Turnkey Contract

What Is “Turnkey Contract” ?

•    Relationship between parties & their rights and obligations.

Retsal Drilling Co.

v

Commissioner of Internal Revenue

(127 F. 2D. 355)

(Circuit Court of Appeal, USA)

Turkey job is a job wherein,

                              “the driller of an oil well undertakes to furnish everything and does all the work required to complete the well, place it on production, and turn it, over ready to ‘turn the key’ and start the oil running into the tanks”.

Duncan Wallace, QC, Contracts for Industrial Project, (Paper presented at a Seminar on Building and Civil Engineering Claims held in Kuala Lumpur in February, 1984, at p.3) described “turnkey” as.

                              “ …. a contract where the essential design emanates from, or is supplied by, the Contractor and not the owner, so that the legal responsibility for the design, suitability and performance of the work after completion will be made to rest … with the contractor …. ‘Turnkey’ is treated as merely signifying the design responsibility as the contractor’s”.

In High Mark (M) Sdn. Bhd. v. Pacto Malaysia Sdn. Bhd.;

                        (1987) 2 M.L.J. 85,

Zakaria Yatim J, refers to Duncan Wallace’s

paper (op.cit.) at p.6, and said,

                           “The turnkey system, however, may be modified. The owner may engage consultants to do the foundation or sub-structure designs leaving only the superstructure the subject of the lumps sum turnkey arrangements. This known as a “mixed – turnkey” contracts.

And states further (at p. 86),

                             “It is clear, therefore that, in its pure from the turnkey contractor is responsible for the planning, construction and supervision of the work. On completion of the work the contractor hands over the completed job to the owner. Sometime the owner engages consultants to do the foundation and sub-structure design. The contractor is only responsible for the planning, construction and supervision of the rest of the construction work. In oder to determine what is the nature of a particular turnkey job, it is necessary to look at the relevant contracts between the parties concerned”.

In High Mark (M) Sdn. Bhd.’s case, the consultants firms employed by the consultant firms  employed by the contractors in connection with a turnkey contract. Then it was held by the court that all the drawings and designs prepared by the consultants were the property of the contractors.

THE ABOVE DISCUSSION IS PART OF AN ARTICLE, 'THE TURNKEY CONTRACT" at www.hbp.usm.my/aziz