Building and Construction Law
| Citation | (2016) 17 SAL Ann Rev 155 |
| Author | CHOW Kok Fong LLB (Hons), BSc (Bldg) (Hons), MBA; FRICS; FCIArb; FCIS; FSIArb; FSProjM; Chartered Arbitrator; Chartered Quantity Surveyor; Senior Adjudicator. Christopher CHUAH LLB (Hons), DipSurv; FCIArb; FSIArb; FCIOB; Senior Adjudicator; Advocate and Solicitor, Supreme Court of Singapore. Mohan PILLAY LLB (Hons), LLM; FCIArb; FSIArb; Chartered Arbitrator; Senior Adjudicator; Advocate and Solicitor, Supreme Court of Singapore. |
| Published date | 01 December 2016 |
| Date | 01 December 2016 |
| Publication year | 2016 |
7.1 Construction contracts are voluminous, a large part of which may consist of standard documents or provisions incorporated from other contracts and documents. The documentation process is often a hurried undertaking and the standard provisions and incorporated terms may not always be consistent with each other. More crucially, these terms may conflict with documents which are drafted specifically for the particular contractual situation. In 2016, the issue of how to resolve these conflicts surfaced before the Court of Appeal on two occasions.
7.2 In Ser Kim Koi v GTMS Construction Pte Ltd1 (“Ser Kim Koi”), it took the form of a provision in Item 72 of the Preliminaries, which stipulated that a completion certificate would not be issued until all parts of the works were, in the Architect's opinion, ready for occupation and for use. The Court of Appeal, in the course of its judgment, held that this term should take precedence over the printed conditions:2
Item 72 being a specially drafted term should, therefore, take precedence over the printed conditions. This can be compared to some other standard form contracts which contain a provision stating that … nothing contained in the contract bills or bills of quantities shall override, modify, or affect in any way whatsoever the application or interpretation of the conditions …
7.3 In Grouteam Pte Ltd v UES Holdings Pte Ltd3 (“Grouteam”), the dispute which related to whether a subcontractor had served its payment claim on time, turned on provisions found in four documents:
(a) the Sub-Contract Agreement;
(b) the Summary of Contract Negotiations (“SOCN”) annexed to the Sub-Contract Agreement;
(c) the General Conditions and Preliminaries (“Preliminaries”); and
(d) the Purchase Order dated on the same day as the Sub-Contract.
7.4 The main contractor's case was that item E of the Preliminaries (viz, Preliminaries E) governed the timeline for the service of the payment claim. This requires the subcontractor to serve its payment claim within seven days from the end of each month. The subcontractor maintained that the applicable term was cl E of the SOCN (“SOCN-E”) and this provided that payment claims were to be served no later than the 20th day of each month. The Court of Appeal held that SOCN-E governed the submission of the payment claim. In arriving at this decision, the court considered, inter alia, that:4
(a) The SOCN was signed two days before the subcontract was executed and it seemed implausible, therefore, that the parties would have intended to supersede the SOCN.
(b) The Purchase Order had reproduced the payment schedule found in the SOCN.
(c) The SOCN was drafted specifically to govern the relationship between the parties to the subcontract, whereas the Preliminaries were taken from the main contractor's tender documents for the Main Contract to which the subcontractor was not a party.
Arising from the court's finding that SOCN-E governed the service of the payment claim, it followed that the payment claim, the adjudication notice, and the adjudication application were all served in good time.5
7.5 In a “design-and-build” contract, the contractor is responsible for carrying out both the design and construction of a project. It is distinct from the traditional “build-only” model where the contractor's obligation is to construct a project on the basis of design provided by design consultants employed by the owner or employer.
7.6 The principal features of design-and-build contracts were examined in Goh Eng Lee Andy v Yeo Jin Kow.6 Kannan Ramesh JC accepted that a design-and-build contract necessarily operates as a lump-sum contract in that the contractor “has to do all that is necessary to achieve the contractual scope of works without an adjustment in price”.7 Consequently, a design-and-build contractor has “no recourse to the owner for additional payments unless it can be shown that the works undertaken were substantially different from the original design or that the additional expense came about as a result of the owner's breach”.8
7.7 Ultimately, whether a construction contract is a “design-and-build” contract is a matter of interpretation. In this case, the court held that the incorporation of the term “design and build” was prima facie evidence that the parties intended to and did enter into a “design-and-build” contract9 and this intention was borne out by the conduct of the parties. The learned judicial commissioner pointed, inter alia, to the fact that the owner had refrained from accepting the final quotation until he was satisfied with the architectural and construction drawings10 and the contractor's entering into arrangements with the design professionals in preparing the design and paying the fees for these services.11 Arising from this finding, the court dismissed the contractor's counterclaims for “variation works”, as these relate to items which were not extraneous to the scope of the contract.12
7.8 While most construction contracts provide for the contractor to proceed with the works with due diligence, in the absence of such an express term, the issue arises as to whether such a term may be implied.
7.9 The subcontractor repeatedly failed to meet rescheduled deadlines and, when the elements were delivered, they were out of sequence and behind schedule. Certain terms governing due diligence and delivery schedule were set out in an LOA but this letter was never accepted by the subcontractor. The court, therefore, held that the subcontractor's obligation was to follow the contractor's progress on-site and to produce and deliver the slabs in accordance with the delivery schedule as envisaged by the LOI.
7.10 In the circumstances, to justify its termination of the subcontract, it was necessary for the contractor to argue that the LOI contained two implied terms. The first of these is that time is of the essence. The second is that the subcontractor is expected to proceed with its works with due diligence. The court addressed the issue of implied terms on the basis of the three-step process in Sembcorp Marine Ltd v PPL Holdings Pte Ltd.14
7.11 The first step identifies the gaps in the parties' contract and determines whether those gaps had arisen because the parties failed to contemplate them (in which case, the inquiry proceeds to the second step) or whether those gaps arose for some other reason (in which case, the inquiry ends).15 The learned judge found that “despite accurate and timely production and delivery being the commercial purpose of the parties' contract”, the LOI was silent on this point and concluded that the gaps arose “because the parties failed to contemplate them”.16
7.12 The second step considers whether “it is necessary in the business or commercial sense to imply [each] term in order to give the
7.13 The third step is to determine the actual content of the implied terms. The term requires the subcontractor to proceed with its works with due diligence and expedition and is qualified only by a requirement of reasonableness. The learned judge stated:21
… One effect of this implied term is to require CAA to meet the delivery dates which Newcon would make known to CAA from time to time. Another … is to oblige CAA to arrange its work processes between the delivery dates so that it makes reasonable progress on production and is therefore able to deliver slabs on time, in sequence and in full on the appointed dates.
I accept also that it is necessary that time be of the essence, but only with respect to this implied term of due diligence and expedition. The effect of time being of the essence in relation to this term is to give Newcon the right to terminate the contract if CAA were guilty of persistent breach of its obligation of due diligence and expedition which evinces either an inability to perform its contractual obligations or an intention no longer to be bound by the contract. This second implied term is deliberately drawn in narrow terms. It does not entitle Newcon to terminate the contract for any breach of any time provision under the contract. It is confined to a breach of the implied term as to due diligence and expedition. Even then, it does not give Newcon the right to terminate the contract for any breach of the implied term as to due diligence and expedition. It gives Newcon that right only if the breach, taken together with other breaches, goes to the root of the parties' bargain.
7.14 On this analysis, the court found that the subcontractor was in breach of the obligation to proceed with due diligence and thereby committed a repudiatory breach of these implied terms.
To continue reading
Request your trial