Prepared by: Ng Mei Shan

Types of Building Contracts used in Malaysia

.  PAM = Pertubuhan Arkitek Malaysia  PAM Contract – a construction agreement entered into between employer/building owner and the contractor to execute specified construction works for private sector projects.  It is estimated that 90% of the building contracts in private sector are based on a PAM form.

Development of PAM Forms of Building Contract PAM/ ISM 1969 PAM 1998 PAM 2006 .

PAM Forms of Building Contract   Since the launching of PAM 2006. . many users of PAM forms are debating whether to migrate to the new suite of contracts or continue using the older and tested PAM 1998.

New Provisions in PAM 2006 Time Money Matters Quality Dispute Resolution Others .

4 – Employer is entitled to set off for costs incurred and or loss and/or expense. • Clause 30.ITEM TIME DESCRIPTION • Clause 23.8 and Clause 24.7 (additional variation). ensure notices and particulars are given in timely manner.3(m)). Clause 24. • Clause 30. Employer required to give notice prior to withholding and deducting monies from payments due to contractor. Money Matters .17 –A simple interest based on Maybank Base Lending Rate plus 1% shall be payable by the defaulting party who fails to make any payments to the other party ( Contractor or Employer).1 (Loss and/or expense) – ‘time bar’.6 – ‘substantial change’ in quantities of ‘provisional quantities’ or due to Variation entitles the Employer/Contractor to a change in rates.1 – MC should beware of the ‘time bar (28 Days)’ in respect of claims for EOT and ensure that notices and particulars are given in a timely manner.8(v) & 24.7 – MC may suspend work if the Employer fails to make timely payment and entitled to EOT (and loss and expense) for such suspension (Clause 23.3 – 7 additional ‘matters’ entitling MC to claim for Loss /Expense • Clause 11.2 –MC is required to keep contemporaneous records • Clause 30. • Clause 24. Architect either reject or issue a Certificate of EOT within 6 Weeks from the receipt of sufficient particulars from MC. • Clause 11. • Clause 11.

30.0 – Performance Bond c) Clause 38.1 – defines ‘Practical Completion’. • Extends the powers of Architect in terms of ‘defects’ • Clause 34.2 – Architect required to either certify PC.4 (Set-off by Employer). Reference to adjudication is a condition precedent to arbitration for disputes under Cl.0 – Notices b) Clause 37. or refuse with reasons within 14 days of receiving Contractor’s Notification.4 – ‘Adjudication’ is introduced. • Clause 15.0 – Governing Law Dispute Resolution Others . • Three (3) new clauses introduced in PAM 2006: a) Clause 36.ITEM QUALITY DESCRIPTION • Clause 15.1 to Clause 34.

THE COMPARISON  ARTICLES OF AGREEMENT .

the consideration payable and contains operational definitions of the important terms and expression used in the Contract. c) The places of business of registered addresses d) A short description of the Works to be completed with reference to the Contract Bills. Drawings and Specifications. b) Names of the respective parties. • Introduces the employer. the contractor and the key personnel in the Contract.ARTICLES OF AGREEMENT • Comprises of: a) Date of agreement. . specifies the scope of Works.

No significant impact • The term ‘Employer shall nominate and appoint’ is removed.Articles of Agreement Article 1 – Contractor’s Obligations 2 – Contract Sum 3 – Architect 4 – Engineer 5 – Quantity Surveyor 6 – Specialist Consultant 7 . • New article . to 59 nos.Definitions 8 .Meanings PAM 1998 to PAM 2006 • Re-wordings. • MC no longer has the rights to object or arbitrate on the nomination & appointment of any person by the Employer. • The defined terms had increased from 18 nos.

THE COMPARISON  Conditions of Contracts Clause by Clause PAM 1998 • 35 Clauses • Green Booklet PAM 2006 • 38 Clauses • Yellow Booklet .

goods and by MC shall be to the ‘reasonable standards of workmanship of the quality satisfaction of the Architect’ and standard described in the Contract Document and/or required by the Architect in accordance with the provision of Contract (Cl. 1. • ‘Site operation’ excluded (falls within ‘methods of construction’) .1 • ‘Temporary works’ included • Mc ‘not fully’ responsible for the temporary works if it is designed by the Architect/Consultants.Clause 1. stability and safety of all site operations and methods of construction…. • rephrased and shortened goods and standard workmanship provided • MC shall provide materials.1) …. • ‘Temporary works’ not included • Expended from the second half of PAM98 Cl. 1.The Contractor shall be fully responsible for the adequacy...0 – Contractor’s Obligations PAM 1998 PAM 2006 • Such quality and standard of materials.

4: Failure of Contractor to comply with AI.PAM 1998 PAM 2006 • Clause 2.2: ‘If within seven (7) days upon receipt of the Architect’s instruction in writing the Contractor does not comply therewith then the Employer may employ and pay other…. • The time of compliance under an AI shall not be less than 7 days from the date of receipt of AI • In case the MC did not comply.’ • Clause 2. the cost of employing other Person to give effect to such instruction shall be set off by the Employer under Clause 30.4 .

• There shall be 2 signed original copy of Contract Documents. PAM 2006 • Title: Contract Documents.PAM 1998 • Title: Contract Documents • There is no priority of documents under PAM 98 • One copy certified on behalf of the Employer of the Contract Documents • Submission of Work Programme is 14 Days upon issue of Letter of Acceptance. . • Submission of Work Programme is 21 Days from the Letter of Award. Architect may request for revised Works Programme • The as-built Drawings and and operation and maintenance manual (O & M) to be supplied before the Completion Date when the time is not specified. with the priority of documents as set out In Cl. 3.1. • As.built Drawings and operation and maintenance manual (O & M) to be submitted within 3 months of the commencement of DLP. Programme and As – Built Drawing • Contract Documents are mutually explanatory.

(d) & (e) • New clause 6.5 – Widening the powers of the Architect to deal with defective works through 3 new Sub – clauses 6.8 – Warranties in respect of materials and goods .PAM 1998 PAM 2006 • Clause 6.5 (c).4 – Only 2 subclauses which entitle architect to deal with defective works • Clause 6.

If any such directions are so given and confirmed in writing by the Architect then as from the date of issue of that confirmation it shall be deemed to be an Architect’s instruction PAM 2006 (Clause 10. unless given in writing in regard to a matter in respect of which the Site Staff have been expressly authorized in writing by the Architect.2) • Any directions given to the Contractor or his Site Agent upon the Works by the Site Staff shall be of no effect unless given in regard to a matter in respect of which the Architect is expressly empowered by the Conditions to issue instructions and unless confirmed in writing by the Architect within three (3) working days such direction being given.PAM 1998 (Clause 10. unless confirmed by an AI .2) • Any directions given to the Contractor or his Site Agent by the Site Staff shall be of no effect. All such directions involving a Variation shall be of no effect.

PAM 1998 (Clause 13. signing of the Contract.3 arithmetical errors or any errors any error whether of in the prices and rates shall be arithmetic or not in the corrected and/or rationalised computation of the Contract by the Architect or Consultant Sum shall be deemed to have without any change to the been accepted by the parties Contract Sum before the hereto. Any and subject to Clause 12.1) • The Contract Sum shall not be • The Contract Sum shall not be adjusted or altered in any way adjusted or altered in any way whatsoever otherwise than in whatsoever. other than in accordance with the express accordance with the express provisions of the Conditions provisions of the Contract. Consultants be aware! Post-rationalisation (if any) should be stated in the Letter of Award itself to avoid later arguments .1) PAM 2006 (Clause 13.

1 – Practical Completion is defined • New procedures and requirements to be complied by both the Architect and Contractor.PAM 1998 • Practical Completion not defined • Less procedural for the issuance of CPC and CMGD (Without proper time frame) PAM 2006 • New clause 15. • Refer to Figure 3: Flow chart for practical completion • Refer to Figure 4: Flow chart for issuance of CMGD .

the Employer shall be liable The Contractor shall be liable for and shall indemnify the Employer against any damage.1) PAM 2006 (Clause 18. omission.PAM 1998 (Clause 18. liability. claim or proceedings whatsoever whether arising at common law or by statute in respect of personal injury to or death of any person arising out of on in the course of or caused by the carrying out of the Works and provided always that the same is due to any negligence. default and/or breach of Contract by the Contractor or of any Person whom the Contractor is responsible .1) The Contractor shall be liable for and shall indemnify the Employer against any expense. expense. In that event. loss. liability. claim or proceedings whatsoever in respect of personal injury to or the death of any person whomsoever arising out of or in the course of or caused by the carrying out the Works. loss. unless it is solely due to any act or neglect of the Employer or of any person for whom the Employer is responsible.

0 – Damages For Noncompletion PAM 1998 • Without issuance of ‘Certificate of Non Completion’ (CNC) by the Architect • Liquidated and Ascertained Damages (LAD) PAM 2006 • Clause 22. . CNC can be ‘revoked’ by a subsequent Certificate of Extension of Time.1 – ‘Certificate of Non Completion’ (CNC) is introduced. and the CNC is the conditions precedent to deduction of LD • Liquidated Damages (LD) • Clause 22.3 – New clause.Clause 22.

tier procedures .PAM 1998 • No time limit. followed by supporting particulars within 28 Days of cessation of the delay • Time limit – Architect to assess and make decision 6 weeks after receipt of sufficient particulars • Relevant Events: 24 numbers .a notice within 28 Days of Relevant Event. Procedures and decision within a ‘reasonable time’ • Relevant Events: 12 numbers PAM 2006 • 2 .

3 – term ‘circumstances’ used • 8 numbers of circumstances PAM 2006 • 2 – tier procedure – a notice within 28 days of ‘matters referred to in clause 24.1’.4 • Clause 24. • Ascertainment provision – Clause 24.1 • Clause 24.3 – term ‘matters’ used • 14 numbers of matters – additional 6 new events .Clause 24.0 – Loss And/or Expenses Caused by Matters Affecting the Regular Progress of the Works PAM 1998 • Without ‘time bar’ for procedure involved • Ascertainment provision – Clause 24. Followed by supporting particulars within 28 Days upon ending of the ‘matter’.

Clause 25.Clause 25.0 – Determination of Contractor’s Employment by Employer PAM 1998 • Clause 25.8 (Employer’s rights and remedies not prejudiced) .Clause 25.7 (Remedy limited to damages only) .6 (Final Account upon determination) .Clause 25. time compliance 21 Days • New Clauses: .4 – Time compliance 14 Days PAM 2006 • Clause 25.Clause 25.4 – rephrased .5 (Records of Works) .

5 and 6 • New clause 26. MC do not have determination rights . 4 .2 – Procedure for determination – 2 tier determination process Step 1: MC shall give written notice by hand or registered post specifying default by Employer Step 2: Termination days (14 days) Void and accept default (24 days) 24-14 days = 10 days (grey period) 2nd notice by MC to Employer Step 3: If the Employer rectify within 14 days.Clause 26.1 – failure of the Employer to nominate a succeeding Architect or Consultant in accordance with Articles 3.0 – Determination of Own Employment by Contractor PAM 1998 • A single notice is required to be delivered to the Employer or Architect by registered post or recorded delivery PAM 2006 • New ‘default’ under Cl. 26.

Cl. 30. 30.4 Set Off by Employer iii. 30. Cl. Cl.7 Suspension of Works for non-payment • Interim Certificate is issued to the Contractor with a copy to the Employer • ‘Certified Value Retained’ is now called ‘Retention Fund’(PAM 2006) Refer Figure 5 for Final Account Procedures Refer Figure 6 for Summary of Certificates and Payment .PAM 1998 PAM 2006 • Clarified that IC shall be issued after Practical Completion • IC is issued to Employer with a copy to the Contractor • New Clause: i.3 Errors in payment certificate ii.

0 Adjudication and Arbitration PAM 1998 • Without Adjudication clause • Arbitration is being referred to after practical completion PAM 2006 • Adjudication introduced • New sub-clause: Set off disputes referred to adjudication – condition precedent to arbitration prior to Practical Completion .Clause 34.

0 Performance Bond Clause 38.2 • All written notice or doc sent by facsimile shall also be sent by hand or ordinary mail or registered post soonest possible after such facsimile transmission • The performance bond to be valid until Completion Date + 3 months • If Sub-contract Works is not completed by the expiry date of Performance Bond.0 Notice Clause 37. 23. the bond is to be extended until the expected Practical Completion Date + 3 months • Self .explanatory • Standard provision in most contract .Clause 36.0 Governing Law • Permit issuing of notice through facsimile transmission (not applicable to Cl.2 & 24.

 PAM 2006 limit the rights of employers while reducing the risks borne by contractors if compared to PAM 1998  PAM 2006 increase employer’s exposure and burden in terms of claims and payments  PAM 2006 provide more possible grounds for disputes between Contractor and Employer Conclusion  . PAM 2006 is more procedural. All the parties involved are required to strictly adhere to notice requirements and time provision.

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