lOMoARcPSD|4327069

CIDB - Form of Contract used in construction industry

Professional Practice I (Universiti Malaya)

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CLAUSE EXPLAINATION
1.1 The Client’s The client’s obligation starts upon the insurance of letter of acceptance.
general obligations
The Client’s general
obligations include:

(i) giving timely It is used for the contractor to commence work on site. In the letter of acceptance, it
access to the project must state the date of starting work for contractor to enter the site (Clause A.6).
site This is where the time for the contractor to settle in the performance bond, the
insurances and the preliminary works at site before the date of possession.

Timely manner means the information is given within the proper time.
(ii) providing relevant For example, in the tender document, all relevant information must be clearly stated
information in a timely such as the time, places and date of the tender submission.
manner

For example, if they used lump sum tender, the client will pay fixed price to the
(iii) paying the contractor that have been agreed by both client and the contractor after all the works
Contractor based on the been done completely.

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At one time -
give during the
date of
Access to site commencement
- for contractor
to start the
works Progressively -
terms of this contract On the other hand, if they are using reimbursable clearly
contract, the contractor been pay by
mentioned
the client for the actual cost of performing the to
work plus additional payment to allow
Letter of
for an overhead and profit. Acceptance

Contract administrator is a person which appoint by the Client to administering the

(iv) naming a construction standard contracts.
Contract Administrator Replacement of contract administrator can be done when necessary accordance to
and a replacement client.
whenever necessary

(v) complying with all All the client’s obligation must be complied by any laws, regulations, by-laws including
relevant laws including written law.
statutory obligations

1.3 The Contract

Administrator
1.3.1 The Contract Contract administrator is a person which appoint by the Client to administering the

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Administrator must: construction standard contracts.

(i) provide all Timely manner means the information is given within the proper time.
available relevant For example, in the contract document, all relevant information must be clearly stated
information to the such as scope of work to be done by contractor (Clause A.4), date of starting work
Contractor in a timely (Clause A.6) and date for completing the work (Clause A.7).
manner

(ii) make all For example, if there is discrepancy between the bills of quantity and the drawing, the
decisions on issues contract administrator will look whether it is lumpsum contract based on drawing or
concerning quality, bills of quantity. If it is lumpsum contract based on bills of quantity, then the bills of
quantity, finance, time, quantity will be the priority and vice versa.
and the contract
(including resolving
discrepancies), except
where stated differently
in this contract

(iii) administer this Contract administrators are engaged by employers. However, in carrying out other
contract in a timely tasks, they must act impartially and fairly between employer and contractor.

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manner and carry out For example, in issuing the final payment, the contract administrator must evaluate
certification functions the work done by contractor thoroughly that is stated in the contract and within the
impartially date of completion.
Also, if the client is negligent towards the contractor, like not paying the contractor,
the contract administrator must advice the client to pay the contractor or else, the
client liable for breach of contract.

1.3.2 The Contract The Contract Administrator must finalize the accounts and issue a final payment
Administrator’s certificate within 30 days after the final completion certificate (Clause 3.6.1).
authority ends After that, the contract administrator’s authority releases automatically from the
automatically when the responsibility of managing the contract.
final payment
certificate is issued.

1.4 Instructions,
decisions,
certificates, claims,
and notices For example, the contract administrator may instruct the contractor to remove from
1.4.1 The Contract and not to bring to the Site such materials and goods.

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Administrator may Besides, instruct to demolish and reconstruct such work to comply with the Contract.
issue instructions Referring to 6.1.1, the client may terminate the contractor employment if he fails to
relating to the work follow the instruction given by the contract administrator.
until the final payment
certificate is issued.
The contract administrator’s instruction must be in written form and dated. It also
1.4.2 All Contract contains the short title of the contractor’s work. (Referring to the CNAR 02)
Administrator’s
instructions, decisions,
and certificates must be
dated and made in
writing.

1.4.3 No oral or written The contract administrator’s instruction is valid only when it is in written form.

instruction is valid
unless confirmed in
writing by the Contract
Administrator.

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1.4.6 All instructions,

decisions, certificates,
and notices and claims
must be in writing,
copied to all relevant
parties, and sent by
registered post or
delivered by hand with
acknowledgement by
the receiving party or
office.
1.5 Variations
1.5.1 The Contract Variation means the alteration or modification of design, quantity or quality of Works.
Administrator may All instruction issued by contract administrator to vary the work need to be approved
issue instructions to by Client first.
vary the work. All
instructions issued by
the Contract
Administrator are taken
to have had the Client’s
prior approval.
All variations instructed by contract administrator shall be measured and valued by

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1.5.2 If there is a contract administrator.

financial effect on the If the variation effects the contractor’s price, the value of varied work has to be
Contractor’s price, the included in the payment certificate.
Contract Administrator
must certify the value
of the varied work in
payment certificates.
2.1 Access to the
site, and the date for
starting and
completing the work
2.1.1 The Client may
give the Contractor
access to the relevant
areas of the project site
at one time or
progressively.

2.4 Suspension of
work
2.4.1 The Contract The contractor must suspend his work when the contract administrator issue
Administrator may instruction of work suspension for the contractor.

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issue instructions to In clause 6.1, it is stated the reasons of termination of contract’s employment by client.
suspend the work for In clause 6.3, it is stated about the compensation for termination for both client and
any reason. If so contractor.
instructed, the In clause 6.4, it stated the procedure of termination of the Contractor’s employment.
Contractor must
suspend the work.

2.5 Adjusting the

date for completing
the work
2.5.2 If the delay is due If there is any delay that is not due to faults and breach by the contractor, and the
to any of the following delay may affect the date for completing the work, the contract administrator can
reasons but not due to adjust the date of completing the work in an adjustment of time certificate (Referring
any breach by the to CNAR 06).
Contractor or those the
Contractor is Delay that cause by:
responsible for, the a) act or failure of client
Contract Administrator b) bad natural environment
must assess and decide c) government authority or statutory action
if the date for d) contractor suspension of work due to contract administrator’s instruction
completing the work is e) contractor suspension of work due to non-payment by client
affected and so, adjust

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the date for completing The contractor is entitled to get the extension of time.
the work in an
adjustment of time
certificate:

(i) The act or failure

to act by the Client, the For example, when the client fails to give site to the contractor on the date of site

Contract Administrator, possession because his site is occupied by illegal dump. Then, it takes time for the

or others engaged by work to remove the dump. So, the contractor can get extension of time if the time to

the Client or anyone get the site from client is long enough that can affect the completion of contractor’s

within their control. works.

(ii) Exceptionally bad

natural environmental
event (including For example, if the works is disturbed by natural environment or the building is

exceptionally bad collapsed during the defect liability period because of earthquake or typhoon, the date

weather) beyond the of completing works can be adjust.

control of the parties.

(iii) A government

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authority or statutory For instance, if accident happened that involve death on site, the local authority may
body action. instruct the contractor’s work to be stop, which cause the delay to complete the work.
If it is not due to any negligence or default by contractor, he can get extension of time.

2.6 Practical
completion and
practical completion
Practical completion achieved
certificate when
2.6.1 When the
Contract Administrator
decides the Contractor
has achieved practical
completion, the
Contract Administrator
the work is substantially minor work is completed /
must certify the complete rectified
practical completion
date in a practical
completion certificate.
(referring to clause 2.6.2)

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The contract administrator must comply the date of practical completion in the
practical completion certificate (Referring CNAR 07).

2.6.2 Practical
completion is achieved
when:

(i) the work under

this contract is The works have been completed in accordance with the terms and conditions in the
substantially complete; Contract.
and Substantially complete means the project is fit for occupancy and the client can use
the building as intended.

(ii) any minor

outstanding work and Minor outstanding work is works that is not complete been detect during the defect

any minor defective liability period, such as a certain wall that is not plaster yet.

work will not cause

major disruption to the Defect can cause if the works was not carried out in a good and workmanlike manner.

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Client when the minor Minor defective work is such as the uneven plastering on the wall.
work is completed or
rectified.

2.7 Defects liability

period and final
completion
certificate Defect liability period starts after the practical completion date.
2.7.1 The defects If the defect liability period is not stated, it is 12 weeks (referring to A.9).
liability duration is The defects liability period provides a practical mechanism to the Employer for the
stated in A.9 and starts repair or making good of defects which may not be apparent before completion.
the day after the Contractor must remedy defective work which becomes apparent during the defects
practical completion liability period.
date. Making the Contractor responsible for carrying out the repairs is usually cheaper and
more efficient than either the Employer repairing the defect itself or engaging a third
party to repair the defect.

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(Referring to clause 4.2.1) If Contractor fail to rectify any breach immediately, the
contract administrator may instruct contractor:
2.7.2 The Contract Get others to rectify
Administrator may the breach
1. To rectify
instruct the Contractor Fail to rectify
the breach (in within 7 days
to rectify all breaches written form)
including defects at any Deduct from payment
certifies all costs
time throughout the
project until the final
2. Not to Contract
completion certificate is rectify the administrator adjust
breach (in the value work done
issued.
written form)

2.7.3 The Contract For example:

Administrator must - the date for rectified breaches is on 12 December 2017.

issue a final - the date for defect liability period end is on 12 February 2018.

completion certificate Therefore, the final completion certificate is issued at the end of defect liability period.

when all breaches If not stated in contract, the final completion certificate issued 12 weeks from the

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including defects are practical completion date (referring to A.9).

rectified, or at the end
of the defects liability
period stated in A.9,
whichever is later.
2.8 Non-completion
and compensation
for delay
2.8.3 The total Referring to clause 2.8.1 and clause 2.8.2,
liquidated damages
Contractor
payable is calculated Contract Contractor
does not
administrator must pay
from the day after the complete the
issue a non- liquidated
work by date
completion damages for
current contractual of work
certificate the delay
completion
date for completing the
work to the practical
completion date. The To calculate the total of liquidated damages:
Contract Administrator - after the date of work completion to date of practical completion
must certify this in The liquidated damages are calculated by per day (referring to A.10).
payment certificates. The total of liquidated damages must certify in payment certificates.

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3.1 Price for the

work The total price for the work stated in A.5 is the contract sum that client have to pay to
3.1.1 The total price for the contractor.
the work is stated in
A.5. This, or an
adjusted sum, is the
sum the Client must
pay the Contractor for
the work done.

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3.1.2 If the total price is

not stated, the Contract
If price not stated
Administrator must
in contract
calculate the price for
the Contractor’s work
based on actual work
contract administrator
done and the rates must calculate the price
stated in this contract. for contractor’s work:

If the rates are not

stated, then fair market
based on actual using fair market
rates must be used. work done & rates
rates in contract

Actual work done is work done by contractor include the overhead and profit.
Fair market rates are the price that property would sell for on the open market.

3.3 Performance

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guarantee insurance
and retention sum
3.3.2 If the Contractor Performance guarantee insurance is to provide an assurance of compensation in the
does not provide the event of inadequate or delayed performance on a contract.
performance guarantee
insurance, then the Retention sum is certain amount that retained by client to ensure that the contractor
Contractor is taken to properly completes the activities required of them under the contract.
have opted for a
retention sum instead. The contract administrator must retain 10% of total amount certified as the cumulative
The Contract value of work done by the Contractor as retention sum if contractor does not provide
Administrator must performance guarantee insurance.
then retain 10% of the
total amount certified The limit of amount for performance guarantee insurance is equivalent to 5% of the
as the cumulative value total price for the work or estimated total price if there is no pre-agreed total price if it
of work done by the is not stated (referring to A.12).
Contractor under a
progress payment as a
retention sum up to the
limit of the amount for
performance guarantee
insurance stated in

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A.12.

3.4 Advance,
payment claims, and
payment certificates
3.4.1 If this contract If there is advance payment, the Contract administrator must issue payment certificate
provides for an advance for advance amount.
to be paid by the Client Payment certificates are based on actual work valued (referring to clause 3.4.2)
as stated in A.13, the
Contract Administrator
must issue a payment
certificate for the
advance amount.

If there is advance payment or claims, the contract administrator must assess and
3.4.4 The Contract
value before issue a payment certificate within 7 days of receiving a payment claim.
Administrator must
assess and value all
entitlement provided in
this contract and issue
a payment certificate
within 7 days of
receiving a payment

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claim.
3.4.5 The Client must If it is not stated, it will be 7 days from the date of any payment certificate including
pay the Contractor the the final payment certificate (referring to A.14).
net amount due stated
in payment certificates The net amount due is include the total additions minus total deductions that stated in
including the final payment certificate (referring to clause 3.5.3).
payment certificate not
later than the time
state in A.14.

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3.5 Contents of
payment certificates
3.5.3 Net amount due

The Client must pay the Referring to clause 3.5.1, addition in payment certificate:

Contractor the net a) cumulative value work done by contractor and subcontractor based on contract

amount due (total rates, if none are stated, based on fair market rates.

additions minus total b) Net value of varied work

deductions) stated in c) Compensation for direct financial loss and expense by contractor

payment certificates
including the final Referring to clause 3.5.2, deduction in payment certificate:

payment certificate, not a) Advance payment, if any

later than the time b) Cumulative value certified under previous certificates

stated in A.14. c) Adjustment value of completed work follow a breach of non-rectified instruction
by contract administrator
d) Compensation for direct financial loss and expense by client
e) Retention sum

If it is not stated, it will be 7 days from the date of any payment certificate including
the final payment certificate (referring to A.14).

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3.6 Final payment

certificate and
release of retention
sum Before issue a final payment certificate, the contract administrator:
3.6.1 Within 30 days a) Finalize the account
after the final b) Release any retention sum after all adjustment
completion certificate, within 30 days after the final completion certificate.
the Contract
Administrator must
finalize the accounts
and release any
retention sum after all
adjustments and issue
a final payment
certificate.

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3.6.2 The Client must The client must pay the contractor the net amount due stated in final payment
pay the Contractor (or certificate.
vice versa as
appropriate) the net The net amount due is include the total additions minus total deductions that stated in
amount due stated in payment certificate (referring to clause 3.5.3).
the final payment
certificate not later If it is not stated, it will be 7 days from the date of any payment certificate including
than the time stated in the final payment certificate (referring to A.14).
A.14.

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6.1 Termination of
the Contractor’s
employment by the
Client
6.1.1 If the Contractor
defaults by:

For example, the contractor does not do his work regularly within the proper time and
(i) not proceeding
often skip the work that may cause delay to the project.
with the work in a
regular and timely
manner;

Referring to clause 2.4.1, the Contract Administrator may issue instructions to suspend
(ii) stopping or
the work for any reason. If so instructed, the Contractor must suspend the work.
suspending the work
without valid grounds;

Referring to clause 1.4, the contract administrator may issue instructions relating to
(iii) not complying
the work until the final payment certificate is issued and the instruction must be in
with the Contract
written form.
Administrator’s
instructions; or

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(iv) not rectifying a Referring to clause 2.7.2, the Contract Administrator may instruct the Contractor to
breach instructed by rectify all breaches including defects at any time throughout the project until the final
the Contract completion certificate is issued.
Administrator to be
rectified within the time
provided in this If not rectify, the contract administrator gives written notice to the contractor.
contract;
then the Contract The notice instructs the contractor to rectify the default.
Administrator may give
a written notice to the
Contractor stating what
the default is. The
notice must instruct the
Contractor to rectify the
default and warn of a
possible termination if
the default is not
rectified.

In clause 2.7.2, the Contract Administrator may instruct the Contractor to rectify all
breaches including defects at any time throughout the project until the final completion
certificate is issued.

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6.1.2 If the Contractor

does not rectify the
default within the
period specified by the
Contract Administrator
(if not specified, then
the period is taken to
be within 7 days from
the date the Contractor
receives the notice),
the Client may then
terminate, in writing,
the Contractor’s
employment. This
For example, the contractor does not comply the Contract Administrator instruction or
termination must occur
rectify breach.
within 7 days following
the end of the specified
The Client may terminate the Contractor’s employment within 7 days from the date of
period.
the default without further notice, in written form.

6.1.3 If the Contractor

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commits any
subsequent default that
is a ground for
termination of the
Contractor’s
employment, whether
the same ground or a
different one, the Client
may terminate, in
writing, the
Contractor’s
employment within 7
days from the date of
If the contractor becomes bankrupt or insolvent or has a winding-up order made, the
the default without
client may terminate his employment immediately.
giving further notice.

6.1.4 The Client may

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terminate, in writing,
the Contractor’s
employment
immediately if the
Contractor becomes
bankrupt or insolvent or
has a winding-up order
made.

6.3 Compensation
following
termination If termination occur, the default party must pay compensation as certified by Contract
Following valid Administrator in payment certificates.
termination of the
Contractor’s For examples, the client terminates the contractor’s employment because he does not
employment by the comply with the contract administrator instructions.
Client or Contractor, the
defaulting party must So, the contractor must pay the compensation for all direct financial loss and expense.

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pay compensation for

all direct financial loss
and expense incurred
by the other as certified
by the Contract
Administrator in
payment certificates.

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6.4 Procedures
following Procedures of Termination of
Contractor’s Employment
termination of the
Contractor’s all plant, equipment,
employment materials, and labour that the Contractor must
are to be retained on or demobilize from the
Termination of removed from the project project site (within 3 days
site (within 7 days from from Contract
Contractor’s the date of termination of Administrator instruction)
contractor's employment)
employment by Client.

the Client and the

the Contract
Contractor must submit
Administrator must
all claims (within 30 days
prepare a payment
from the date of
certificate (within the next
termination of
30 days)
contractor's employment)

the Client and the

Contractor must submit
all final claims under this
contract (as soon as
possible) to Contract
Administrator

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7 Resolution of
disagreements
7.1 Negotiation and Disagreement arises
Between contracting
mediation parties

Negotiation Mediation
(Clause 7.1.1) (Clause 7.1.2)

Reach a settlement Appoint a neutral party

not agree on
a mediator

Write to person named

in A.6 for a mediator to
be nominated & briefly
outline the
disagreement

Reach a settlement

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Negotiation is a process where two parties in a conflict or dispute (fight) reach a

settlement between themselves that they can both agree on. Negotiations are reached
through discussions made between the parties or their representatives without an
involvement of the third party.

Mediation means the process in which a neutral (means not supporting any one side)
third party assists the parties in conflict to reach a solution. The third party is called
the mediator and the mediator facilitates communication between the parties. The
mediator manages communication process between the parties fairly, honestly and
impartially. 

If is not stated for person who nominates a mediator, it will be an authorized

representative from the Kuala Lumpur Regional Centre for Arbitration (Referring to
A.16).

The parties can choose either:

a) any mediation procedure
b) procedures chose by mediator

If settlement reach, the parties are bound by settlement contract terms.

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7.2 Arbitration
Arbitration can be referring if a final and binding resolution is required for all remaining
disagreements (Clause 7.2.1).

The work is
certified to be
practically
complete by
the Contract
Administrator. One party
thinks that
Both parties party’s
agree to go to obligations
arbitration (in under this
written form) contract have
been
Arbitration completed
can start and
continue
after any one
of this.
One party acts
as if that party
Termination of
is not bound
contract
by this
contract.

Termination of
Contractor's
employment

This method will have to go for court proceeding, which is the cases will be hearing by
judge.

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If the parties do not agree on one arbitrator, they may write to the person named in
A.17 for an arbitrator to be nominated in written form with a brief outline of the
disagreement (refer to clause 7.2.3).

If there is no named stated in A.17, the authorized representative will be from Kuala
Lumpur Regional Centre for Arbitration.

The arbitrator is considered appointed once an arbitrator accepts a nomination.

Roles of arbitrator:
a) may decide the procedures and rules if both parties do not agree on adopted
arbitration procedures and rules.
b) may revise any Contract Administrator’s decisions and certificates
c) make decisions that Contract Administrator does not make

Arbitration under this contract is governed by the Arbitration Act prevailing in Malaysia
(refer to clause 7.2.6).
Following below is the link for Arbitration Act 2005.
http://www.agc.gov.my/agcportal/uploads/files/Publications/LOM/EN/Act%20646%20-

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%20Arbitration%20Act%202005.pdf

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