Proceedings of the 6 th Asia-Pacific Structural Engineering and Construction Conference (APSEC 2006), 5 – 6 September 2006, Kuala Lumpur, Malaysia C-12 UNDERSTANDING CONTRACT DOCUMENTATION Mohamad Ibrahim Mohamad 1 and Zulkifli Madon 2 1 CTMC, Fac.of Civil Eng,. UTM, 81310 Johor Bahru, Malaysia. E-mail: drm2i@yahoo.com 2 Director, Public Work Department, Negeri Sembilan, Malaysia. ABSTRACT : The contractual obligation by any party in any contract will be interpreted by terms and contents of the documents laid down in the contract. Effective interpretation and understanding of the contractual obligations will be much dependent on the clarity of the documents in translating the needs and requirements implied as in the agreement. Without proper understanding of the documents may lead to the different interpretations which may result in unnecessary contractual problems such as disputes, unnecessary claims, reworks, shoddy works, and even litigation. This paper presents the results of the study related to issue of understanding of contract documentation done in Malaysia. The findings presented include the factors that inhibit the understanding of the contract as well as the factors that can help to make the interpretation process much easier. The paper also suggested various factors that can be used to improve the level of understanding of contract document that can be considered in designing the contract document. Keywords: construction contracts, understanding contract documentation, factors that support and inhibit contract understanding , improving contract document. 1. INTRODUCTION Contractual obligation by any party in any contract will be of questionable state if the understanding of the terms and interpretation of the contents of the contract documents are not fully appreciated. The contract documents drafted for any contract should fulfill the intended roles of being the references and guidelines for the relationships between the contracting parties throughout the project. Factors of contractual language and its judicial interpretation may lead to the problem of understanding of the needs of the contract which may lead to misinterpretation and misunderstanding of the facts in contract obligations. This situation may prevail an opportunistic party to take the unfair advantage of another party when an adjustment to be made in the contract. Therefore it is necessary to have proper understanding of the contents of the contract documents which leads to the enhancement of the contractual relation and assurance of the intended deliverance of the product. The complexity of contract documentation in a construction contract most of the times hinders the contract participants especially the contractor and the clients to really understand the contractual needs and obligations of the parties. The various backgrounds of the contractors in our construction industry especially in the public sector in Malaysia contribute to difficulties in delivering the required product to the clients. Therefore, understanding the contents and requirements of the contract documents will have great influence in the smooth and good performance of the construction project. 2. Understanding the Contract Requirements The constructions contracts express the intent of parties and memorialise their principal risk allocation decisions (McCallum, 2002). To understand the contract requirements is to understand the contents of the documents and the spirit of the contractual relationships. Contracts are formed and signed based on the fair basis where parties agree amicably to discharge their obligations to satisfy each other needs and requirements.