer who fails to pay after the expiry of the honouring period, the contractor is entitled to interest at a rate of 1% + Maybank Base Lending Rate until the payment is made. The contractors entitlement to payment is subject to the employers contractual rights of deduction, for example, liquidated damages as in clause 22.0 and set-off under clause 30.4. This is the Inherent right of the employer If the Contractor owes a debt or fails to pay a sum due to and owing to the employer within 21 days after receipt of the written notification by the employer of such debt from set-off, a simple interest based on the Maybank Base Lending Rate plus 1% shall be payable by the contractor until the date payment is made under Clause 30.17 PAM 2006 If an employer raises a bona fide arguable contention that an Interim Certificate may have been overvalued, he is entitled to have the issue arbitrated under clause 34.0. Q5. In a workshop on the understanding of PAM 2006, a participant enquired on the delay issue. You are to explain to him/her on the potential types of delay encountered for any project and identify the relevant clauses applicable to each of the categories identified. [20 marks] Answer: Generally, there are THREE types of contractual delay stated in the contract, such as: Excusable non-compensable delay (Neutral events) (Time granted but no additional costs) Excusable-compensable delay (caused by Employer/Architect) (Time granted and additional costs) Non-excusable delay (Contractors own faults) (Not entitled to any time and costs) The relevant Clauses applicable under PAM 2006 for excusable non-compensable delay are as follows: 23.8a 23.8b 23.8c 23.8d 23.8g(part of it) 23.8i 23.8n 23.8p 23.8q 23.8x The relevant Clauses applicable under PAM 2006 for excusable compensable delay are as follows: 23.8e 24.3a, 23.8f 24.3b, 23.8g 24.3c 23.8j 2.43d 23.8k 2.43e 23.8l 2.43f 23.8m 2.43g 4

 Q6.

23.8o 23.8r 23.8s 23.8t 23.8u 23.8v 23.8w

2.43h 2.43i 2.43j 2.43k 2.43l 2.43m 2.43n

In a construction project, there are delays contributed by employer/consultants and contractor/subcontractors and affecting different activities of the programme but occurring at the same time frame. If you are the contractor for the project, what are the options available for you to proceed with the claim for the extension of time and/or loss and expense applicable? [20 marks] Answer:

Delays can be excusable delays which may be either due to fault by the employer or his agents, such as late access or delay in issuing drawings or delays due to a neutral event such as excessively adverse weather or force majeure. Inexcusable delays are those which are due to fault on the part of the contractor or his agents. Arguments as to a contractor 's entitlements where two competing causes of delay occur which affect the completion date have never been easy to resolve. A legal expert on Building Contracts has offered assistance by suggesting a number of approaches.
1. Devlin approach Yes, EOT to be granted. `If a breach of contract is one of two

causes of a loss, both causes co-operating and both of approximately equal efficacy, the breach is sufficient to carry judgment for the loss.
2. Dominant approach Dominant + common sense approach. If there are two

causes, one the contractual responsibility of the defendant and the other the contractual responsibility of the plaintiff, the plaintiff succeeds if he establishes that the cause for which the defendant is responsible is the effective, dominant cause. Which cause is dominant is a question of fact, which is not solved by the mere point of order in time, but is to be decided by applying common sense standards.
3. Burden of proof approach Entitle if contractor can substantiate it. If part of the

damages is shown to be due to a breach of contract by the plaintiff, the claimant must show how much of the damage is caused otherwise than by his breach of contract, failing which he can recover nominal damages only.
4. First pass the post which occurs first is liable. This adopts the logic that where

delays are running in parallel the cause of delay which occurs first in terms of time will be used for adjustment of the contract period. Other causes of delay will be ignored unless they affect the completion date and continue on after the first cause has ceased to have any delaying affect. In this case only the latter part of
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that second cause of delay will be relevant to the calculation of an extension of time.
5. A but for test pro-contractor. The argument often runs that but for the

architect's instruction the delay would not have occurred.

6. USA approach The courts in the USA have also addressed this problem and

applied the legal maxim that a party cannot benefit from its own errors. An employer who deducts liquidated damages during an overrun period when the delay is being caused by both late issue of information and correcting defective work running concurrently could fall into this category. The USA courts have taken the line that where this type of situation arises the employer will not be entitled to deduct liquidated damages and for the same reason the contractor will not be entitled to payment of additional cost. There is no hard and fast rule concerning which delay takes precedence where a number of delays affect the completion date. Each case has to be judged on its own merits. Under PAM 2006, there is no specified method stated for such situation and any of the above support can be used subject to the architects concurrence.