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MBG 1244-PERDANAMODEL ANSWERASSIGNMENT 1

QUESTION
Nirvana Development sends a letter of award to Krishnan Contractor to carry
out and complete the construction of two blocks of 20 storey building.
Krishnan Contractor is very excited with the news and shows you, as his
project manager, the letter and instructs you to make preparation for the
commencement of the work. As you read the letter you realise that it does not
specify the exact date for the taking possession of the site. It further stipulates
that only the section for one of the (Block A) two blocks will be given first; the
section for the other block (Block B) will be given later and no specific date is
mentioned for that event. When you visit the site, you notice that there is a
family of squatter occupying the Block A section. You further notice that there
is a little stream flowing through the site which is not shown in the contract
documents. Your estimation for the earthwork does not include the little
stream element. Its two weeks now and Krishnan Contractor has yet to receive
instruction from Nirvana Development on the date for taking possession.
Advise Krishnan Contractor relating to all of the above issues.

ANSWER
INTRODUCTION
The site on which the construction of a project is to be carried out normally
belongs to the employer. For the purpose of the contractor to perform the
construction works, the employer must give the contractor the possession of
the site. Without such giving of possession of the site, the contractor cannot
simply enter and carry out the work. If the contractor does so without the
employers permission, the contractor is in fact committing an act of trespass
and may be liable under the law of tort.
It is not advisable for the contractor to enter the site without the employers
consent. There are many legal issues that may arise out of such illegal
entrance and occupation of the site. Particularly, the employer may be liable
as the land owner for the contractors negligent acts. For example, the
contractor may, in the performance of the work, encroach into the neighbours
land. Although the employer may finally recover from the contractor any
damages he incurs in paying the neighbour, the legal complications involved is
something the employer may wish to avoid.
Once the employer has appointed the contractor, the former must thereafter
hand over the site to the latter for him to begin with the construction of the
works. All standard forms of construction contract contain express provisions
for giving possession of site by the employer to the contractor. 1 Generally the
clauses set out the conditions and procedures for the giving possession of site.
Despite the clear express provisions in the contracts, there are many issues
that may arise out of the giving possession of site clauses.
1 PWD 2010, Clause 38.0; PAM 2006, clause 21.0; CIDB 2000, clause 17; JCT
05, clause 2.0;
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From the facts of the case, it appears that Krishnan Contractor is facing many
problems relating to his contract with Nirvana Development for the
construction of the office building project. Ideally, Krishnan Contractor should
visit the site before he submits his bidding for the contract. In addition the
date for giving possession of the site should be clearly specified somewhere in
the contract documents. Furthermore, it is equally important that Krishnan
Contractor should satisfy himself that the site is free from any encumbrance
when he takes possession from the employer.

THE ISSUES
The issues that may be extracted from the facts of the case are as follows:
1) The date for possession of site is not specified in any of the contract
documents; therefore, when exactly should Nirvana Development give
Krishnan Contractor the possession of the site?
2) A portion of the site is being occupied by squatters; should Krishnan
Contractor take possession of the site in that condition, or should the
employer remove the squatters first before giving the site to Krishnan
Contractor?
3) Nirvana Development intends to give first, the section for Block A only
and the site for Block B later, can Krishnan Contractor insist on the
employer to give him the whole of the site?
4) The little stream that crosses the site is not shown anywhere in the
drawings; can Krishnan Contractor claim for extra expenses for making
the site suitable for the construction in accordance with the drawings?
and
5) Nirvana Development delays in giving possession of the site to Krishnan
Contractor for two weeks; can the contractor terminates the contract?

THE DISCUSSION
The contract for the construction of the office building between Nirvana
Development and Krishnan Contractor is a private project. Therefore, for the
purpose of discussing the issues, the clauses in PAM 2006 standard form of
contract are used as reference.
Issue One:
The date for possession of site is not specified in any of the contract
documents; therefore, when exactly should Nirvana Development give
Krishnan Contractor the possession of the site?
It is the normal practice for the contractors to specify the duration of the
contract period in the tender document when bidding for the work. It means
that, the employer knows when he selects a contractor, the duration that the
selected contractor takes to complete the whole of the construction work.
Therefore when he sends the letter of acceptance, he will be able specify the

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date for the completion of the work and the date for giving possession of site
by looking at the duration of the work.
In practice, the date for giving possession of the site is the date the contractor
commences with the construction work and the duration of the contract begins
from that date.2 However, in this case, the letter of acceptance does not
specify the date of giving possession of the site. The issue here is, what are the
legal principles for setting the date when there the letter of acceptance
specifies not date for the giving possession of site. The answer to this issued
may be found in the common law and also the practice in the construction
industry.
Under the common, the employer is under an implied duty of co-operation to
give the contractor the possession of the date within a reasonable time as to
enable the contractor to complete the work. In the case of Hounslow London
Borough Council v. Twickenham Garden Development 3, Megarry J. ruled that:
The contract necessarily requires the building owner to give to the contractor
such possession, occupation and use as necessary to enable him to perform
his work. 4 Furthermore, in the case of Freeman v. Hensler 5 the Court of
Appeal held that it is an employers implied duty (of co-operation) to give the
contractor possession of the site within reasonable time to enable him to carry
out and complete the work on the completion date. Similar principle was also
stated in the case of Penvidic Contracting Co. Ltd. v International Nickel of
Canada Ltd.6 In this case, the Canadian court held that in a new project a term
would normally be implied into a construction contract (in the absence of an
express term) that the site would be handed over within a reasonable time.
In practice, there are at least two clauses in PAM 2006 that may be referred to
resolve this issue. Firstly, there is clause 2.0 that gives power to the architect
to issue instructions to the contractor. Secondly, clause 21.4 of PAM 2006
confers upon the Architect power to postpone the whole of the work or any
parts of the work. It is suggested that the architect may issue a written
instruction7 under clause 2.0 to the contractor postponing the whole of the

2 PAM 2006, clause 21.1


3 [1971] Ch. 233
4 at p. 257
5 (1900) HBC (4th ed.) Vol. 2, p. 292 (CA)
6 [1975]53 DLR 748
7 clause 2.0
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construction work.8 However, there is a liability that the employer may incur
when using these clauses. Firstly, the contractor is entitled to be awarded with
extension of time.9 Secondly, the contractor is also entitled to claim direct loss
and expense.10
Issue Two
A portion of the site is being occupied by squatters; should Krishnan
Contractor take possession of the site in that condition, or should the employer
remove the squatters first before giving the site to Krishnan Contractor?
It is a general principle that the site should be free from encumbrances. 11 It is
the employers duty to remove and encumbrances found on the site. The
contractor should not accept the site if there are encumbrances therein. The
employers delay in removing the encumbrances will entitle the contractor to
extension of time and claim for direct loss and expense.
In the case of Rapid Building Group Ltd - v - Ealing Family Housing Association
Ltd.12 the contract between the parties related to the construction of 101
dwellings in five blocks in London under the JCT 63 Form. The defendants,
Ealing Family Housing Association, were unable to give the contractor, Rapid
Building Group, possession of the site on the date stated in the contract,
because at the north east corner of the site there were squatting a man and
his wife and his dog. They were squatting in an old Austin Cambridge car with
various packing cases behind a stockade. Following eviction proceedings Rapid
Building were given possession but late.
This case illustrates the point that the site should be free from encumbrances
before the contractor can accept it. It is the employers duty to remove them
for the purpose of giving possession of site to the contractor.
Issue Three
Nirvana Development intends to give first, the section for Block A only and the
site for Block B later, can Krishnan Contractor insist on the employer to give
him the whole of the site?

8 clause 21.4
9 clause 23.8(f)
10 clauses 24.3(b) or 24.3(c)
11 Rapid Building Group Ltd. v Ealing Family Housing Association Ltd. (1984)
29 BLR 5
12 supra
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The general principle under common law is that, unless a contrary intention is
express in the contract, the contractor should be entitled to be given the whole
of the site. In the case of Whittal Builders v. Chester Le Street D.C. 13 by giving
piecemeal possession, the employer was in breach of contract that entitled the
contractor to claim damages.
Certain construction projects are specifically planned to be completed in
stages and the occupied or take possession of, for purpose of usage or
operation, in stages as well. If such is the employers intention, this should be
made known to the contractor at the tendering stage. Standard forms of
contract contain express provision for this procedure. 14 The contract
documents should also make indications to this effect. 15 Other clauses should
also be amended so as not facilitate the procedure. 16 Sectional completion
refers to a provision in the contract that allows different completion dates for
different sections of the works. This is common on large projects that are
completed in sections, allowing the employer to take possession of the
completed parts whilst construction continues on others.
Issue Four
The little stream that crosses the site is not shown anywhere in the drawings;
can Krishnan Contractor claim for extra expenses for making the site suitable
for the construction in accordance with the drawings?
The general principle relating to risk of the site condition is that, it is the
contractors risk. According to the Halburys Laws of England, 17
It is no excuse for non-performance of a contract to build a house or to
construct works on a particular site that the soil thereof has either a
latent or patent defect, rendering the building or construction impossible.
It is the duty of the contractor before tendering to ascertain that it is
practicable to execute the work on the site... 18

13 (1987) 40 BLR 82
14 clause 21 and the Appendix
15 Tender form
16 Appendix: dates of completion of the sections, the amount of the LAD for
each section, etc.
17 Second Edition Volume 3
18 Ibid, paragraph 386
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In the case of Appleby v Myers,19 is was held that under the general law, there
is no warranty by the employer that the site is fit for the work or that the
contractor will be able to construct the building according to the employers
design on the site. This position was further confirmed in the case of Thorn v.
London Corporation. 20 In this latter case, the court restated the common law
position that, without an express provision to the contrary, ground condition
risk rests with the contractor like any other physical condition or buildability
issue.
In order to manage this risk, PWD 2010 standard form requires the contractor
to do the site investigation before tendering for the work. This requirement is
in fact a condition precedent for all bidding contractors. 21 PAM 2006 does not
make this as a condition precedent for tendering. However, as a principle of
good practice, Krishnan Contractor should have made a site visit before
submitted his tender.
Issue Five
Nirvana Development delays in giving possession of the site to Krishnan
Contractor for two weeks; can the contractor terminates the contract?
Whether or not an employers delay in giving possession of site to a contractor
amounts to a breach of condition that entitles the latter to terminate the
contract is question of facts. The question is whether or not there is a clear
intention on the part of the employer not to proceed with the contract. If there
is such clear intention, then an employers failure or refusal to give the site is a
breach of condition that entitles the contractor to terminate the contractor.
Under the common law, an employers outright refusal to the contractor
possession of the site is a repudiatory breach. 22 Similarly, in the case of Carr v
J.A. Berriman,23 the delay in giving possession of the site coupled with unlawful
omission of some work amounted to adequate intention of repudiatory breach.
In the case of Tan Hock Chan v Kho teck Seng,24 the Federal Court held that the
employers failure to give effective possession of the lot for the sixth house,
the employer had broken his covenant and the contractor could rescind the
19 (1867) LR 2 CP 651
20 (1876) 1 App. Cas. 120
21 Instruction to tenderers.
22 Roberts v. Bury Commissioners (1870) LR 4 CP 755
23 (1953) 89 CLR 327
24 [1980] 1 MLJ 308
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contract. While delay in giving possession of site without sufficient prove of
intention not to proceed with the contract is only a breach of warranty that
entitles the contractor claim damages.25
In addition, it is also equally important to consider the relevant term in PAM
2006 relating to the employers duty in giving possession of site to the
contractor. The standard form contains adequate provision for the employer to
utilise in the event of disability to give the contractor the possession of the
site.

25 Rapid Building Group v Ealing Family House Association (1984) 29 BLR 5


(CA) (supra)
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CONCLUSION
Relating to Issue One, if Krishnan Contractor intents to carry out the work, he is
advised to notify the employer to fix a date for giving possession of the site.
He may inform Nirvana Development that they may instruct their architect to
issue an instruction (under clause 2.0) to Krishnan Contractor postponing the
whole of the work26 and at same time fix the date of possession of the site. 27 If
Krishnan Contractor is no more interested to continue with the contract, he
may notify the employer about the breach and his intention to no longer be
bound by the contract.
Relating to Issue Two, if Krishnan Contractor intents to continue with the
contract, he should inform the employer to remove the squatters as condition
precdent for him to accpet the site.
Relating to Issue Three, as to Nirvana Developments intention to give
possession of the site in phases, since this is not specified in the tender
documents, such an approach can only be done with the contractors consent.
Krishnan Contractor is not contractually bound by the employers request. He
may like the negotiate and ask for comepensation.
Relating to Issue Four, risk as to site condition rests with the contractor.
Krishnan should not solely rely on the contract documents for the purpose of
fixing the contract price during the tendering stage. He should have done the
site investigation. He is liable for the risk of site condition.
Relating to Issue Five, there is inadequate evidence to show that Nirvana
Development has committed a repudiatory breach. Krishnan Contractor may
have difficulty in convincing the judge that Norvana Development has
committed repudiatory breach. However, Krishnan Contractor shoud notify the
employers this breach and allow time for them make good the breach. If the
breach persists, then only may the contractor give notice of termination.

26 clause 21.4
27 clause 2.0
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