ARC News • April 23, 2021

In the construction industry, it is not unusual that the parties rely on a proposal or simple letter of award to engage in a construction work. Whilst it is not legally wrong to rely on such letter of award or proposal, however, have you ever pondered the sufficiency of such documents to protect your interests should there be disputes between the parties?

Why is EPCC Contract Important?

Typically, a proposal provides the technical details of product/solution as well as pricing information to be offered whereas a letter of award usually states the acceptance of the offer with the agreed pricing and some key commercial terms such as payment schedule, payment terms, and date of completion. Solely relying on such documents may potentially expose both parties to substantial risks in the event of disputes as there are a lot of rooms for the defaulting party to escape from its liability since these have never been clearly provided for in the proposal or letter of award.

Unlike a proposal, an EPCC contract stipulates all the key commercial terms that both parties have mutually agreed such as obligations of the parties, scope of work, project timeline, consideration, payment terms, grant of access to the site, liquidated ascertain damages should there be a delay in the completion of the project and liability of the parties.

On top of that, the risks and responsibilities to be borne by each party as well as the remedy to the non-defaulting party will also be clearly spelled out in the EPCC contract. This allows the parties to clearly understand their respective obligations in the work that they are engaging in and that the interests of the non-defaulting party can be reasonably protected in the event of any breach of contract by the defaulting party.

Key Takeaways

Premised on the above, it is undoubtedly that an EPCC contract is the right instrument to protect the interests and rights of both parties as compared to a proposal or a letter of award. It must be emphasized that the existence of a properly drafted EPCC contract becomes even more important than ever when the project value is huge. It is better to be safe now, to spend some time to produce a proper EPCC contract agreeable by both parties, than be sorry later, when you do not have any avenue to recover your loss due to the absence of the EPCC contract when unresolvable disputes arise.

This Article is co-written by Yeo Shu Pin (Partner) and Quek Li Thong (Legal Executive) of Messrs. Afif Rahman & Chong

Disclaimer: Every attempt to ensure the accuracy and reliability of the information provided in this publication has been made. This publication does not constitute legal advice and is not intended to be used as a substitute for specific legal advice or opinions. Please contact the authors for a specific technical or legal advice on the information provided and related topics.