Judicial interpretations of the term ‘Lump Sum’ in construction contract

• Main Author: Mohamad Ali, Norwati
• Format: Thesis
• Language: English
• Published: 2009
• Subjects: K Law (General)
• Online Access: http://eprints.utm.my/id/eprint/12760/1/NorwatiMohamadAliMFAB2009.pdf; http://eprints.utm.my/id/eprint/12760/

‘Lump sum’ is a commonly used term in contract since the 18th century. Although the term is widely used in the construction industry, the interpretations and position of the lump sum contract in the eyes of the law is lacking which could contribute to dispute on rights and responsibilities of contracting parties. Failure of contract conditions to define the term interpretations could impact the overall project implementation and completion process. As such, the objective of this research is to investigate the judicial interpretation of the term ‘lump sum’ in construction contract. In the legal textbook, the term ‘lump sum’ is interpreted as ‘fixed priced’. It is also interpreted as ‘a lump sum contract is one to complete the whole (sometimes termed as ‘entire’ or a ‘specific’ work) work for a lump sum’. Based upon PAM Contract 2006 (with quantities), ‘lump sum’ is fixed price and is not subject to remeasurement or recalculation except for provisional quantities and variations.’ The study had shown that none of the relevant cases had the judge himself given firm judicial interpretation of the term ‘lump sum’. Occasionally the term ‘lump sum contract’ is referred to as ‘entire contract’. The doctrine that a lump sum contract has to be completed in practically all respects in order to qualify the contractor to get any money at all is very out of date. Lump sum itself is subject to adjustment because the court leans against a construction of the contract which would deprive the contractor of any payment at all simply because there are some defects or omissions. Whether a contract is an entire one is a matter of construction. Clear words are needed to bring an entire contract into existence. In the absence of such words, the ordinary lump sum contract cannot be an entire contract, for the courts to construe the promise to complete as a term and not a condition.