Standard Forms of Contract – The Malaysian Position

(by Professor Datuk Sundra Rajoo © September 2014*)

A paper presented at the International Bar Association (IBA) Annual Conference 2014
in Tokyo on the session entitled “East meets West – a comparative approach to EPC
project delivery”, organised by the International Construction Projects Committee on
20th October 2014.
*The author would like to express his sincere gratitude to Mr Lam Wai Loon and Ir
Harbans Singh KS for their respective contributions towards this paper.
Introduction
i. A successful standard form of contract would lend itself to regulate the day-to-
day relationship on a construction site and provide a clear and definitive understanding
to the parties, professionals and site personnel of their roles and responsibilities. Users
and practitioners must be familiar with the particular standard form of conditions of
contract being used. It would therefore be useful in expressing the obligations of the
parties and setting out with reasonable clarity the scope of the project. It is based on
the perceived good sense of providing for the problems which experience has taught
in the course of construction contracts. Precision in the drafting of a contract is critical
to the avoidance of disputes.

ii. In Malaysia, standard forms of contract which are predominantly formulated

and published by authoritative bodies of the industry, as well as recognised by the
contracting parties, are among the most popular choice of standard form of contracts
being used among industry leaders.

iii. This paper discusses the Malaysian position relating to the aforesaid topic in
four sections:

• The first section introduces the various types of standard forms of contract
which are commonly used in Malaysia in both the private and the public sectors,
and according to the kind of construction works involved.

• The second section sets out the author’s view on the popularity, or otherwise,
of the use of foreign standard forms of contract, such as FIDIC, by the
Malaysian industry players, and the reasons for the same.

• In the third section, the author highlights the growing trend of the usage of
bespoke contract, describes the parties preferring the use of such contracts,
and the reasons for this growing trend.

• In the fourth and last section, the author highlights and discusses various issues
peculiar to Malaysia, and the recent development relevant to the contracting
practice in Malaysia.

1. Types of Standard Forms of Contract Commonly Used in Malaysia

1.1 Upon settlement by the parties on their choice of contractual arrangement
and contract procurement method, the next step involves the determination of issues
pertaining to the terms of the preferred legal framework that is intended to form the
basis of the agreement between the parties. This is usually achieved through the
employment of Forms of Contract which may be any of the types listed below:
 • Standard Forms of Contract;
• Modified Standard Forms of Contract; and
• ad hoc or bespoke Forms of Contract.

In Malaysia, whilst standard forms still form the bulk of all

engineering/construction contracts let out,[1] there is a growing preference by the
larger employers to utilize modified or ad hoc forms. The latter also seem to prevail in
the sub-contracting and material supply fields, perhaps due to the unavailability of any
Standard Forms covering these categories of contracts on the local scene.
1.2 Categories of Standard Forms of Contract utilized in Malaysia
1.2.1 For a relatively small country, Malaysia boasts of quite a number of Standard
Forms of Contract in the engineering/construction field. This may or may not augur
well for the industry as a whole since these Standard Forms are being supplemented
by an increasing number of modified or ‘bespoke’ forms. This may also reflect on the
extent of fragmentation of the industry. Nevertheless, for the purposes of this paper, it
may be prudent to review the fundamental forms under the following categories[2]:

• government/public sector contracts;

• private sector contracts; and
• contracts of an international nature.

1.2.2 Whilst there are other so called standard forms involving particular sectors of
the industry, e.g. petrochemical, power generation, highways, etc. or being generated
by specific employers, i.e. Petronas, Tenaga Nasional Berhad (TNB), MAB, etc., the
general scope that is about to be discussed in this paper does not permit for these to
be addressed in detail.
1.3 Government/Public Sector Contracts
1.3.1 Historically, the initial set of government Standard Forms were drafted by
various government agencies for works in the public sector. In the local context, this
is evidenced by the genesis of the Public Works Department (PWD)[3] / Jabatan Kerja
Raya (JKR)[4] Standard Forms; these being modelled on the 1931: RIBA[5] Standard
Form of Contract.[6] Over the years the above Standard Forms were modified
progressively to suit local conditions and to keep up with the current political and
industry developments; the latest revisions coming in 2010 (and issued in June 2011).
1.3.2 As the bulk of all engineering/construction work let out until the mid-nineteen
eighties were through governmental agencies, the said Standard Forms enjoyed
widespread popularity. However, with the advent of privatisation and a consequential
reduction of projects undertaken directly by governmental agencies, be these Federal,
State or Statutory, the usage of such forms has shown a marked decrease with further
erosion in utility expected to continue in the coming decades. Nevertheless, these
Standard Forms do remain of importance to the industry and the practitioners in small
to medium projects involving primarily the state and/or quasi-governmental project.

1.3.3 In more recent times, the Construction Industry Development Board

(CIDB)[7] has drafted and published a standard form of its own for building works
(undertaken under Traditional General contracting) under the style of the ‘CIDB
Standard Form of Contract For Building Works: 2000 Edition’. A standard form for the
nominated sub-contract[8] has also been published. Whether there are still more
Standard Forms to be issued by the CIDB is still not clear[9]. Although it appears that
CIDB’s intention is to make the use of their forms commonplace, the question as to
whether these CIDB Standard Forms will ultimately replace the existing JKR Standard
Forms for the moment at least begets no precise answer.
1.3.4 JKR Standard Forms for Traditional General Contracts
Currently, JKR has a couple of Standard Forms of Contract for both engineering and
building works undertaken on the basis of traditional general contracting. These are:

• JKR Form 203A (Rev 1/2010): Conditions of Contract to be used where bills of
quantities form part of the contract;

• JKR Form 203 (Rev 1/2010): Conditions of Contract to be used for contract
based on drawings and specifications;

• JKR Form 203N (Rev 1/2010): form of contract to be used for nominated
subcontractors where the main contract is based upon Form JKR 203 or 203A

• JKR Form 203P (Rev 1/2010): form of contract to be used for nominated
suppliers where the main contract is based upon Form 203 or 203A

The above-mentioned Standard Forms are time-tested and as adverted to

hereinbefore, have been utilised quite successfully for a wide range of building,
infrastructure and engineering projects of varying sizes and complexities.

1.3.5 JKR Standard Form for Turnkey Design & Build Contracts
Owing to the popularity, as of recent, of works being let out on the Design &
Buildmethod of contract procurement, JKR has developed and published a set of
standard Conditions of Contract for such works under the title of ‘PWD Form DB (Rev
1/2010)’. This form represents at the moment the only local standard form for such
contracts. However, there is no similar form for turnkey contracts.
1.3.6 JKR Standard Form for Other Contracts
To date JKR has no Standard Forms for the other types of contracts previously
discussed, e.g. Turnkey, domestic sub-contracts, management contracts,
construction management contracts, serial contracts, continuation contracts, etc.
Judging by the current trend in privatising more projects, it is doubtful if JKR will, in the
future, generate/publish such Standard Forms.
1.3.7 CIDB Standard Forms
As discussed above, CIDB has started the ball rolling by drafting and publishing
Standard Forms of Contract with the ‘CIDB Standard Form of Contract for Building
Works (2000 Edition)’ being the first such form. This form has been joined by the
Standard Form of Contract for Nominated Sub-contractors, i.e. Form
CIDB.B(NSC)/2002. For domestic sub-contracts, CIDB has introduced the ‘Model
Terms of Construction Sub-Contract Work (Rev 2007)’ whilst a standard Form for
Design & Build Contracts remains in the pipeline and is speculated to be published in
the coming years. Unfortunately, just like JKR, CIDB has still not generated any
Standard Forms for the other types of contracts, such as, turnkey, management
contracts, etc.
1.3.8 Miscellaneous Forms
Some statutory bodies and also private sector employers utilise the JKR Standard
Forms with slight modifications and/or amendments. Examples of such usage include
projects involving the Drainage and Irrigation Department (DID/JPS), Lembaga
Pelabuhan Kelang (LPK), Urban Development Authority (UDA), to name a few.
1.4 Private Sector Contracts
Parallel to the procurement path adopted by the public sector for its works up to the
mid-eighties, the private sector inevitably developed its own Standard Forms to cater
for projects undertaken along the traditional general contracting route. The impetus
was provided by the Malaysian Institute of Architects or Pertubuhan Arkitek Malaysia
(PAM) for its primary activity, i.e building works, which saw the publication of the
PAM/ISM series of Standard Forms in 1969. Engineers did not find the PAM/ISM forms
suitable for their applications in the engineering and infrastructure fields. Early
attempts to modify the PAM/ISM and ICE, IMECHE and IEE Forms to meet the
particular local applications did not result with much success as evidenced by the lack
of enthusiasm in such usage and the litany of disputes generated. This resulted in the
Institution of Engineers Malaysia (IEM) developing their own Standard Forms in the
late-eighties and early nineties. Presently the PAM and IEM forms represent the main
Standard Forms used in the private sector; with CIDB making a recent entry.

1.4.1 PAM Forms

Rather than developing and drafting a new standard form on its own, PAM in
collaboration with the Institute of Surveyors Malaysia (ISM) in 1969 adopted the 1963:
JCT[10] Standard Form of Building Contract (Reprinted 1968)[11] with necessary
modifications as its flagship standard form. These forms to be used for private sector
building works undertaken through the traditional general contracting contract
procurement method comprised:

• PAM/ISM 69: Standard Form of Building Contract With Quantities;

• PAM/ISM 69: Standard Form of Building Contract Without Quantities; and

• PAM NSC 70: Standard Form of Contract for Nominated Sub-contractors to be

Used With PAM/ISM 69.

Though the JCT 1963 Form was revised progressively over the years to rectify its
weaknesses and shortcomings, the PAM/ISM Form remained relatively unaltered until
its complete overhaul and replacement with a new standard form in 1998, i.e the PAM
1998 Form.[12]
1.4.2 The PAM 1998 Forms
The anachronistic and archaic PAM/ISM 69 Forms were replaced with the new and
updated PAM 1998 Forms which included, inter alia, the following Standard Forms:

• The Malaysian Standard Form of Building Contract (PAM 1998 Form ‘With
Quantities’ edition);

• The Malaysian Standard Form of Building Contract (PAM 1998 Form ‘Without
Quantities’ Edition); and

• The PAM 1998 Sub-contract Form (to be used for nominated sub-contracts
where the main contract is based upon the PAM 1998 Form).

For details on the philosophy behind and the making of these forms, reference can be
made to the scholarly treatise entitled, The Malaysian Standard Form of Building
Contract [2nd Edn].[13]
1.4.3 The PAM 2006 Forms
After only five years of the publication of the PAM 1998 Form, PAM started a review
process to produce a more balanced Standard Form of Contract. The above
culminated in the drafting and publication of the latest revised forms comprising:[14]

• Agreement and Conditions of PAM Contract 2006 (With Quantities);

• Agreement and Conditions of PAM Contract 2006 (Without Quantities); and
• Agreement and Condition of the PAM Sub-Contract 2006.

It should be noted that the PAM 2006 Forms are used essentially for:

i) Private sector projects;

ii) Building works; and

iii) Contracts undertaken through Traditional General contracting (TGC)

procurement route.

Cognisance should be taken of the fact that there are currently no standard PAM
forms for the following contracts:[15]
i) Engineering/construction contracts (other than building contracts);

ii) Package deal/turnkey types of contracts;

iii) Management types of contracts, e.g. management contracting and construction
management;

iv) Domestic sub-contracts;

v) Serial contracts;

vi) Periodic/term contracts;

vii) Continuation contracts; and

viii) Other miscellaneous types of contracts.

It is submitted that save for package deal/turnkey type of contracts where there may
be some motivation to draft a standard form, it is highly unlikely to see PAM generating
any other forms for the remaining contracts. Therefore, reliance may have to be placed
on the other Standard Forms available in the market to fill this void.
1.4.4 IEM Forms
Realising the rigours and pitfalls of the JKR forms and the unsuitability of the PAM
forms for primarily engineering and infrastructure projects, practitioners in the
engineering/construction field attempted to employ various British engineering forms
such as the ICE Forms, IMECHE forms, IEE forms, JCT forms and to a lesser extent,
FIDIC forms. Modifications to these forms were undertaken on a job specific and ad
hoc basis leading to much uncertainty and disputes in the local engineering
industry.[16]
The Institution of Engineers, Malaysia (IEM) then stepped in to rectify the seemingly
confusing situation and addressed the lacuna in this area of the industry by drafting
and publishing a series of Standard Forms for engineering works procured by way of
traditional general contracting. The process commenced in 1989 with the advent of
the first form and five years later a much awaited form for Mechanical and Electrical
works made its debut.

1.4.5 To date IEM has published three main forms, viz:

• IEM.CE 1/89: IEM Conditions of Contract for Works mainly of Civil Engineering
Construction (Second Reprint September 1994). This has recently been
replaced with the IEM.CE 2011: IEM Form of Contract for Civil Engineering
Works (Second Edition, July 2011).

• IEM.CES 1/90: IEM Standard Conditions of Sub-contract for use in conjunction

with the IEM Conditions of Contract for Civil Engineering Works (First Reprint
September 1994); and

• IEM.ME 1/94: IEM Conditions of Contract for Mechanical and Electrical Works
(First Edn 1994).

Markedly absent is the IEM Standard Conditions of sub-contract for use in conjunction
with the IEM Conditions of Contract for Mechanical and Electrical Works.

1.4.6 The IEM Standard Conditions of Contract are used essentially for:

i) Private sector projects;

ii) Civil Engineering, Mechanical and Electrical Works; and

iii) Contracts procured under the Traditional General Contracting (TGC)

procurement route.

However, they do not cater for the following contracts:

i) Package deal type/ turnkey type of contracts;

ii) Management types of contracts, eg management contracting and construction
management;

iii) Domestic sub-contracts;

iv) Serial contracts;

v) Periodic/term contracts;

vi) Continuation contracts; and

vii) Other miscellaneous types of contracts.

The IEM Forms, in addition, also do not cover building contracts as there is a desire
not to duplicate the existing PAM Forms (and perhaps the new CIDB form)

1.4.7 With the emergence of CIDB as the new source of Standard Forms for the
construction industry, it is anticipated that IEM may not, in the near future, draft and
publish any new forms. However, for engineering works (as distinct from construction
works), IEM will still be looked upon as a source of the relevant Standard Forms within
the local context. Attempts have been made over the years to review and revise the
above forms. Although drafts of these forms have been generated, these have to date
not been finalised for publication except for the recently published IEM.CE 2011.

2. Usage of Foreign Standard Forms of Contract in Malaysia

2.1 Standard forms of contract of foreign origin have been, and continue to be
employed in Malaysia for various projects despite the emphasis on the use of the so
called local or ‘home grown’ forms. The reasons for such usage are many but for
conciseness these can be classified under the following principal categories:[17]

• Where the contract is essentially of an international nature funded by an

international agency such as the World Bank, Asian Development Bank or
foreign promoter or investor, e.g. a multi-national corporation;

• Where, though locally funded or promoted, the employer or contractor is of

foreign domicile and insists on the adoption of a foreign or international
standard form of contract with which he is familiar or which meets his
expectations;

• Where there is no local standard form available to cater for the particular
contract involved, e.g. a management contract or a construction management
contract; or

• Where though there is a local standard form at the disposal of the parties, it is
nevertheless not wholly suitable for the particular project or contract involved,
e.g. either its provisions are not extensive or its stipulations lacking in clarity as
to the respective obligations and/or liabilities of the parties.

In situations as adverted to above, to ensure that the legal framework to be put in place
adequately meets the commercial and legal expectations of the respective parties,
there is a compulsion to use a standard form whatever its origin so long as the
objectives of the agreement reached are ultimately met. Hence, the necessity to
explore the possibility of using international/foreign Forms of Contract which in all
probabilities will be of British origin due to our traditional association with and
dependence on British sources of engineering/construction Conditions of Contract.[18]
The following are some of the main types of international/foreign standard forms of
contracts utilized in Malaysia:

• FIDIC Standard Forms of Contract;

• JCT Standard Forms of Contract;

• ICE Standard Forms of Contract; and

 • 1MechE and IEE Standard Forms of Contract.

2.2 FIDIC Standard Forms of Contract

FIDIC[19], the International Federation of Consulting Engineers, in association with
the European International Federation of Construction (FEIC) produces a whole series
of Standard Forms of Contract for use worldwide with modifications, if necessary to
suit the legal system of the country of a particular application, i.e. the domicile of the
employer.
In the Malaysian context, FIDIC forms are used in specific instances particularly
where:

• The project is being funded by or is being under the purview of an international

agency of the likes of the World Bank, Asian Development Bank, etc;

• Where the parties find the FIDIC forms the most appropriate for their
transaction owing to factors such as familiarity, comprehensiveness, etc; and

• Where there are either no local forms available for the particular application or
if there exist such forms, these being inadequate or deficient.

2.2.1 Locally to date, the most frequently used FIDIC forms comprise:

• FIDIC Conditions of Contract for Civil Engineering Works (4th Edn.): The Red
Book;

• FIDIC Conditions of Contract for Mechanical and Electrical Works (3rd

Edn.): The Yellow Book; and

• FIDIC Conditions of Contract for Design, Build and Turnkey: The Orange Book.

The contracting practice in Malaysia also seems to be consistent in adapting the 1999
revisions made by FIDIC upon the above said forms and in utilizing the following new
forms, namely:

• FIDIC Conditions of Contract for Construction: The New Red Book – for
building and engineering works designed by the employer;

• FIDIC Conditions of Contract for Plant and Design Build: The New Yellow
Book – for electrical and mechanical plant and for building and engineering
works designed by the contractor;

• FIDIC Conditions for EPC Turnkey Contracts: The New Silver Book – for
privately or public/private financial EPC Turnkey projects – BOT Model; and

• FIDIC Short Form of Contract: The New Green Book – for minor building or
relatively uncomplicated construction works.

2.2.2 Application of FIDIC Standard Form of Contract as a choice of contract in

a Malaysian construction project
In general, the doctrine of freedom to contract continues to be applied by the Malaysian
court to all contracts before it. The courts take the view that the parties to a contract
have the right to determine the terms and conditions it wishes to contract upon so long
as such terms do not conflict with the Contracts Act 1950.

It is only in very limited circumstances that a Malaysian court would rewrite the terms
of the contract entered into by the parties freely and with consent. In respect of the
application of FIDIC standard forms of contract in Malaysia, parties to a contract would
be free to contract to the terms and conditions of the FIDIC Conditions for EPC
Turnkey Contract (“The Silver Book”), FIDIC Conditions of Contract for Construction:
(“The Red Book”) and the FIDIC Conditions of Contract for Plant and Design Build:
(“The Yellow Book”).[20]
The FIDIC Form of Contract in its present day form traces its roots to the ICE Form
used by the Federation of Civil Engineering Contractors and the Institution of Civil
Engineers in the United Kingdom after the Second World War (and the different forms
prior to the War).[21] However, despite the fact that Malaysia’s legal system and
common law is to a large extent derived from that of the United Kingdom, the FIDIC
Form appears not to have received wide-spread application for domestic contracts.
This is particularly in light of certain local standard forms which has received
widespread use.
2.2.3 Pertinent revisions were introduced in the Fourth Edition of the FIDIC
Conditions of Contract for Works of Civil Engineering Construction (“the Red Book”)
as well as in the 1999 Red Book. In 1987, a revision was made which involved the
change of name which removed the reference to the contract as an international
contract. It was perhaps feared that the title of the Red Book would imply its use be
restricted to construction contracts with an international flavour to it.[22]
2.2.4 In most ways, international building contracts may involve the application of
several laws instead of just one. When considering the choice of law applicable to a
particular contract, the Malaysian courts would refer to the following factors, in addition
to the express terms of the contract –

• the country where the contract was executed;

• the country wherein entire or substantial performance of the contract is to take
place;
• the country where one or more of the parties to the contract are domiciled;
• the country where a significant part of the works are manufactured; and/or
• the country from which the contract is financed.

2.2.5 It is common practice for the employer to determine the choice of law applicable
to the project. To the extent that the choice of law is made in good faith based on
relevant considerations, the courts do not often find reason to interfere with the
choice.[23] What remains undisturbed is the autonomy of the parties to determine the
law under which they are subject to.
2.2.6 In the Malaysian decision of Aloe Vera (M) Sdn. Bhd. v Avacare Inc.[24] the
court held that it would give effect to an exclusive jurisdiction clause contained in a
contract. However, the court went on to say that it would, in exceptional circumstances,
allow a party to sue in Malaysia notwithstanding the agreement. The reason for this
was that the court held that if not, the action would have to be commenced first in the
foreign jurisdiction, and then in Malaysia. The court was of the opinion that this would
lead to duplicity of proceedings as well as costs, not to mention generate a significant
delay in enforcing the claim thus further inhibiting the Plaintiff from ultimately obtaining
his remedy.
2.2.7 A closer look at the Malaysian Court of Appeal decision of Inter Maritime
Management Sdn. Bhd. v Kai Tai Timber Co. Ltd., Hong Kong[25] brings about further
discussion. The appeal court held that the merits of having a trial in Malaysia or in a
foreign country and the considerations that had to be weighed in deciding whether to
give effect to a forum selection clause was a matter which laid entirely within the
discretion of the trial judge. An appellate court would very rarely interfere with this
exercise of the trial judge’s discretion.
As such, the aforementioned Court of Appeal decided not to adopt the American
approach to forum selection. Thus when dealing with a forum selection clause, the test
to be satisfied before effect can be given to the clause is whether the court considers
the forum selected or some other forum elsewhere to be more convenient for the
purpose of adjudicating the dispute. In such instance, the party disputing the clause
must show reason why the clause ought not to be enforced

2.2.8 In short, it ought to be clear that a Malaysian court is not bound to give effect
to such a clause for the simple reason that the parties cannot by agreement create or
confer jurisdiction upon a court of law where the facts show that the court is or is not
already seized of jurisdiction.[26]
2.2.9 The following is a brief guide for understanding the contractual context within
which the Engineer under a FIDIC contract operates in Malaysia:

Role of Engineer (FIDIC Clause 5 – apart from the Red Book)

i) Design
The design is the first of the engineer’s tasks to be completed by the time the Employer
finalises the terms and conditions of the construction contract. The definition of design
is varied and its limits would be defined by the circumstances of the
contract.[27] Where the design is complete by the tender stage, the eventual
contractor who successfully bids for the project would enter the scene with more
complete knowledge of the circumstances of the project and what would be expected
of the contractor.
Amongst the elements that the engineer has to ensure the design of the project
encompasses are the shape and dimensions of the project bearing in mind the ultimate
objective the employer has in mind. This would include the use of skills and materials
which would further the objectives. The anticipated cost of the project is a further item
to be in the forefront of the engineer’s mind. An accurate bill of quantities, where such
is the responsibility of the engineer is a major factor that would impact on the overall
cost of the project.[28]
ii) Agent of Employer
The fact that the consultant engineer is the agent of the employer is not something
easily disputed. The engineer is rightfully considered the agent of the employer for
various reasons. First, the work carried out by the engineer is carried out for the benefit
and with the objectives of the employer in mind. Also, upon the appointment of the
contractor, certain duties devolve upon the employer. These duties require some
familiarity with the design philosophy of the works and the engineer best performs it.
The engineer’s role as supervisor in terms of quality control is another factor. As agent
of the employer, the engineer may have the authority to authorise variations or further
work to be performed. This would depend upon the contract and its terms.[29]
iii) Supervisor
The duty of achieving the quality objective under a construction contract lies with the
contractor. However, owing to the engineer’s first-hand knowledge in the construction
design and specifications, the role as supervisor of construction has evolved.
In Oldschool vs. Gleeson,[30] the judge had to determine the extent of the consulting
engineer’s duty in relation to the design and supervision of the works. The court held
that the consultant was not under the obligation to instruct the contractor as to how to
perform his duties. He has the right to offer advice but the obligation ultimately falls on
the contractor to achieve the design agreed upon. The supervisory role is therefore
supportive and ancillary to the contractor’s duty of achieving the standard prescribed
by contract.[31]
Certification of Progress and Project Completion (FIDIC Clause 14)
The contract would normally provide for the issue of certificates of progress to mark
the approach towards completion. These certificates, where the contract provides so,
allows for payments to be released to the contractor. It is a fact in most instances
where certificates of payment are not issued that the contractor would become
physically hampered in performing the contract due to cash flow problems. The
certificate records the value of the work so far performed, and it may be contractually
mandated that the issue of such certificate be a condition precedent to the release of
funds to the contractor.

The engineer performs the role of certifier when he issues extension of time, including
dates by which certain portions of work have to be completed and when he values
variations to the contract or design specifications.[32]
Adjudicator and Quasi-Arbitrator (FIDIC Clause 3.5)
Generally, the engineer is an arbitrator only when he has to determine a dispute
between the contractor and the employer. The contractor often provides for the
engineer to hear disputes that may arise from time to time. The fact that the engineer
has useful expertise and first-hand experience in the subject construction is thought
to allow an expedient means of dispute resolution. In contrast, the rationale behind the
appointment of the engineer as quasi-arbitrator has been questioned so far as the duty
of impartiality of the quasi-arbitrator is concerned.[33]The contractual relationship
between the engineer and employer is often used as reasons why the engineer might
well be biased in reaching his decision, although the duties owed by the engineer to
the employer as agent do not impinge on his duty as quasi-arbitrator.
Naturally, in order to perform his role the engineer must be free to decide without first
seeking the approval of the employer.[34] Where this is an obstacle, [35] it is fuel for
the argument that the choice of engineer as dispute revolver is not wise. A quasi-
arbitrator is required to be impartial and to use his faculties of logic and reason in
reaching a decision. In performing the role of a quasi-arbitrator/adjudicator, it can be
seen how the law might impose the above conditions on him. It might be seen also
how he would be encouraged to provide reasoned decisions, though arguably the
failure to do so would not nullify the decision or determination. A subsequent arbitrator
may however revise the decision more readily where a reasoned decision is not
provided.[36]
Upon closer examination of Clause 4.4 of the 1999 Edition of the Red Book, there is
no reason why the assigning or subcontracting of the contract would lead to problems
as seen in the English decision of Linden Gardens v. Lenesta Sludge Disposals Ltd.;
St. Martin’s Property Corporation Ltd. v. Sir Robert McAlpine & Sons Ltd.[1994] 1 A.C.
85. In Malaysia, the requirements for a legal assignment are provided in section 4(3)
of the Civil Law Act 1956. For a valid legal assignment, the assignment must be
absolute and granted by the assignor in writing with notice. The Courts in Malaysia
would also recognise and enforce an equitable assignment provided that the common
law requirements for an equitable assignment are satisfied.
2.2.10 It is submitted that going by the current trends in the industry and the swing
towards globalization, we will see quite a bit of the new Yellow and Silver Books. As
for the 2006 Blue-Green Book or “Dredger’s Contract”, except for marine works
involving dredging, there appears to be no other field where it can be employed locally.
However, the major factor militating against the adoption of these new forms is the
relative novelty of such forms. No one knows for sure their shortcomings nor their
ambit as these forms have not been applied/tested in the market. It is averred that the
time tested ‘old’ forms will still be preferred until the ‘new’ forms have established a
foot-hold in the industry.
2.2.11 The fourth section of this paper shall review the relevant Malaysian law as
construed where a foreign standard form of contract (e.g. FIDIC Forms of Contract,
ICE Forms of Contract, etc.) is used as the choice form of contract in a construction
project, or where one of the local forms of contract are used, which is also subject to
the Contracts Act 1950. In addition, the fourth section shall provide a more detailed
look at the pertinent developments within the contracting practice in Malaysia in
relation to civil engineering and building works which have no doubt affected the
application of these forms.

2.3 JCT Standard Forms of Contract

The Joint Contracts Tribunal (JCT) is an ‘affiliation of interest groups within the British
construction industry which operates as a forum for discussing and determining the
content of the clauses of the standard form of building contracts’.[37] It issues and
regularly amends the Standard Forms of Contract with supporting documentation and
Practice Notes.
2.3.1 Application
JCT Standard Forms of Contract in their original form are rarely used in Malaysia. The
only limited exceptions have been in very specific applications involving special types
of contracts, e.g. management contracts, continuation contract, etc. In most cases, the
JCT forms have been used either with necessary modifications or as a basis of a
locally generated ad hoc or ‘bespoke’ form of conditions of contract, e.g. one with
contractor’s design.[38]
2.3.2 Common Types[39]
JCT has, since its inception, generated a whole list of Standard Forms of Contract. Of
relevance to the Malaysian construction industry are only the following main types;
which at one time or another have been used in various styles:

• JCT Standard Forms of Building Contract (1980): JCT 80;

i) Private With Quantities;

ii) Private Without Quantities;

iii) Private With Approximate Quantities;

iv) Nominated Sub-contracts: NSC/1 to 4; and

v) Domestic Sub-contracts: DOM/1;

 • JCT Standard Form of Building Contract With Contractor’s Design (1981): JCT
CD 81;
• JCT Intermediate Form of Building Contract (1984): JCT IFC 84;
• JCT Standard Form of Management Contract (1998): JCT MC 98;
• JCT Standard Form of Measured Term Contract (1989);
• JCT Standard Fixed Fee Form of Prime Cost Contract (1967); and
• JCT Standard Form of Construction Management Agreement (C/CM 2002).

2.3.3 As part of its general revision and updating, JCT has recently issued a new set
of Standard Forms listed below, cognisance of which should be taken:

• JCT Standard Forms of Building Contract (1998 Edn.);

• JCT Standard Form of Building Contract With Contractor’s Design (1998 Edn.);
• JCT Intermediate Form of Building Contract (1998 Edn.);
• JCT Standard Form of Management Contract (1998 Edn.);
• JCT Standard Form of Measured Term Contrat (1998 Edn.); and
• JCT Standard Form of Prime Cost Contract (1998 Edn.).

Whether these new forms will be used by local practitioners is purely speculative at
the moment. Much depends on the ability of local bodies, e.g. CIDB to generate
suitable standard forms to cover the major applications adequately.[40]
2.4 Standard Institutional Forms
History reveals that even in Britain, before bodies such as FIDIC or JCT started
developing Standard Forms of Contract, the principal institutions, i.e. the Institution of
Civil Engineers (ICE), Institution of Mechanical Engineers (IMechE) and Institution of
Electrical Engineers (IEE) had initiated the process of drafting Standard Forms to
address their respective areas of concern, i.e. engineering works.

2.4.1 Notable is the emphasis of JCT on building works whilst FIDIC appeals more
to an international engineering/construction audience. The institutions seem more
focused to their fields of specialisation. Hence, it is inevitable that they represent the
most suitable bodies to draft and issue Standard Forms of Contract in their particular
areas of competence; hence the so called institutional forms. It is no secret that when
local bodies such as the Institution of Engineers, Malaysia develop their own Standard
Forms, they fashion these after the British institutional forms.[41]
2.4.2 Application
Well before JKR came out with its standard form for Turnkey/Design & Build
contracts, the local practitioners used to employ the ‘ICE Design and Construct
Conditions’. Since the local private sector is still without such a standard form, the
ICE’s version continues to be the basis of private design and construct contracts. In
parallel, the ICE’s ‘Standard Form of Contract for Civil Engineering Works’ is adopted
in situations where it is preferred over the corresponding IEM or FIDIC Forms.

2.4.3 As for the IMechE and IEE Standard Forms, these have been adapted for local
use by employers for certain Mechanical and Electrical works; a classic example being
Tenaga Nasional Berhad.[42] Such forms will continue to fill in the voids on the local
scene where there is a lack of motivation to address issues pertaining to Mechanical
and Electrical works in favour of the seemingly more lucrative building and civil
works.[43]
2.4.4 Common Types
The primary forms of ICE Standard Forms of Contract utilised locally are:

• ICE Conditions of Contracts for Works of Civil Engineering Construction

(6thEdn). The 7th Edn. which has been recently issued supercedes the 6th
Edn.;
• ICE Conditions of Contracts for Design and Construct [1992];
• ICE Conditions of Contract for Minor Works (2nd Edn.) [1995]; and
• ICE Conditions of Contract for Ground Investigation [1983].[44]

Of the above-mentioned forms, the first two are the most popular. The last form is
suitable only for investigations carried out under the control and supervision of an
independently employed engineer.

2.4.5 Miscellaneous Standard Forms

From time to time local practitioners have looked upon or may be compelled to look at
various other Standard Forms that may suit their particular applications, examples of
which include:

• the New Engineering Contract;

• ACA[45] Forms of Contract;
• GC[46] Forms of Contract;
• ‘New Singapore SIA’[47] Forms of Contract.

This does not mean that the parties cannot employ any other Standard Forms from
any other jurisdiction provided it is in line with their requirements and meets their legal
and commercial objective.

3. Usage of “Bespoke” or “Ad hoc” Forms of Contract in Malaysia

3.1 Whilst standard forms of contracts generated and published by the authoritative
bodies of the construction industry in Malaysia remain a popular choice for use
amongst parties, it must be noted that it is rare for the aforementioned standard forms
to be used without amendments or modifications being undertaken to suit the
principal’s particular requirements. Unless such amendments are undertaken by
competent professionals, experience has shown that they have led to serious claims
and disputes, thereby “watering down” the purpose and effectiveness of the said
standard forms.

3.1.1 In Malaysia, it is quite common to encounter the use of standard forms of

conditions, of which have been subjected to amendments or modifications to meet
local conditions and the particular requirements of the parties (principally the employer
as the principal).

3.1.2 Certain employers or specific sectors of the industry may prefer not to use any
of the above mentioned standard forms even with amendments or modifications but
prefer to have these drafted from their own point of view. These are popularly called
“bespoke” or “ad hoc” or “client-specific” or even “custom-made” forms of conditions
of contract. Among the examples of such “bespoke” conditions of contract are the
‘Putrajaya’ Form, ‘KLCC’ Form, ‘KLSSB’ Form, and ‘KLIA’ Form.
3.1.3 A more direct example of such “bespoke” forms are the so-called JKR or PWD
Standard Forms of Conditions of the Contract; the word “standard” connoting that
these are standardised for use in all public sector projects under purview of JKR
(Jabatan Kerja Raya / Public Works Department). These comprise the JKR Forms 203
(Rev 1/2010), Form 203A (Rev 1/2010), Form 203N (Rev 1/2010) and 203P (Rev
1/2010) for Main Contracts and Nominated Subcontracts undertaken along the
traditional general contracting route of procurement. A separate form, i.e. the JKR
Form DB (Rev 1/2010), is to be used for Design & Build Contracts. JKR Sarawak has
published its own Form of Contract in 2006 which is meant to apply to traditional
general contracts based on Bills of Quantities as well to those based on drawings and
specifications.

3.1.4 The FIDIC form, whilst not often used in its original form except for international
contracts, is noteworthy in that it often forms the template for other forms, some of
which have been used for some very substantial projects in Malaysia.

3.1.5 Other institutional or corporate employers, both in the public and private
sectors, have generated and are drafting their own bespoke forms of conditions of
contract either due to their particular policies, or specific requirements. This has
resulted in a myriad range of forms of conditions of contract with which practitioners
must be familiar in undertaking their works.

3.1.6 It is pertinent to note that a true standard form which is produced by a body
which is representative of the industry, e.g. CIDB, is in principle unlikely to attract the
application of the “contra proferentem” rule of construction. In the case of Union
Workshop (Construction) Co. v Ng Chew Ho Construction Co. Sdn. Bhd. [1978] 2 MLJ
22, it was held that the meaning of the sub-contract in question was perfectly clear
that there could be no resort to other documents to give another meaning to it. The
facts were that the appellant had sub-contracted to build steel frames for the
respondent in fulfilment of the respondent’s much larger contract with the contract
principle.
The dispute was related to the question whether payment for the construction was to
be by the nett weight of the structural frames only or was to be by the gross weight of
the steel used including bolts, washers and connecting plates. The terms of the sub-
contract between the parties were clear and provided for payment not only for the steel
girders or frames but also for ancillary steel used in the erection of the girders.

The High Court held that where the draftsmen had purposely left out any condition
which he could without difficulty have put in, then the contra proferentem rule applied
so that the inevitable conclusion was that the clause of the main agreement did not
form part of the agreement between the parties and that payment was to include the
weight of steel other than the girders.
3.1.7 However, the position may well be different where the parties contract on the
basis of a standard form of contract containing the parties’ own amendments or one
that is self-styled as a standard form. Referable is the case of Chester Grosvenor Hotel
Co. Ltd. v. Alfred McAlpine Management Ltd. (1995) 56 BLR 115 where J Stannard
held that a management contractor should not be held responsible for a trade
contractor’s default:
“I accept that where a party invariably contracts in the same written terms without
material variation, those terms will become its ‘standard form contract’ or ‘written
standard terms of business’. However, it does not follow that because terms are not
employed invariably, or without material variation, they cannot be standard terms.
What are alleged to be standard terms may be used so infrequently in comparison
with other terms that they cannot realistically be regarded as standard, or on any
particular occasion may be so added to or mutilated that they must be regarded as
having lost their essential identity. What is required for terms to be standard is that
they should be regarded by the party which advances them as its standard terms and
that it should habitually contract in those terms. If it contracts also in other terms, it
must be determined in any given case, and as a matter of fact, whether this has
occurred so frequently that the terms in question cannot be regarded as standard, and
if on any occasion a party has substantially modified its prepared terms, it is a question
of fact whether those terms have been so altered that they must be regarded as not
having been employed on that occasion.”
3.1.8 In a similar fashion to construction contracts as alluded to above, the conditions
of contract for the engagement of professionals such as consultants can also be of
various types. Professional bodies such as the Board of Engineers Malaysia (BEM),
Pertubuhan Arkitek Malaysia (PAM), etc. have developed