Payments in Construction Law

November 6, 2017 Law


In building environment, payments was defined as the value of plants, stuffs or goods comprised in a contract as inRoyden ( M ) Sdn Bhd V Syarikat Pembenaan Yeoh Tiong Lay Sdn Bhd[ 1 ] . In a simple words, payment can be a consideration in footings of money for plants that Contractor had carried out and stuff delivered to site conformity to the contract. Contractually it can be said that the money must be paid by Employer quickly of to the full unless there are specific grounds for detaining or keep backing it. While interim payment can be defined as probationary or short-run payments made increasingly to a Contractor at hebdomadal, bi-weekly or monthly intervals based on periodical estimated value of work that the Contractor has carried out ( Siti Suhana & A ; Rosli, 2010 ) . Interim payment is besides known as progress payment or phase payment ( Clause 30.2, PAM 2006 ) . The major criterion signifiers of building contracts used in Malaysia viz. the PWD 203A ( 2007 ) , PAM ( 1998/2006 ) and CIDB ( 2000 ) , contain commissariats for payments to be made against Interim Certificates issued sporadically by the Architects, Oversing Officer ( S.O. ) or Client’s Representative or Contract Administrator as the instance may be. The commissariats give the Contractor the right to be paid upon the issue of the interim certification and oblige the Employer to pay the Contractor the certified sum ( Harban Sigh, 2003 ) .

In the event of late payment or non – payment made by Employer, Contractor may hold several option either to find the contract, suspension of work at site or decelerating down the work. There is a proviso under PAM 2006 Clause 30.7 stated that Contractor has right to suspend the plants until payment due is made and a written notice must be delivered by manus or registered station to Employer. While Clause 42.10 of CIDB 2000 allows Contractor to give a notice to Employer about his purpose to suspend the plants and if the Employer still did non made the payment, Contractor may suspends entirely or partially the plants or cut down the rate of executing of plants. Contractor besides entitled for extension of clip and if any loss or amendss incurred originating from such suspension of plants. In following subdivision 2 instances of Determination by the Contractor will be discussed.


Case: Dataran Rentas Sdn. Bhd. V BMC Construction Sdn. Bhd. ( 2008 )

This instance is between plaintiff in error ( Dataran Rentas Sdn Bhd ) against the determination of the High Court at Penang on a weaving up request filed by respondent ( BMC Construction Sdn Bhd ) against the plaintiff in error the High Court had made the undermentioned orders: –

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( I ) that the appellate be wound up pursuant to the commissariats of the Companies Act 1965 ;

( two ) that the Official Receiver be appointed the probationary murderer of the plaintiff in error ; and

( three ) that the costs of the request be paid out of the assets of the plaintiff in error.


The relevant background facts taking to the filing of the winding-up request by the respondent against the plaintiff in error are as follows:

( 1 ) The respondent’s claim against the plaintiff in error is for the amount of RM173, 096.18 due and outstanding by the plaintiff in error to the respondent pursuant to four interim certifications issued under a edifice contract entered into between the two parties.

( 2 ) By a missive of award dated 29.7.1997, the plaintiff in error awarded a edifice contract to the respondent.

( 3 ) Pursuant to the missive of award, it was agreed that the footings and conditions of contract are as per PAM Standard Form Building Contract 1969 Edition ( without Measures ) [ “PAM Conditions” ] .

( 4 ) Pursuant to Clause 30 ( 1 ) of the PAM Conditions read together with the Appendix, the plaintiff in error was contractually obliged to pay the respondent the sum due under Interim Certificate within 30 yearss.

( 5 ) The plaintiff in error has failed to pay the undermentioned interim certifications within the stipulated clip stated under Clause 30 ( 1 ) of the PAM Conditions.


NO. Dates




RM 23,876.74



RM 23,986.80



RM 68,086.41



RM 57,146.23



It was further held that, as per Gopal Sri Ram JCA, on a true building of clauses 26 ( 1 ) ( a ) and 30 ( 1 ) of the contract, the plaintiff in error ‘s duty to do payment on an interim certification was a cardinal term or a primary duty. Court order that the sedimentations be paid to the respondent ( BMC Construction Sdn. Bhd. ) to account of taxed costs.


Case: D. R. Bradley ( Cable Jointing ) Limited 5 Jefco Mechanical Services Limited ( 1988 )


  1. Jefco were chief contractor for the renovation of Islington Town Hall. Bradley was appointed as domestic subcontractor to Jefco for the electrical installing.
  2. The subcontract between Bradley & A ; Jefco were made verbally, no specific payment footings were accepted but it was agreed that interim payment would be made.
  3. Bradley made assorted petition for payment but none were met in full. On 29ThursdayOctober 1985, Bradley made another application of interim payment ?27, 140.00 and a notice was given in the event of non – payment, Bradley would go forth site.
  4. No payment was made and on 12ThursdayDecember 1985, Bradley left the site and judicial proceeding commenced.


Underpayments by Jefco did non amount to a repudiatory breach, but the non-payment of the last application was such a breach, as it moderately shattered Bradley’s assurance of being paid. Bradley was entitled to see the contract at an terminal and to be terminated.


In the absence of express clause in the contract, not – payment could give rise to a contractor or subcontractor’s entitlement to find, if such non – payment undermined the nucleus of the contract. However, in the absence of an express clause giving a right to suspend work, no such right exists in common jurisprudence. The options is either to transport on working, or find the contract as the lone other redress if the non – payment ‘shatter confidence’ .


The non – payment event is a common instance occurred in a building industry. In any fortunes, Contractor can non suspend plants or decelerate down the advancement work in event of late payment or non – payment. The Employer entitled to end the employment contract based on Clause 51 ( a ) ( two ) PWD 203A,“the Contractor fails to continue on a regular basis and diligently with the work”if proven Contractor decelerate down the advancement work at site. InKah Seng Construction Sdn.Bhd. V Selsin Development Sdn.Bhd ( 1997 )andCanterbury Pipe Lines v Christchurch Drainage ( 1986 ), the tribunal held that no implied of impermanent suspension owing of non – payment from Employer. However, in PAM 2006, and CIDB 2000, Clause 42.10 there are proviso that allows suspension of work in event of non – payment. There are commissariats under PAM 2006 and CIDB 2000 standard signifier of contract leting Contractor to find his employment in the event of non – payment by the Employer. Under the common jurisprudence, expiration merely allowable if proved renunciation of primary duty by Employer. Mention is made to the instances ofBan Hong Joo Mines v Chen & A ; Yap Ltd ( 1969 ), andYong Mok Hin V United Malay States Sugar Industries Ltd ( 1967 ).


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