What does the law say?
No Automatic right to suspend work
In Malaysia, the law is clear that a contractor has no automatic right to suspend work unless it is expressly provided in the contract. Even in cases of non-payment by the employer, the contractor must continue performing its obligations unless the contract contains a valid suspension clause. Contractors who suspend works without relying any express clauses in the contracts may invoke repudiatory breach.
This principle was affirmed in Kah Seng Construction Sdn Bhd v Selsin Development Sdn Bhd [1997] 1 CLJ Supp 448, where Low Hop Bing J (as his lordship then was) held as follows:-
Similarly, in Oriental Housetop Sdn Bhd v Magna Haven Sdn Bhd & Another Case [2021] 1 LNS 1260, where the contractor’s suspension of rectification works due to non-payment without a suspension clause was deemed unlawful:
“[42] …It seems to me that OH felt aggrieved for underpayment of its completed work and therefore refused to carry out the required rectification work. The suspension of the rectification work was done at its own folly and peril because the suspension is legally wrongful as seen in Kah Seng Construction Sdn Bhd v. Selsin Development Sdn Bhd [1997] 1 CLJ SUPP 448; [1996] MLJU 359. Instead OH should have carried out the rectification work at its costs (which might have been cheaper since OH as the specialist roofing contractor is in the better position to manage cost control) and thereafter sue for its unpaid work done. This is the common recurring mistake encountered by many unpaid contractors and sub-contractors in responding to non payment of their work done.”
Conclusion
It may appear logical that a contractor would not wish to continue funding a project out of pocket when the employer fails to pay. However, suspending work without a valid contractual right may backfire. In the absence of a suspension clause, any unilateral suspension of work may amount to a breach of contract by the contractor, not the employer. This, in turn, may entitle the employer to terminate the contract and pursue claims for substantial damages.
This article is prepared and published by
Messrs. Ben Lee & Sharen
Advocates & Solicitors
General Disputes Resolution and Construction Division
