The Agreement Must Prevail



Ohbayashi-Gumi v Kian Hong Holdings Pte. Ltd.,

 [1987] BLD (Aug) 475




The defendants, Ohbayashi, contracted with the Housing Development Board for reclamation work at Telok Ayer Basin.  Part of the main contract was let out to Kian Hong as sub-contractor.  A dispute arose as to whether the sub-contractor should be paid a price based on pontoon load measurement as he claimed, or whether it should be by design volume measurement as the main contractor argued.  The appendix to the sub-contract referred to the sub-contractor's revised quotation which specified pontoon measurement.  This appeared to have been accepted by Ohbayashi.  The sub-contract also contained terms which supported Kian Hong's contention.  The difficulty arose chiefly because the main contractor had accepted the risk inherent in a lump sum contract, whereas the sub-contract was a unit rate contract; but cl. 20 of the sub-contract provided that in the event of conflict between the terms of the main contract and the terms of the sub-contract, the latter should prevail.


Abdul Wahab Ghows J stated: 'unless it is clearly stated in the sub-contract one must not assume that the sub-contractor agreed to undertake the risks that the  contractor accepted under the main contract.  Even greater caution should be exercised when it is apparent that the sub-contractor has indicated in writing that he wished to avoid such risks, as in this case, by requiring to be paid for the stones by pontoon loads'.


The Court of Appeal held that the basis of agreement in the sub-contract was measured and valued.  'Once the intention of the parties has been ascertained, the court is bound to give effect to that intention by supplying anything necessary to be inferred from the terms used, and by rejecting as superfluous whatever is repugnant to the intention so discerned'.  The main contractor's appeal was accordingly dismissed.






Express Condition Is Needed In Subcontract

To Indemnify The Main Contractor



Regional Construction Sdn. Bhd. v Chung Syn Kheng Electrical Co. Bhd.

[1987]  BLD (Jun) 180




Nominated electrical sub-contractors caused a delay to the main contract works, as a result of which the employer deducted money from the sum due to the main contractor.  The main contractor alleged that the liquidated damages clause under the main contract should be incorporated into the sub-contract, but it was held by the Court of Appeal that the liquidated damages clause would not be so incorporated, because it was repugnant to, and inconsistent with, the express conditions of the sub-contract providing that the sub-contractor should indemnify the main contractor in the event of delay.  Furthermore, the amount of the deduction by the employer in respect of which the main contractor claimed could be challenged by the sub-contractor, since it might be regarded as a penalty within a 75 of the Contracts Act, even though the employer was not a party to the proceedings.  The sub contractor was not bound to indemnify the main contractor in respect of any sum, regardless of whether it was properly deducted or not.










Subsequent Agreement Bound



Engineering Construction Pte Ltd. v Ohbayashi-Gumi Ltd.

 [1986] 1 MLJ 218






The plaintiffs were building sub-contractors to Ohbayashi-Gumi, the main contractors, on the Ministry of Environment Kim Chuan Sewage Treatment works contract.  It was agreed that they would carry out the works at 6.5% less than the main contract price.  The sub-contractors commenced work without a written sub-contract being signed.  Three months later the main contractors sent the sub-contractors a draft contract.  The sub-contractors suggested five amendments.  The main contractors accepted three, signed and sent it to the sub-contractors, who never signed or returned it.  Lai Kew Chai J held that the sub-contractors had agreed to the terms of the sub-contract and were bound by it.  (The main contractors were not, however, entitled to determine the contract, because by a subsequent agreement, they had relieved the sub-contractors from the performance of part of the contract works and could not therefore rely upon slow progress in these to justify determination).










Clauses In The Sub-Contract

Agreement Prevail


Union Workshop (Construction) Co v Ng Chew Ho Construction Co. Sdn. Bhd.

 [1978] 2 MLJ 22



The appellants, Union Workshop, had entered into a sub-contract with Ng Chew Ho, the main contractors, for industrial buildings on the FAMA Padi Storage and Drying Complex Project in Alor Setar, Kedah, for the supply and erection of steel frames.  The main contract between the respondents, Ng Chew Ho, and FAMA, the employers, provided for payment only for nett quantities of steel-work and the contractor was to make his own allowance for all waste and ancillary steel.  The respondents contented that the sub-contractors had been shown this provision in the main contract and that it should govern the sub-contract.  However, the terms of the sub-contract were clearly that the sub-contractor was to be paid for supply, fabrication, delivery and erection as a whole.  The trial judge held that the sub-contractors were only entitled to payment for nett quantities.  They appealed - Chang Min Tat FJ in the Federal Court held: ‘The clear intention of this sub-contract was that the subcontractor was to be paid for the gross weight.... Whereas here, the meaning is perfectly clear, there can be no resort to other documents to give another meaning to it.  And where the draftsman had purposely left out any condition which he could without difficulty have put in, then the contra proferentem rule applies to arrive at the inevitable conclusions that the (main contract) clause did not form part of the agreement (the sub-contract) between them, and that the payment was to include the weight of steel other than the girders’.  The sub-contractor’s appeal was allowed.