Conditions Precedent in Construction Contracts

May 2023

By Janet Chai Pei Ying

In most construction contracts, in particular the standard forms contract such as the PAM Contract 2018, AIAC Standard Form of Building Contract 2019, PWD Form 203A (Rev. 2007) and JKR Sarawak General Conditions of Contract, there would usually be a requirement to serve a written notice within a stipulated time from the occurrence of the event or circumstances that form the basis for applications for extension of time (“EOT”), claims for loss and expense and in some cases claim for additional expense caused by variation. 

Failure of a contractor to comply with such condition precedent will inevitably render the contractor’s EOT application or claim for loss and expense fatal. In the case of Sunissa Sdn Bhd v Kerajaan Malaysia & Anor [2020] MLJU 283, the High Court had to deal with the contractor’s claim for loss and expense arising out of an extension of time granted for the completion of the works through no fault of the contractor, and where the Government’s defence is that the contractor had failed to provide a notice in writing of its intention to claim for loss and expense within the stipulated time from the occurrence of the event as found in Clause 44.1 of the PWD Form 203/203A (Rev. 2007). Clause 44.1 reads:-

There was no dispute that the delay arose through no fault of the contractor and it was for this very reason that several EOTs were granted, and the contractor successfully completed the works within the extended duration. Upon the issuance of the Certificate of Practical Completion (“CPC”), the contractor submitted a full particular of all claims for direct loss and expense 90 days after the issuance of CPC.

The High Court disallowed the contractor’s claims for loss and expense, except for that part of the claim which the High Court found was within “reasonable contemplation”. Whilst the Court of Appeal in Jabatan Kerja Raya Malaysia & Anor v Sunissa Sdn Bhd [2022] 5 MLJ 705 overturned the High Court’s attempt to make a dichotomy between “beyond” and “within” reasonable contemplation in the said Clause 44.1, the point to note here is the fatal effect of a failure to provide a written notice within the stipulated time at the time the event of delay or the basis giving rise to loss and expense arose, notwithstanding the fact that there was no dispute that the grounds giving rise to the extension of time was through no fault of the contractor.

Entitlement to an extension of time does not lead to an entitlement to compensation. Contractor administrators should give be familiar with the rights and obligations in construction contracts to avoid suffering similar fate to the contractor in the Sunissa case and many other cases.

In another case of Daya Cmt Sdn Bhd v Yuk Tung Construction Sdn Bhd [2018] MLJU 871, a case involving termination of the construction contract due to perceived delay or inability of the contractor to complete the works within time, the contractor filed an action for wrongful termination and various other claims contending that the employer had committed acts of prevention setting time of completion of the works at large.

It was the contractor’s case that there were other events of delay contributing to the delay in the progress of works warranting an extension of time. The contractor did not apply for any extension of time for these events at the relevant time and only raised such issues contending the ‘prevention principle’ when the claim was filed in Court. The contractor also argued that given that these events were due to the fault of the employer, the Superintending Officer (“SO”) of the employer was duty bound to form an opinion as to whether the completion of the works had been delayed even in the absence of the notice of delay by the contractor. 

The Court of Appeal in Yuk Tung Construction Sdn Bhd v Daya Cmt Sdn Bhd and another appeal [2020] MLJU 1084 held that whilst the SO could in a plain and obvious case certify extension of time on his own, this could not be a kind of duty analogous to the duty of care in tort law. Where the SO does not so act, the obligation remains on the contractor to apply for extension of time by giving timeous written notice, failing which the contractor could not assert prevention or seek for extension of time later.

As harsh as the decision of the cases may be, such is the fate if one does not adhere to the condition precedent in the contract. The rationale to the notice requirement is simple – a timeous notice given at the relevant time will allow contemporaneous matters to be investigated more easily rather than later when all the evidence is probably buried within the walls of the buildings already erected.

In view of the above, it is important for contractors, whether main contractor or sub-contractor, to bear in mind the following in their administration of construction contracts:-

• Be familiar with the terms and obligation of your construction contract
• Ensure your record keeping is in order
• Do not wait and see.

This material is for general information only and is not intended to provide legal advice. If you have any queries on matters related to the above, please feel free to contact us at insights@chooi.com.my.

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