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SINGAPORE - YOUR PARTNER FOR LEGAL SOLUTIONS IN ASIA
SECTION 1 INTRODUCTION
 
26.1.1     Building and construction law in Singapore shares common features with its equivalent in other common law jurisdiction. It is built largely on the contracts between the participants in the building and construction industry. Contracts governing projects of any significance are usually in standard form. While the terms and conditions of the standard form contracts in use in Singapore may not be identical to those used elsewhere, they have a basic structure that is similar to those used internationally.
 
26.1.2     Aside from contract that regulates the private arrangements between the parties, there is the law of torts that also have a significant impact on the rights and liabilities of the parties in the builing and construction industry. In addition, there are statutes and regulations, giving expression to various considerations of public policy, that govern the conduct of construction industry players. Indeed, many of the Commonwealth jurisdictions, including Singapore have introduced legislation to govern both the substantive rights of the parties in terms of payment as well as a statutory dispute resolution process to support the right to timely payment.

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SECTION 2 BUILDING AND CONSTRUCTION CONTRACTS IN SINGAPORE
 
Standard Form Contracts
 
26.2.1     At one time, building and construction contracts tended to conform to a certain pattern shaped by procurement policies and systems that survived Singapore´s colonial past. A number of indigenous standard form contracts have since emerged in response to local arrangements and practices.
 
26.2.2     In the detail, significant differences can be found in the local standard forms, from those used elsewhere. However, in terms of organisational structure, the contractual arrangements between the parties fall into a number of categories that should be readily recognisable.
 
26.2.3     First of all, there is the "traditional" system of contracting. In this approach, the owner or developer of an intended project first engages someone to administer the contract. For a building project, he is usually the architect. The other professionals e.g. the quantity surveyor, the structural engineer, and the mechanical and electrical engineer are then appointed. Contracts are entered into between the employer and these consultants. A standard form for the contract with the architect is the Singapore Institute of Architects (SIA) Conditions of Appointment which also contains the Scale of Professional Charges. A similar form issued by the Association of Consulting Engineers, Singapore (ACES) is also available for the appointment of engineers.
 
26.2.4     The architect (or engineer) would usually prepare a design. The architect usually by himself or with the other consultants prepares the drawings, the specifications, the bills of quantities and other documentation that would constitute the contract documents. These must be in sufficient detail to enable contractors to submit competitive tenders for the construction of the works. The successful tenderer would be `awarded´ the contract. In the traditional structure, as the design function is usually left in the hands of the consultants, there will not be any competitive design submitted by the contractors.
 
 
26.2.6     In recent years, along with trends elsewhere, there has been a movement away from the "traditional system." For instance, "design and build" contracts are getting popular. Under this arrangement, the contractor agrees to accept all responsibility for the structure he constructs including obligations relating to design on top of his usual obligations for the work done.
 
 
26.2.8     A variant of this is what is now commonly described as Engineering Procurement & Construction (EPC) contracts. Such contracts are often used in construction of petrochemical and pharmaceutical facilities and would involve the main contractor in the design of the facilities as well as the procurement of the equipment and machinery to be used.
 
Contract Documents
 
 
26.2.10     The standard form contract would usually contain provisions relating to certification of payment, variations and defective work.

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SECTION 3 ARCHITECTS, ENGINEERS AND SURVEYORS
 
 
 
 
 
 
 
 
 
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SECTION 4 PERFORMANCE BONDS
 
 
Nature and Type
 
26.4.2     There is some confusion as to the meaning to be attached to what is commonly referred to as the performance bond. First, in terms of its label, it has been variously described as a performance bond, performance guarantee, first demand bond or its American sibling, the stand-by letter of credit. Second, in terms of application or usage, it has been used to secure various stages of the construction process and the document concerned is often described with reference to that particular process; examples of these would be the tender or bid bond, the advance payment bond, the retention money bond, the maintenance bond and so forth. Third, in terms of conditions attached to the call, bonds have also been distinguished by whether they payable on demand (described as "demand bonds") or only upon proof of default (described as "default bonds").
 
26.4.3     Aside from the payment of money, there is another type of performance bond that requires the surety to perform the works left undone or outstanding by the contractor. Such a bond is usually given by the parent company of the contractor. This kind of bond is not popular with local employers who often prefer cash payment by the surety. If they are used at all, they are usually accepted by employers who are multinationals operating in Singapore who have engaged contractors from their home country under arrangements and conditions similar to those found in the home country.
 
Payment Under "Demand" Bonds
 
 
26.4.5     The sole consideration in the application for an injunction is whether there is fraud or unconscionability. The party seeking the injunction would be required to establish a clear case of fraud or unconscionability in interlocutory proceedings. It is not enough to raise "mere allegations." An interlocutory injunction will not therefore be granted against a bank which has given a bond or guarantee to restrain its payment, since the bank must honour it according to its terms, unless it has clear notice or evidence or fraud (Edward Owen Engineering Ltd v Barclays Bank International Ltd [1978] 1 All E.R. 976). As regards the standard of proof of fraud, the courts have accepted, for cases involving letters of credit, what is known as "the Ackner standard" in assessing allegations of fraud in applications for interlocutory injunctions (propounded by Ackner L.J. in United Trading Corporation v Allied Arab Bank [1985] 2 Lloyd's Rep. 554; applied in Singapore in Korea Industry Co Ltd v Andoll Ltd [1989] 3 MLJ 449).
 
 

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SECTION 5 SUBCONTRACTS
 
26.5.1     In Singapore, as is the case elsewhere, it is usual for the contractor to engage sub-contractors to whom he will owe and be entitled to contractual obligations according to the terms of the sub-contract. For larger projects, sub-contracts are also usually in standard forms that are mostly derivatives of the main contract forms. There would be appropriate cross-references between the main and sub-contract forms and some provisions of the main contract may even be replicated in the sub-contract. The sub-contractor will not normally owe any direct contractual obligations to the employer or consultants.
 
26.5.2     The type of contractual arrangements that can be arrived at in sub-contracts can vary considerably. They can involve the supply of labour only, a supply of goods and materials only, a supply and build arrangement, or even a complete `design and build´ arrangement. Most of the principles of law applicable to a main contract would also be applicable to a sub-contract.
 
Employer´s Selection of Sub-contractors
 
26.5.3     In the traditional system, it is usual to provide in the main contract, terms that allow the employer to select for the main contractor, certain specialist contractors whose participation in the project he desires. The specialist contractor is then usually made to enter into a sub-contract with the main contractor. This process is usually described as a `nomination´.
 
26.5.4     Two standard form nominated sub-contracts are in wide usage in Singapore. They are (1) the Standard Conditions of Nominated Sub-Contract for use in conjunction with Public Sector Conditions of Contract for Construction Work 2005 (now in its fourth edition), and (2) the SIA Conditions of Sub-Contract for use in conjunction with the main contract (now in its third edition).
 
Incorporation of Main Contract Terms
 
 
 
"Pay When Paid" Provisions
 
 
 
Direct Claims
 
 
26.5.10     With the enactment of the Contracts (Rights of Third Parties) Act 2001 that came into operation on 1 January 2002, it may be possible for a nominated sub-contractor to assert rights as a third party against the employer even in the absence of a direct contract with the employer. Section 2(3) of the Act provides that the third party should be expressly identified in the contract by name, as a member of a class, or as answering to a particular description. It is possible that a wide category of persons can qualify as third parties under the Act.
 
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SECTION 6 TIME AND COMPLETION
 
26.6.1     This section will look at the issue of completion and extension of time in construction projects within the contractual framework of the SIA form as most of the case law has arisen in that context.
 
Completion Criteria
 
26.6.2     Where standard form contracts are being used, the issue of completion is often reduced to construing what is meant by `completion´ in the standard form in question. A number of standard form contracts, including pre-1980 versions of the SIA Contract defined completion in terms of `practical completion´. Usage had also been made of the term `substantial completion´ in some other standard form contracts. For the SIA Contract, the term completion is used without the description `practical´ or `substantial´.
 
Time for Completion
 
 
26.6.4     The SIA contract, as with most building contracts, contains extensions of time and liquidated damages clauses (See SIA Clauses 23 and 24 respectively). The liquidated damages clause gives the employer a remedy in pre-agreed damages if the contractor fails to complete on time.
 
Extension of Time Clauses
 
26.6.5     The contractor´s progress and completion may be affected by acts of the employer or his agents. These employer related events can be found in SIA 7th Edition, Clauses 23(1)(f), (g), (h), (i), (j), (k), (n) (o) and (p). Clauses 23(1)(a), (b), (c), (d), (e), (l), (m) deal with neutral events, mainly arising from circumstances not reasonably foreseeable.
 
26.6.6     The contract date for completion may be affected by neutral events and employer related events to such an extent that it is rendered inapplicable. Without an applicable date for completion, time will be set `at large´ and the obligation to complete becomes assessable by normal common law principles of reasonableness instead of the agreed contractual framework. With an extension of time, on the other hand, a new date may be set for completion and the right to liquidated damages preserved.
 
26.6.7     The employer could arguably lose his right to compensation where the express provision for liquidated damages is exhaustive of his rights and "nil" is inserted for the rate of liquidated and ascertained damages, Temloc Ltd v. Errill Properties Ltd (1987) 39 BLR 34. However, in the local decision of Shia Kian Eng (trading as Forest Contractors v Nakano Singapore (Pte) Ltd (Suit 600245/2000,HC, unreported) the parties agreed that there should be no liquidated damages. Judith Prakash J found it `difficult to accept the proposition that simply because it was agreed that there should be no liquidated damages clause, no damages at all could be claimed´ if the plaintiff´s delay had caused loss to the defendants.
 
`Contra Proferentem´
 
 
26.6.9     However, it should be noted that Article 7 SIA 7th Edition excludes the application of the contra proferentem rule of construction.
 
Requirements of Notice of Cause of Delay
 
26.6.10     Clause 23(2) of SIA 7th Edition states that it is a condition precedent to the contractor´s entitlement to an extension of time that he gives notice in writing within 28 days of the event entitling him to an extension of time. However, Clause 23(2) then contains the proviso "unless the architect has already informed the contractor of his willingness to grant the extension of time". There are two aspects to Clause 23(2): the contractor´s notice requirements and the architect´s in principle intimation.
 
26.6.11     Once the contractor has given notice, the architect is required to inform the contractor in writing within 1 month of receipt of the contractor´s application for extension of time whether or not he considers the delay caused entitles the contractor "in principle" to the extension of time.
 
 
 
26.6.14     Most standard forms of contract provide for loss and expense to be certified by the architect where the contractor has been delayed by breaches or acts of prevention by the employer or his agent. However, none of the SIA forms after 1980 has a loss and expense clause for prolongation. In fact, Clause 31(14) expressly provides that the architect has no power to decide or certify any claim for breach of contract made against the Employer by the Contractor. However, one might consider that Clause 12(4) [Valuation of Variations] does provide a limited express entitlement under the contract to additional `preliminaries´ costs which are associated with variations, which in themselves do not amount to a breach of contract.
 
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SECTION 7 TERMINATION
 
26.7.1     A typical construction contract usually lasts for a fairly long period of time and the option to terminate the contract by an innocent party in the event of a breach by the defaulting party before the date of completion is an important remedy, apart from the remedy of a right to damages. The right of the innocent party to terminate a contract may arise under the common law or pursuant to express provisions in the contract.
 
26.7.2     Parties may expressly provide that a particular contractual provision is a "condition" the breach of which would then entitle the innocent party to terminate the contract. Alternatively, parties may insert express termination provisions in the contract to give the parties a right to terminate the contract on the occurrence of certain pre-defined events.
 
26.7.3     In the absence of express agreement or contractual termination provisions, the common law enables an innocent party to terminate a contract in the following circumstances:
 
a. a defaulting party commits a fundamental breach of the contract;
b. a defaulting party evinces a subjective intention not to be bound by the contact or an objective indication of inability to execute the contract properly, for instance by deliberately and consistently breaching the contract despite repeated warnings or notices by the innocent party;
c. where a party informs the other that he does not intend to perform the contract any longer, or conducts himself in such a manner as to render his own future performance impossible. This is known as anticipatory breach.
 
 
 
26.7.6     If an innocent party elects to terminate a contract, it is vital that there is an unequivocal acceptance of the breach as terminating the contract. Where the contract provides for a procedure and timing in which the termination is to be effected, there must be strict compliance for the termination to be effective. Failure to do so may result in wrongful repudiation.
 
26.7.7     As termination, also known as forfeiture clauses, are construed strictly Roberts v. Bury Commissioners (1870) LR 5 CP 310, the contractual provisions prescribing the procedures by which a contract may be determined must be properly and faithfully complied with for the termination to be effective. Otherwise, the termination may be wrongful and amount to a wrongful repudiation by the employer instead - Lodder v. Slowey [1904] AC 442. The contractor is then entitled to sue the employer for the actual value of the work done and materials supplied or damages or both.
 
26.7.8     Typical grounds for termination by the employer include:
 
 
-&bbsp; default of the contractor;
- bankruptcy of the contractor;
- failure to start work;
- failure to proceed with the work;
- failure to comply with architect´s instructions;
- failure to comply with the contract;
- failure to complete the works; and
- failure to remedy defects.
 
 
26.7.10     Where the contract does not contain a termination clause and the contractor disputes the alleged default, he may contest or resist any attempt to eject him from the site London Borough of Hounslow v. Twickenham Garden Developments Ltd [1971] Ch. 233. See also Mayfield Holdings Ltd v. Moana Reef Ltd [1973] 1 NZLR 309.
 
26.7.11     Clauses 32(4) & 32(5) of the SIA Main Contracts, however require the contractor to deliver possession of the site upon receipt of the Notice of Termination, irrespective of the validity of the notice.

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SECTION 8 TORT IN CONSTRUCTION
 
26.8.1     The law of tort has a significant impact on construction projects. In particular, its importance relates to owners of buildings who have no contractual relationship with those who have been involved in, for instance, the negligent design or construction of their property. Devoid of a contractual route, as the caveat emptor rule would apply in relation to the contract of sale of the property, these owners relied on the law of tort to obtain a remedy against those involved in the design or construction of their property. Singapore has since passed the Contracts (Rights of Third Parties) Act (Cap 53B, 2002 Rev Ed) which came into force on the 1 January 2002.
 
26.8.2     There are several difficulties faced in this area of the law, including the nature of the claim of the property owner. Earlier cases reveal the confusion. Liability within the Donoghue v. Stevenson [1932] AC 562 formulation required either injury to person or damage to `other´ property to be caused by the defectively constructed building, but did not extend to pure economic loss for the defectively constructed building itself. These are losses which are unrelated to injury to the person or `other´ property. It was only after the decision in Hedley Byrne & Co Ltd v. Heller & Partners Limited [1964] AC 465 that liability for the tort of negligence included "pure economic losses".
 
26.8.3     In the context of the construction industry, the decisions of Dutton v. Bognor Regis Urban District Council [1972] 1 QB 373 and Anns v. London Borough of Merton [1978] AC 728 classified a claim for damages for a defectively constructed building as damage to `other´ property within the Donoghue v. Stevenson formulation. The extension of the tort of negligence triggered off by the Anns decision reached its high-water mark with the decision of Junior Books Ltd v. Veitchi Ltd [1983] 1 AC 520. Junior Books had applied, inter alia, the two-tier test dealing with proximity and policy considerations derived from Anns. In Sutherland Shire Council v. Heyman (1985) 60 ALR 1, the High Court of Australia made its mark in four exceptionally researched judgments, by being the first to discredit the classification in Dutton and Anns. Since then, reservations have been repeatedly expressed about both Junior Books and the Anns two tier test. In England, the decline of the trend in favour of liability for defective building was initiated by D. & F. Estates v. Church Commissioners [1989] AC 177 and completed by Murphy v. Brentwood D.C. [1991] AC 398. In Murphy, the House of Lords, inter alia, overruled the Anns decision and categorically denied liability for defective building works in the tort of negligence. They placed reliance on the Defective Premises Act 1972. They also preserved the Hedley Byrne decision and accepted the Junior Books decision as part of it.
 
 
26.8.5     After a thorough review of all the Commonwealth cases, the Court of Appeal held that the degree of proximity between the developers and management corporation was sufficient to give rise to a duty on the part of the developers to take care to avoid causing to the management corporation the kind of damage the latter had sustained. The relevant proximity was established, inter alia, as the management corporation was conceived and created by the developers and the the developers knew or ought to have known that negligence in the construction of the common property would have to be made good by the Management Corporation. In addition, the Court found that there were no policy reasons to negative such a duty of care as there would be no liability "in an indeterminate amount for an indeterminate time to an indeterminate class."
 
 
 
26.8.8     The current position in Singapore on pure economic losses arising from defective strata-titled common property is that recovery has been allowed in tort by the management corporation. However, the UK position today has reverted to the non-availability of recovery for pure economic losses in the context of defective building work generally after the decision in Murphy while other common law jurisdictions like Australia, Canada and New Zealand, as reflected in the decisions of Bryan v.Maloney (1995) 128 ALR 163, Winnipeg Condominium Corp No.36 v. Bird Construction Co (1995) 121 DLR 193 and Invercargill C.C. v. Hamlin [1994] 3 NZLR 513 respectively, are allowing recovery.
 
 
26.8.10     The Court of Appeal then considered the application of the exceptions to the general rule. Where the exceptions applied, the employer´s duty is to ensure that care is taken in relation to the execution of the works. However, they found none of the exceptions relevant to the case. The MCST relied on the Housing Developers (Control and Licensing) Act (Cap 130, 1985 Rev Ed) and the relevant rules to assert that the developer could not delegate to an independent contractor the duty of building the condominium in a good and workmanlike manner. In rejecting the MCST´s assertion, the Court of Appeal was of the view that there was nothing in the legislation or the rules to support it.
 
26.8.11     They also acknowledged that the legislature is far better equipped than the courts to deal with policy matters in the field of consumer protection, as such matters may require limitations or safeguards.
 
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SECTION 9 IMPACT OF LEGISLATION
 
Building Control Act 1989
 
26.9.1     The Building Control Act is a prescriptive code. It prescribes standards of safety and good building practice. The legislation provides a blueprint to control legally the construction of building works, the monitoring of existing structures with powers to deal with them where safety is in issue. It is well known that the current legislation was a direct consequence of the Hotel New World collapse.
 
26.9.2     A central feature of the legislation was the conception of the role of an "accredited checker". The accredited checker operates as an extra level of control in the process of design. The legislation obliges "every person for whom building works are to be carried out" to appoint an accredited checker. The accredited checker must be registered with the Building Authority and maintain no professional or financial interest (other than the stipulated appointment) in the building works concerned. In addition, only qualified civil or structural engineers of 10 years' standing in terms of practical experience in the design and construction of buildings, in addition to being distinguished by ability, standing or special knowledge or experience could be appointed as accredited independent checkers. This is clearly to ensure that the professional stature of the expert would safeguard his independence when appointed as accredited checker. The appointed accredited checker is required to check the key structural elements in the plans and issue a certificate and evaluation report approving them. This is the independent technical control prescribed by the legislation.
 
26.9.3     Section 6(1) provides for approval of plans by the Commissioner of Building Control. Among the documents to be submitted with the plans is the certificate of the accredited checker in relation to the adequacy of the key structural elements. By section 6(5), the Commissioner of Building Control is authorised to rely solely on the certificate and evaluation report of the accredited checker to approve plans. Hence, the Commissioner of Building Control has no duty to check the plans when granting "approval".
 
26.9.4     Notwithstanding the earlier section, section 6(6) gives the Commissioner the discretion to carry out random checks with respect to structural plans and design calculations of the building works. The Commissioner also retains the right to revoke acquiescence of the building plans if satisfied that any information given in respect of the approval had been false in a material particular.
 
26.9.5     Section 32 is an extremely comprehensive exclusion of liability of the Government and public officers. It even protects the government and any public officer from suit arising by reason of the fact that any building works are carried out in accordance with the provisions of this Act or that such building works or plans of the building works are subject to inspection or approval by the Commissioner or the public officer. Accordingly, the Building Authority has been given unequivocal protection which the decision of Murphy v. Brentwood District Council [1991] 1 AC 398 achieved to a limited extent in England in 1991.
 
 
Building and Construction Industry Security of Payment Act 2004
 
26.9.7     Preceding the introduction of the Building and Construction Industry Security for Payment Act 2004 ("the Act") in Singapore, legislation in other Commonwealth countries was studied and considered, including the United Kingdom´s Housing Grants, Construction and Regeneration Act 1996, New South Wales´ Building and Construction Industry Security of Payment Act 1999, the Building and Construction Industry Security of Payment Act 2002 of Victoria, and New Zealand´s Construction Contracts Act 2002. The Act that was eventually passed incorporated most of the key features of the New South Wales Act and some elements of the rest, with several important modifications that took into account local concerns and circumstances.
 
26.9.8     The Act came into operation on 1st April 2005. Since then, most of the standard form contracts in use in Singapore have been amended to accommodate the provisions of the Act. In exercise of the powers conferred by section 41 of the Building and Construction Industry Security of Payment Act 2004, the Minister for National Development has introduced the Building and Construction Industry Security of Payment Regulations 2005 ("the Regulations") that accompany the Act. Like the parent Act, the Regulations came into operation on 1st April 2005. The Regulations contain, inter alia, requirements that were left by the Act to the Minister to prescribe.
 
26.9.9     The legislation has far-reaching impact on the practices of the construction industry, and the amendments made to the Public Sector Standard Conditions of Contract to bring it in line with the legislation indicate this. The primary objective of the legislation is to redress the difficulties faced by the construction industry in obtaining payment for work done and services rendered. The intention of the legislature is unequivocally to facilitate payment in the construction industry. In that regard, the Act not only categorically affirms the right to payment, it goes further and also provides a mechanism for obtaining payment through the speedy dispute resolution procedure of adjudication. Anticipating that efforts may be made to impede the right to payment, the Act prohibits any attempt to hamper the right to payment with its anti-avoidance provisions.
 
Updated as at 30 April 2009


By: Dr Anne Netto
Anne Magdaline Netto & Co, and
Adjunct Faculty Member, Singapore Management University

George Tan
Senior Director
TSMP Law Corporation