CIPAA, LAD and EOT: construction contract guidance for Malaysia

CIPAA: getting paid

The Construction Industry Payment and Adjudication Act 2012 (CIPAA), in force since 15 April 2014, gives parties to a written construction contract a fast statutory route to resolve payment disputes. An adjudicator decides the dispute within a fixed timetable, and the decision binds the parties unless it is set aside or the dispute is finally settled by arbitration or the court.

The process runs on short deadlines counted in working days:

This is a summary to show the shape of the process. Read the Act itself, and take advice, before you act on a deadline.

Extension of time: who carries the delay

When completion is delayed by something the contractor is not responsible for, the contract usually allows the completion date to be extended. Whether a claim succeeds often turns less on the delay itself than on the paperwork: whether notice was given, in the form and within the time the contract requires.

The standard forms used in Malaysia, including PAM, PWD 203A, CIDB, IEM and FIDIC, each have their own notice requirements and time bars. Know which form you are on, and keep dated records from the day an event starts.

Liquidated damages: what delay costs

Liquidated damages, often called LAD, are a sum agreed in the contract for each day or week that completion is late. They are meant to fix the employer's loss in advance, so it does not have to be argued afterwards.

Whether and how much can be recovered depends on the clause, on whether time was properly extended, and on how Malaysian courts have applied the Contracts Act 1950 to such clauses. This is an area where the case law matters, and where the facts of your project decide the answer.

How Caprix Advise helps

Advise covers payment and claims, delay and extension of time, liquidated damages, variations, termination, CIPAA adjudication, arbitration, time bars, certificates, bonds and defects.

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Guidance, not legal advice

Advise helps you understand your position and the relevant cases, but it can make mistakes and it does not know every fact of your project. Before issuing a notice, withholding payment, starting adjudication or arbitration, or terminating, consult an advocate and solicitor or a contracts specialist.

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Questions about CIPAA, LAD and EOT