Construction disputes are prevalent, particularly in complex projects involving multiple parties, layered responsibilities, and strict contractual timelines.
Below is a practical overview of the most frequently encountered issues in Malaysian construction projects.
1. Non-Payment for Work Done
Disputes often arise when the contractor has completed work and submitted claims, yet certification is either delayed, undercertified, or uncertified. These claims typically involve progress claims or interim payment certificates.
Tips: Maintain proper documentation and issue timely follow-ups to support your entitlement.
2. Delayed Issuance of CPC and/or CMGD & Release of Retention Sum
A common frustration for contractors is the deliberate delay or refusal to issue the Certificate of Practical Completion (CPC) and/or the Certificate of Making Good Defects (CMGD). These certifications are critical contractual milestones that trigger the contractor’s entitlement to final payments and the release of retention sums.
The retention sum—typically 5% of the contract value, is commonly withheld to protect the employer in the event when the contractor fails or defaults in its performance under the contract, such as abandonment or the works is of poor and/or defective quality.
Tips: Maintain proper documentation and issue timely follow-ups to support your entitlement.
3. Unjustified Backcharges or Deductions
Employers may deduct sums from the contractor’s account for alleged defects, delays or third-party rectification works. These backcharges must be contractually permitted and clearly substantiated. Arbitrary or excessive deductions are open to challenge.
Tips: Review deduction provisions carefully and ensure all charges are supported by evidence and proper notice.
Employers may deduct sums from the contractor’s account for alleged defects, delays or third-party rectification works. These backcharges must be contractually permitted and clearly substantiated. Arbitrary or excessive deductions are open to challenge.
Tips: Review deduction provisions carefully and ensure all charges are supported by evidence and proper notice.
4. Failure to Assess Extension of Time (EOT) Applications
Where delays occur due to events outside the contractor’s control, the contractor may request an EOT. If the contract administrator fails to assess such applications, disputes can arise—particularly when LAD is later imposed.
Tips: Submit EOT notices in strict compliance with the contract and follow up on pending assessments in writing.
Where delays occur due to events outside the contractor’s control, the contractor may request an EOT. If the contract administrator fails to assess such applications, disputes can arise—particularly when LAD is later imposed.
Tips: Submit EOT notices in strict compliance with the contract and follow up on pending assessments in writing.
5. Imposition of Liquidated Ascertained Damages (LAD)
LAD is often imposed where the contractor fails to complete on time. However, if the delay is due to unresolved or ignored EOT requests, such deductions may be challenged as unjustified.
Tips: Ensure all relevant delays are properly notified and documented.
LAD is often imposed where the contractor fails to complete on time. However, if the delay is due to unresolved or ignored EOT requests, such deductions may be challenged as unjustified.
Tips: Ensure all relevant delays are properly notified and documented.
Key Parties Involved
Note: While subcontractors usually have no direct contractual link with the employer, in limited circumstances (e.g. under Section 30 of CIPAA 2012 or Section 71 of the Contracts Act 1950), they may pursue direct claims.
(a) Employer: The project owner or developer:
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(b) Main Contractor: Responsible for overall project execution
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(c) Sub-Contractor: Engaged by the main contractor for specific scopes of work
Note: While subcontractors usually have no direct contractual link with the employer, in limited circumstances (e.g. under Section 30 of CIPAA 2012 or Section 71 of the Contracts Act 1950), they may pursue direct claims.
Recommendations for Reducing Risk
- Submit notices and claims promptly in accordance with the contract.
- Maintain a detailed record of instructions, variations, and any relevant correspondence.
- Understand the contract terms especially in relation to certification, CPC/CMGD, determination, application of EOT, backcharge/set-off, LAD.
This article is prepared and published by
Messrs. Ben Lee & Sharen
Advocates & Solicitors
General Disputes Resolution and Construction Division
