RQS#Leong Khar Yee#20WVR12809

BTQS3063 PROJECT AND DISSERTATION II
THE EFFECTS OF COVID-19 ACT ON THE APPLICATION OF

LIQUIDATED DAMAGES IN MALAYSIAN CONSTRUCTION
INDUSTRY
BY
LEONG KHAR YEE
DEPARTMENT OF QUANTITY SURVEYING

FACULTY OF BUILT ENVIRONMENT
TUNKU ABDUL RAHMAN UNIVERSITY COLLEGE
KUALA LUMPUR
2022/2023
i
THE EFFECTS OF COVID-19 ACT ON THE APPLICATION OF LIQUIDATED
DAMAGES IN MALAYSIAN CONSTRUCTION INDUSTRY
by
LEONG KHAR YEE
Supervisor: Mr. Pang Khai Shuen
Project dissertation submitted in partial fulfilment of the requirements for the award
of the Bachelor of Quantity Surveying (Honours)
Department of Quantity Surveying
Faculty of Built Environment
Tunku Abdul Rahman University
College, Kuala Lumpur
2022/2023
Copyright © 2023 by Tunku Abdul Rahman University College.
All rights reserved. No part of this dissertation may be reproduced, stored in a
retrieval system, or transmitted in any form or by any means without the prior
permission of Tunku Abdul Rahman University College.
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DECLARATION OF ORIGINALITY
“The project submitted herewith is a result of my own investigations. All information that
has been obtained from other sources has been fully acknowledged. I understand that
plagiarism constitutes a breach of University College rules and regulations and would be
subjected to disciplinary actions.”
Signature
Leong Khar Yee
Date: 25th September 2022
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ACKNOWLEDGEMENT
First and foremost, I would like to express my gratitude to Mr. Pang Khai Shuen, my subject
supervisor, for providing me proper guidance and supervision throughout the academic
semester. He used to lead me on the right track by using his professional opinions and
suggestions. I would also like to take this opportunity thanks to the Faculty of Built
Environment at Tunku Abdul Rahman University College (TARUC) for giving students an
opportunity to be involved in this project dissertation I as a part of my degree programme.
Besides, I would also like to thanks to my classmate, Lau Juen Sien in giving me valuable
information during the research progress in order to complete my research successfully.
Last but not least, I am grateful to have my family accompany me in giving me motivation and
support. I am very appreciative for their kind cooperation and encouragement by giving me a
good environment to study and complete my dissertation successfully within the limited time
frame.
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TABLE OF CONTENT
DECLARATION OF ORIGINALITY .............................................................ii
ACKNOWLEDGEMENT ................................................................................ iii
TABLE OF CONTENT .....................................................................................iv
LIST OF FIGURES ............................................................................................ x
LIST OF TABLES .............................................................................................xi
LIST OF SYMBOL / ABBREVIATION ...................................................... xiii
ABSTRACT ......................................................................................................xiv
Chapter 1 Introduction....................................................................................... 1
1.1 Research Background .................................................................................................. 1
1.2 Problem Statement ...................................................................................................... 3
1.3 Previous Similar Studies ............................................................................................. 5
1.4 Research Aim .............................................................................................................. 6
1.5 Research Question ....................................................................................................... 6
1.6 Research Objective ...................................................................................................... 6
1.7 Scope and Limitations ................................................................................................. 6
1.7.1 Scope .................................................................................................................... 6
1.7.2 Limitation............................................................................................................. 7
1.8 Importance of Research ............................................................................................... 7
1.9 Research Design .......................................................................................................... 8
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1.10 Structure of the Report ................................................................................................ 9
Chapter 2 Literature Review ........................................................................... 11
2.1 Introduction ............................................................................................................... 11
2.1.1 Section 75 Contract Act 1950 ............................................................................ 11
2.2 Enforceability of Liquidated Damages ..................................................................... 12
2.2.1 Case Study ......................................................................................................... 12
2.2.1.1 Malaysia Law ............................................................................................. 12
2.2.1.2 Foreign law ................................................................................................. 13
2.3 Types of liquidated damages ..................................................................................... 15
2.3.1 Liquidated damages ........................................................................................... 15
2.3.2 Unliquidated damages ........................................................................................ 16
2.4 Benefits and drawbacks of having a Liquidated Damages clause in a contract ........ 17
2.4.1 Developer ........................................................................................................... 17
2.4.1.1 Benefits ....................................................................................................... 17
2.4.1.2 Disadvantages ............................................................................................. 18
2.4.2 Contractor .......................................................................................................... 20
2.4.2.1 Benefits ....................................................................................................... 20
2.4.2.2 Disadvantages ............................................................................................. 21
2.4.3 Summary ............................................................................................................ 21
2.5 The application in enforcing Liquidated Damages during pre-stage and final account
negotiation and the factors affecting liquidated damages enforce due to delay................... 22
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2.5.1 Negotiation......................................................................................................... 22
2.5.2 Calculation of Liquidated Damages................................................................... 24
2.5.2.1 Developer to Purchaser ............................................................................... 24
2.5.2.2 Main Contractor to Sub-Contractor ............................................................ 24
2.5.2.3 Developer to Main Contractor .................................................................... 25
2.5.3 Type of damages caused by delay ..................................................................... 28
2.6 Enforcement of Liquidated Damages due to Covid-19 Pandemic ........................... 30
2.6.1 Relationship Between the Developer and Main Contractor .............................. 30
2.6.2 Relationship between Developer and Purchaser ................................................ 33
2.7 Conclusion................................................................................................................. 35
Chapter 3 Research Methodology ................................................................... 36
3.1 Introduction ............................................................................................................... 36
3.2 Research process ....................................................................................................... 37
3.3 Techniques for Data Collection................................................................................. 38
3.3.1 Secondary Data Collection ............................................................................... 38
3.3.2 Primary Data Collection ................................................................................... 38
3.4 Development of Research Instrument ....................................................................... 39
3.4.1 Questionnaire Design ......................................................................................... 39
3.4.1.1 Section A .................................................................................................... 40
3.4.1.2 Section B..................................................................................................... 40
3.4.1.3 Section C..................................................................................................... 41
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3.4.1.4 Section D .................................................................................................... 41
3.4.2 Type of Questions .............................................................................................. 42
3.4.2.1 Closed and Open - Ended Question ............................................................ 42
3.4.2.2 Checklist Question...................................................................................... 43
3.4.2.3 Likert Scale ................................................................................................. 44
3.5 Pre-testing Research Instrument................................................................................ 44
3.6 Sampling Method ...................................................................................................... 45
3.6.1 Population .......................................................................................................... 46
3.6.2 Sample................................................................................................................ 46
3.7 Technique for Data Analysis ..................................................................................... 48
3.7.1 Univariate Analysis ............................................................................................ 49
3.7.2 Relative Importance Index (RII) ........................................................................ 49
3.8 Research Model / Conceptual Framework ................................................................ 50
3.9 Summary ................................................................................................................... 54
CHAPTER 4 Data Analysis ............................................................................. 55
4.1 Introduction ............................................................................................................... 55
4.2 Data Collection.......................................................................................................... 55
4.3 Response Rate ........................................................................................................... 55
4.3.1 Response Rate for Pre-Test Survey ................................................................... 55
4.3.2 Response Rate for Questionnaire Survey .......................................................... 56
4.4 Result Analysis of Pre-Test Survey .......................................................................... 56
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4.5 Result Analysis of Questionnaire Survey.................................................................. 56
4.5.1 Demographic Information.................................................................................. 57
4.5.2 Findings in Relation to Objective One: Types, Advantages and Disadvantages
of Having Liquidated Damages Clause in Contract to Developer and Contractor .......... 62
4.5.3 Findings in Relation to Objective Two: Application in Enforcing Liquidated
Damages during Pre-Stage and Final Account Negotiation and the Factors Affecting
Liquidated Damages Enforce Due to Delay ..................................................................... 73
4.5.4 Findings in Relation to Objective Three: How the Covid-19 Act Affects the
Enforcement of Liquidated Damages ............................................................................... 75
4.6 Summary of Quantitative Data Analysis ................................................................... 82
CHAPTER 5 CONCLUSION .......................................................................... 83
5.1 Introduction ............................................................................................................... 83
5.2 Research Findings ..................................................................................................... 83
5.2.1 Findings in Relation to Objective One: Types, Advantages and Disadvantages
of Having Liquidated Damages Clause in Contract to Developer and Contractor .......... 83
Liquidated Damages Enforce Due to Delay ..................................................................... 84
Enforcement of Liquidated Damages ............................................................................... 85
5.2.4 Summary of Research Findings ......................................................................... 86
5.3 Limitation of Study ................................................................................................... 86
5.4 Recommendations of Future Studies......................................................................... 87
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5.5 Conclusion................................................................................................................. 87
REFERENCES .................................................................................................. 88
APPENDICES ................................................................................................... 92
Appendix A: Questionnaire.................................................................................................. 92
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LIST OF FIGURES
Figure 1.1 Comparison of Time Deviation of Public and Private Project ................................. 1
Figure 1.2 Comparison of Public Sector and Private Sector ..................................................... 2
Figure 3. 1 Research Journey (Kumar, 2010, p.37) ................................................................. 36
Figure 3. 2 Eight Steps Model in Research Process (Kumar, 2010, p.39)............................... 37
Figure 3. 3 Section A Question ................................................................................................ 40
Figure 3. 4 Closed-Ended Question ......................................................................................... 42
Figure 3. 5 Open-Ended Question ........................................................................................... 43
Figure 3. 6 Checklist Question................................................................................................. 43
Figure 3. 7 Research Framework Diagram .............................................................................. 51
Figure 3. 8 Programme Chart for PD I .................................................................................... 52
Figure 3. 9 Programme Chart for PD II ................................................................................... 53
Figure 4. 1 Respondents’ Gender............................................................................................. 57
Figure 4. 2 Respondents’ Highest Education Level................................................................. 58
Figure 4. 3 Respondents’ Type of Firm ................................................................................... 59
Figure 4. 4 Respondent’s Years of Working Experience ........................................................ 61
Figure 4. 5 Preference of Construction Parties on Having liquidated damages Clause in the
Contract .................................................................................................................................... 64
Figure 4. 6 Rate of Liquidated Damages Per Day ................................................................... 69
Figure 4. 7 Reason Choosing Rate of Liquidated Damages Base on Above Question ........... 70
Figure 4. 8 Agreement of Respondents Towards Type of Damages Caused by Delay ........... 73
Figure 4. 9 Entitlement of Developer to Impose Liquidated Damages Due to Lockdown ..... 75
Figure 4. 10 Number of Agreement on Reason Unable to Impose Liquidated Damages ....... 80
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LIST OF TABLES
Table 1. 1 Research Design of this thesis .................................................................................. 8
Table 2. 1 Direct Cost Incurred under the Contract ................................................................. 25
Table 2. 2 Additional Project Administration Costs ................................................................ 26
Table 2. 3 Interest and Financing Costs ................................................................................... 26
Table 2. 4 Assumption of Liquidated Damages....................................................................... 26
Table 3. 1 Research Design of this thesis ................................................................................ 41
Table 3. 2 Z - table ................................................................................................................... 47
Table 4. 1 Respondents’ Gender .............................................................................................. 57
Table 4. 2 Respondents’ Highest Education Level .................................................................. 58
Table 4. 3 Respondents’ Type of Firm .................................................................................... 59
Table 4. 4 Respondent’s Years of Working Experience .......................................................... 61
Table 4. 5 Frequency and Percentage of whether Paying Liquidated Damages to the Innocent
Parties in Common Scenario.................................................................................................... 62
Table 4. 6 Relationship between Thoughts of Construction Parties on whether Paying
Liquidated Damages is a Common Scenario and the Years of Working Experience ............. 63
Table 4. 7 Preference of Construction Parties on Having Liquidated Damages Clause in the
Contract .................................................................................................................................... 64
Table 4. 8 Preference of Construction Parties on Having Liquidated Damages Clause in
Contract Throughout the Years of Experience ........................................................................ 65
Table 4. 9 Benefits of Having Liquidated Damages in the Contract to the Developer ........... 66
Table 4. 10 Benefits of Having Liquidated Damages in the Contract to the Contractor ......... 67
Table 4. 11 Drawbacks of Having Liquidated Damages in the Contract to the Developer and
Contractor ................................................................................................................................ 68
Table 4. 12 Rate of Liquidated Damages Per Day................................................................... 69
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Table 4. 13 Reason Choosing the Rate of Liquidated Damages Base on the Above Question
.................................................................................................................................................. 70
Table 4. 14 Agreement of Respondents Towards Type of Damages Caused by Delay .......... 73
Table 4. 15 Entitlement of Developer to Impose Liquidated Damages Due to Lockdown ..... 75
Table 4. 16 Opinion of Construction Parties on whether Developer Entitled to Impose
Liquidated Damages to Main Contractor ................................................................................. 76
Table 4. 17 Table Respondents’ Responses ............................................................................. 77
Table 4. 18 Agreement on Reason Unable to Impose Liquidated Damages ........................... 80
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LIST OF SYMBOL / ABBREVIATION
ADR Alternative Dispute Resolution
CMCO Conditional Movement Control Order
CIDB Construction Industry Development Board
CIPAA Construction Industry Payment and Adjudication Act
CAR Contractor's All Risk Insurance
EOT Extension of Time
LAD Liquidated And Ascertained Damages
LD Liquidated Damages
MCO Movement Control Order
PAM Pertubuhan Arkitek Malaysia
PCIDA Prevention and Control of Infectious Disease Act 1988
PWD Public Works Department
RMCO Recovery Movement Control
SPA Sale And Purchase Agreement
Covid-19 Act Temporary Measures for Reducing the Impact of Coronavirus Disease
COVID-19 Act 2020
RII Relative Important Index
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ABSTRACT
This dissertation was carried out in order to determine the application of Liquidated Damages
clause in a different situation and focus on the types of liquidated damages, advantages and
disadvantages of the construction parties to enforce the Liquidated damages clause in the
Malaysian construction industry.
Paying liquidated damages to innocent parties due to a breach of certain provisions or criteria
in the contract such as the delay of the project is a very common phenomenon in the Malaysian
construction industry. Liquidated damages can be detrimental to a company as the amounts are
very high. Normally if a construction company fails to complete their work on time, they will
need to pay a certain amount of liquidated damages according to the contract but there may be
some liquidated damages that are not enforced or partially enforced which need to depend on
the situation. Basically, the Malaysian scene for liquidated damages is different from foreign
countries as every country has its contract provision. Although the contract has stated the
provision in the Appendix regarding the amount of liquidated damages to be paid due to the
delay of the project yet there may have been a commercial settlement between both companies’
top management. This research provides information on the study of liquidated damages and
focuses on the application and effect of the liquidated damages in the Malaysian Construction
Industry including the benefits and drawbacks of having the Liquidated Damages clause in the
contract, the calculation of preparing the amount of liquidated damages and others. This
research even allows construction parties to have a further understanding of their rights which
they are entitled to recover for compensation, especially during the lockdown which was
imposed by the Malaysian government due to the Covid-19 pandemic. This is owing to the fact
that many of the construction parties especially those senior managements that were early
involved in the construction industry might be unaware of this statement. Furthermore, a
questionnaire has been formed in order to collect the data from the respondents to analyse it.
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All the respondents are from the construction parties which work in Malaysia as the targeted
group. Lastly, it is anticipated that this research will be able to provide the details related to the
liquidated damages and also increase the awareness of construction parties on reading through
all the details in the contract before signing an agreement in order to protect our own priority.
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Chapter 1 Introduction
1.1 Research Background
Nowadays, construction is considered one of the most difficult sectors in Malaysia. All
the construction companies are currently competing against each other for a single project
which causes the competition to become even harder as the winner always only has one.
However, bidding a project successfully does not mean that company will earn a profit.
In fact, around 70% of the project failed due to failure of project management, budget
overrun, lack of communication and others (TeamStage, 2022). The management of a
construction business must be meticulously planned and closely monitored because the
success or failure of the business will depend on every single small step.
In the construction sector, there are various kinds of projects, including government and
private projects. To give an example, the Malaysian government had established that
when a project is delayed beyond the agreed-upon completion date by more than one
month or by 10 percent from the planned completion date, the project will be considered
to be a delay by the Malaysian government (Nor Aida, Syuhaida & Faizal, 2019). At this
moment, the Liquidated damages clause is valid and enforceable.
Figure 1.1 Comparison of Time Deviation of Public and Private Project
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Figure 1.2 Comparison of Public Sector and Private Sector
Figure 1.1 and figure 1.2 show that 20.5% of public sector projects and 33.3% of the
private sector projects were completed within the expected time without delaying the
project. On the other hand, it shows that 79.5% and 66.7% of public sector and private
sector projects respectively were not completed within the expected time (Rohani,
Akintoye & Kelly, 2005). As the saying goes, “Time is gold”. Nevertheless, delaying
projects is a global scenario including Malaysia because there are a lot of unpredictable
things due to the weather, site conditions and others (FU, 2013).
Eventually, constructing a project requires well planning and a good construction
schedule. The importance of a construction schedule is the good planning of the sequence
of work for plant and machinery, acting as a guideline and references for construction
parties to show the milestones of the project. Besides, Architect will use the work
schedule as a guideline to determine when is the contractors need to complete their work
and allow the Employer to recover the amount of liquidated damages when the contractor
fails to comply with the contract unless the delayed activities lie on the critical path of the
project (Lorman, 2018).
2
There are lots of types of the standard form of contract in this construction industry such
as PAM 2018, PWD Form 203A, IEM, CIDB 2000, AIAC and FIDIC forms of contracts.
A standard form of contract is a set of documents, an agreement, provision without
negotiation and in printed form (Faircontracts.org, 2022). It is used to govern the
contractual relations of the contracting parties (Ting, 2013). It is very common to see
liquidated damages as the standard form provision in the construction contract especially
in the Pertubuhan Arkitek Malaysia (PAM) Condition of Contract 2018 (With/Without
Quantities). As a result, commonly a standard form of construction contract is written to
allow both parties to agree on the amount of damages to be paid in the event of late
completion. Using it to prevent contractors breach the contract and compensate when
breaching the contract occurs.
1.2 Problem Statement
Paying liquidated damages to innocent parties due to a breach of certain provisions or
criteria in the contract such as the delay of the project is a very common phenomenon in
the Malaysian construction industry. Liquidated damages can be detrimental to a
company as the amounts are very high. Hence, the contractor should be aware of this and
avoid liquidated damages.
It is undeniable that delaying construction projects is a very common phenomenon in the
construction industry. When the contractor delays in completing the construction project
without granting any extension of time, the Architect shall issue a Certificate of Non-
Completion under PAM Contract 2018 Clause 22.0. The contractor may need to
compensate the innocent parties for their loss. There will be a financial impact on the
construction company. However, many parties still fail to comply with the clause due to
the failure of planning and sequence the work. There will be some criteria needed to be
fulfilled for a liquidated damages clause to be enforceable. Normally if a construction
3
company fails to complete their work on time, they will need to pay a certain amount of
liquidated damages according to the contract but there may be some liquidated damages
that are not enforced or partially enforced which need to depend on the situation. The
cases to be refer such as Selva Kumar Murugiah v Thiagarajah Retnasamy [1995] 1 MLJ
817, Cubic Electronics Sdn Bhd (in liquidation) v Mars Telecommunications Sdn Bhd
[2019] 6 MLJ 15 and Black J in Roberts v Bury Commissioners (HHQ, 2019).
Furthermore, there is a different between LD and LAD and different standard form of
contract using different terms. When there is a liquidated damages clause in the contract
during tender, there may be risks faced by the developer and contractor. In the view of
the contractor, no one knows if there is any delay happening once the project starts yet if
the contractor can foresee that they are not able to complete the project on time, then they
might mark up a higher percentage in the preliminaries in order to cover their loss and
damages in the future as the higher the risk, the higher contractor bid price (Laryea &
Hughes, 2008). Consequently, the client may need to pay more too. On the other hand, if
a contractor is unable to complete the project on time, then they will need to pay a large
number of liquidated damages as compensation to the client.
Apart from that, there are two types of liquidated damages which are liquidated and
unliquidated damages. Both are the amount needed to be paid to the innocent parties due
to the breach of contract but also have some differences too. In fact, the liquidated
damages could bring advantages and disadvantages to the construction parties. Not only
that, sometimes there might be a problem if one of the parties does not agree with the
amount of liquidated damages and both are not in a mutual agreement. Hence, they might
bring the case to the court or CIPAA for dispute resolution.
4
On top of that, the Covid-19 pandemic is a triggering event that meets the Force Majeure
criteria. The contractor able to use this contract provision to exclude its contractual
liability due to the delay is not his default but he needs to prove its causation and ensure
effects. However, there might be some restrictions to the contractor to claim an extension
of time which leads to being required to pay liquidated damages.
1.3 Previous Similar Studies
In 2007, an article titled “Liquidated Damages: A Comparative Study of Law in England,
Australia, New Zealand, and Singapore” by John Twyford was published in the Journal
of Professional Issues in Engineering Education and Practice 133(3). This research aim
was to examine the difference in Liquidated Damages provision in different countries. It
had shown that it was only a little different due to the courts in each jurisdiction having
relied on similar precedents.
In the year 2017, Nurul Iman BT Mustaffar Kamar published “Time at Large: Implication
for Liquidated Damages”. This research aim was to determine whether the circumstances
of “Time at Large” can be accepted to avoid paying liquidated damages when the delay
event occurs. In the result, it shows that the Contractor might utilise “Time at Large” to
avoid the imposition of liquidated damages from the Employer.
Another recent study by Tan Mei Lee in the year 2021, titled “Burden on developers
continues: payment of liquidated damages under Covid-19 Act”, aimed to discuss on
whether developers are able to exempt the right to pay liquidated damages to the
purchaser due to unable to hand over possession during the Covid-19 pandemic. In result,
it shows that the developer shall pay liquidated damages to the purchaser.
5
1.4 Research Aim
This research aim is to study the application of Liquidated Damages clause in a different
situation and focus on the types of liquidated damages, advantages and disadvantages of
the construction parties to enforce the liquidated damages clause in the Malaysian
construction industry.
1.5 Research Question
1) What are the types, benefits and drawbacks of having a Liquidated Damages clause in
a contract to the construction parties?
2) What is the application in enforcing Liquidated Damages during pre-stage and final
account negotiation and the factors affecting liquidated damages enforce due to delay?
3) How does Covid-19 Act affect the enforcement of Liquidated Damages?
1.6 Research Objective
1) To identify the types, advantages and disadvantages of having a Liquidated Damages
clause in a contract to the developer and contractor.
2) To investigate the application in enforcing Liquidated Damages during pre-stage and
final account negotiation and the factors affecting liquidated damages enforce due to
delay.
3) To find out how the Covid-19 Act affects the enforcement of Liquidated Damages.
1.7 Scope and Limitations
1.7.1 Scope
The scope of this research mainly focused on the study of Liquidated Damages in the
Malaysian construction industry. Since the amount of occurrence of contractor pay
liquidated damages are more and more due to failure to comply and breach the contract.
6
However, these issues can be improved once all the related parties are able to manage
well. This research also covered the application of enforcing the Liquidated Damages
clause in different situations. Likewise, the types, benefits and drawbacks of having a
Liquidated Damages clause in a contract to the developer and contractor. Therefore,
everyone should not brush this issue aside. The standard forms of contract and act that
will be referred to in this research are:
1. Pertubuhan Arkitek Malaysia (PAM) Condition of Contract 2018 (With/Without
Quantities)
2. Temporary Measures for Reducing the Impact of Coronavirus Disease (COVID-
19) Act 2020 (COVID-19 Act)
3. Housing Development (Control and Licensing) Regulations 1989
1.7.2 Limitation
1) The target group of respondents will be all the parties that are involved in the
construction industry such as Developers, Consultants, and Contractors that are registered
with the Construction Industry Development Board (CIDB).
2) The questionnaire will be only issued to all the parties involved in the construction
industry to investigate the study of Liquidated Damages.
1.8 Importance of Research
Doing this research is to highlight the preference of construction parties in
enforcing the Liquidated Damages clause and find out the reason that may affect their
preference. The advantages, and disadvantages of the liquidated damages clause in order
to prevent all the parties from leaving this issue aside. It also shows the enforcement of
the liquidated damages clause when meeting the situation of Covid-19 pandemic.
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1.9 Research Design
Table 1. 1 Research Design of this thesis

Objectives Types of Data Sources of Data Methods of
Required Data
Collection
To identify the types, - Industry preference Primary Data
advantages and Questionnaire
disadvantages of having a - Comparison on among the
Liquidated Damages benefits and Malaysian
clause in a contract to the drawbacks of construction parties
developer and contractor. liquidated damages to
Developers and
Contractor
To investigate the - Agreement on type Quantitative:

application in enforcing of damages caused by Survey
Secondary Data Questionnaire
Liquidated Damages delay Comprehensive
during pre-stage and final literature review on
account negotiation and articles, journals,
the factors affecting reports, internet,
liquidated damages publications from
enforce due to delay. professionals and
others
To find out how the - Established the
Covid-19 Act affects the opinion enforcement
enforcement of of liquidated damages
Liquidated Damages. from the construction
parties
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1.10 Structure of the Report
This thesis will be structured as follows
Chapter 1 – Introduction
This opening chapter presents the readers with the research background, problem
statement, previous similar studies, research aim, research objective and question, scope
and limitation, significant study and structure of research. The previous similar studies
are intended to assist the researcher in selecting the most appropriate methodology, data
sources, and data analysis methods for own research. However, the purpose of the scope
and limitation is to define the boundaries of the study problem that is to be examined in
more detail
Chapter 2 – Literature Review
The literature review chapter provides sufficient research information relevant to the
study. All the information was obtained from textbooks, articles, research journals and
other online resources. In the literature review, it will further explain comprehensively on
the objective review of the study of Liquidated Damages in Malaysian construction
industry such as the type, advantages and disadvantages of the liquidated damages to the
developer and contractor, the application in enforcing Liquidated Damages during pre-
stage and final account negotiation and the factors affecting liquidated damages enforce
due to delay, some calculation, types of damages due to delay of the project and
enforcement of liquidated damages due to Covid-19 pandemic.
Chapter 3 – Research Methodology
Research methodology is to highlight the research process to be used in this research on
collecting, analysing and interpreting the data information to answer and solve the
research problem for the whole research study.

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Chapter 4 – Data Analysis
All the data collected from the respondents will be discussed, examined and presented in
this chapter. Besides, carrying out the data analysis will be able to confirm and support
the point that described in the Chapter 2 literature review.
Chapter 5 – Conclusion
This is the final stage of this research. In this stage, it will recap the information described
in this research and also the contribution of findings to the Malaysian construction
industry.
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Chapter 2 Literature Review
2.1 Introduction
2.1.1 Section 75 Contract Act 1950
One of the most important provisions in the construction contract is the liquidated
damages (LD) clause. All contracts must comply with Contract Act 1950 including
liquidated damages clause. This is because all the contracts including liquidated damages
in Malaysia are governed by Contract Act 1950. Section 75 of the Contract Act of 1950
provides compensation to the injured parties in the breach of contract which the contract
has clearly stated that the damages clause is a penalty. Besides, the courts play an
important role in exercising their supervisory jurisdiction to provide relief from the
oppressive and unconscionable liquidated damages clause.
Section 75 Contract Act 1950 - Compensation for breach of contract where penalty
stipulated for:
75. When a contract has been broken, if a sum is named in the contract as the amount to
be paid in case of such breach, or if the contract contains any other stipulation by way of
penalty, the party complaining of the breach is entitled, whether or not actual damage or
loss is proving to have been caused thereby, to receive from the party who has broken the
contract reasonable compensation not exceeding the amount so named or, as the case
may be, the penalty stipulated for.
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2.2 Enforceability of Liquidated Damages
There are some cases that show liquidated damages that are not enforced or partially
enforced which need to depend on the situation.
2.2.1 Case Study
2.2.1.1 Malaysia Law
Selva Kumar Murugiah v Thiagarajah Retnasamy [1995] 1 MLJ 817
According to this case, in section 75 of the Contract Act 1950, the plaintiff should prove
to the court his or her actual damages had suffered although the appellant had breached
the contract. The damages suffered must be the actual loss suffered or a reasonable
compensation amount (Haken Arabi & Associates, 2020). According to this situation, it
might infringe contract parties’ autonomy and cause the liquidated damages clause to
become meaningless as the aim of this clause was to protect the innocent parties when
the other parties breach the contract. Hence, there were some construction parties
questioning the effectiveness of the liquidated damages clause in the contract as the Court
was refusing to tolerate and interpret such clauses by the parties to the contract (HHQ,
2019).
Cubic Electronics Sdn Bhd (in liquidation) v Mars Telecommunications Sdn Bhd
[2019] 6 MLJ 15
However, for this case, the court decision stated that the Selva Kumar Murugiah v
Thiagarajah Retnasamy decision was no longer applicable and changed the obligation of
parties in the contract as the plaintiff was no longer needed to prove his or actual loss
instead of letting the appellant proved that the liquidated damages were not enforceable.
This is because in Malaysia there was no difference between liquidated damages and
penalties under English law. (HHQ, 2019). Currently, the plaintiff was entitled to receive
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reasonable compensation but not exceeding the amount stated in the contract only if meets
two requirements:
1. Able to show the evidence that the appellant has breached the contract
2. State the sum to be paid due to the breach of contract
2.2.1.2 Foreign law
If the amount of anticipated damages has a huge difference from the actual loss suffered,
the court may refuse to enforce the provision because it is a penalty instead of estimated
actual damages (Mathias, 2022). In the common law systems, if the liquidated damages
have been included as a ‘penalty’ for late completion, rather than a genuine pre-estimate
of loss, then the courts will not enforce it. Hence, some cases successfully strike down
the liquidated damages clauses in settlement agreements due to the unreasonable amount
paid for a settlement agreement (Tuckman, 2021). There may have been a commercial
settlement between both companies’ top management.
In order to further illustrate this point, Party A decided to sue Party B for $100,000. After
that, Party B agreed to have a commercial settlement by paying $60,000 in monthly
instalments to avoid a lawsuit. If Party B did not make the full payment, he will need to
pay the full amount of the original claim with the additional lump sum of $20,000
including the interest, attorney’s fees and vice versa (Tuckman, 2021).
Black J in Roberts v Bury Commissioners had stated a principle that “no person can take
advantage of the non-fulfilment of a condition the performance of which had been
hindered by himself”. It is a principle of prevention that states a party cannot take
advantage of their own wrong. Somehow, some of the contractors may use “time at large”
to avoid paying liquidated damages (Kamar, 2017). When the time is at large meaning to
say that there is no workable contract and the contractor will require to complete their
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work within a reasonable period of time. There will no longer be a fixed date from which
LD can run and therefore the employer will lose his right to claim LD (Beg, 2019).
In PAM Contract 2018 Clause 22 Damages for Non-Completion is stated “Liquidated
Damages” (LD) instead of Liquidated and Ascertained Damages” (LAD) as the damages
is no longer required to be proved and ascertained before being levied (Mimi Yuslinda
Yusof, 2021). This is because the LAD means sum need to be ascertained and agree upon
by the contracting parties (Yeoh, 2021). Below shows different standard form of contract
using different terms of liquidated damages:
Liquidated Damages:
• PAM Contract 2018
• IEM 2017
• CIDB 2000
• AIAC 2019
Liquidated and Ascertained Damages:
• PWD 203A
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2.3 Types of liquidated damages
2.3.1 Liquidated damages
Liquidated damage is not a financial penalty or punishment, it is a genuine pre-estimate
of loss and damages. It is a fixed sum agreed by both parties in the contract which is stated
in the appendix and is fixed in advance before a breach occurs and used to replace the
right to claim damages measured by the amount of loss suffered. Liquidated damages are
imposed for delays in project completion. By their nature, the delayed activities involved
must rely on the critical path of the project as it is completed (Michael, 2018). It can be
many problems that cause the delay of the project such as some crucial items being
unavailable due to a sourcing issue. Mostly the liquidated damages will be calculated on
a daily or weekly basis.
When the Contractor Administrator (Architect or Client Representative) certifies the
Certificate of Non-Completion, the Employer is entitled to the liquidated damages to
which the total amount will be calculated and anticipated reasonably. The amount will be
paid when one of the parties breaches the contract due to non-performance, late
performance or inadequate performance such as the delay in completing the project on
time under PAM Contract 2018 Clause 22.0, and without the need of the employer to
prove the loss and damages to the contractor.
The employer is entitled to claim liquidated damages as debt, monies due or going to due
to the contractor or performance bond which stated under PAM Contract 2018 Clause
22.1. The place to be deducted by the employer for liquidated damages when it is
insufficient to recovered shall according to the following sequences:
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1. Interim Payment (Contractor’s payment)
2. Retention Sum
3. Performance Bond
4. Payment from contractor
According to the RICS (2015), it stated that it is not mandatory for developer to deduct
the liquidated damages in interim payment. Developer can deduct from final payment
certificate and clearly stated in the final account statement. Besides, liquidated damages
also can be deducted from agreed final account. This is because the extension of time may
be given after the Certificate of Non-Completion is issued to the contractor as the new
completion date will be issued. Thus, deduction during the final stage helps to prevent
complications. In reality, if contractor notices that the liquidated damages will be
deducted from the final account, then it will surely influence their decision in the final
account negotiations and bargaining posture. Even though PAM Contract 2018 clause
30.11(e) say cannot state in final account, but employer can still deduct separately from
final payment.
2.3.2 Unliquidated damages
Unliquidated damages are damages that will be assessed and proved after the breach
occurs. The amount of damages is determined by a court because the parties to a contract
had not agreed in advance on the amount of damages that would be imposed in the event
of a breach of the contract's terms (Legal Choices, 2022). Besides, it is unforeseeable as
the amount to be paid will be exactly the total amount of loss suffered by the parties. In
this situation, the sum is ‘at large’ and it may need to be determined by the court after the
breach occurred. It allows the parties to recover their losses which are unable to be
anticipated during the tender stage but all the contemporary records and documents are
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compulsory to be kept as proof in case there is a dispute resolution. In fact, the loss must
not be judged too remote (DesigningBuildings, 2022).
A claim for unliquidated damages under common law is available when the liquidated
damages clause was strike off in the contract or the employer fill ‘NIL’ or ‘n/a’ for the
rate for liquidated damages in the Appendix to the contract to wish not to claim liquidated
damages and have excluded the right to recover the general damages. Therefore, the
parties shall state clearly in the contract about applying the unliquidated damages clause
or delete the liquidated damages clause if they wish to exclude liability for liquidated
damage (DesigningBuildings, 2022).
2.4 Benefits and drawbacks of having a Liquidated Damages clause in a
contract
2.4.1 Developer
2.4.1.1 Benefits
● The benefit of having liquidated damages clause in contract is without the need to
prove actual damages to the contracting parties. According to the case Cubic
Electronics Sdn Bhd (in liquidation) v Mars Telecommunications Sdn Bhd [2019]
6 MLJ 15, the developer can straightforward use the sum agreed by both parties
in the contract without proving his loss to the contractor due to the actual damages
are difficult to calculate and prove. The employer is also not required to go
through the process of bringing a claim under the common law for damages. Not
only that, the amount set by the client can be in any amount that he or she likes
but should be agreed upon by both parties on penalizing the breaching parties
instead of compensating the innocent party (Carney & Felsen, 2022).
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● Liquidated damages clause helps to save the time and cost of arbitration and
litigation. It also reduces the resources and procedure in dispute resolution as
liquidated damages are beneficial for long-term supply contracts. All the
arguments over the intensive negotiation in any specific breach can be avoided
(Hallellis, 2021).
● Developer can get back his possession on time as the contractor will try his best
to complete the work on time to prevent the project delay and pay the amount of
liquidated damages as compensation. Aside from that, paying liquidated damages
may reduce the profit earned by the contractor. It also benefits the client as it
removes the obligation to prove the loss and damages to other contract parties
(DesigningBuilding, 2021).
● It acts as a type of insurance against the cost of breach by the contractor which
gives protection to the employer from risk.
● Liquidated damages also helps to reduce any unnecessary ambiguity over the
project which saves a lot of time and money to argue on certain matters as the
innocent parties no longer need to prove to other parties their loss and damages.
They will straight away use the amount of liquidated damages as remedies
(Bhumesh, 2017).
2.4.1.2 Disadvantages
● The liquidated damages might not be sufficient to pay for the specific breach as
liquidated damages is estimated and fixed during the tender stage. Damages are
unforeseeable which could be far higher than the recoverable loss experienced by
the party in a damages assessment. Therefore, clients might set a greater amount
of liquidated damages during forming the contract to cover the risk that might face
in the future once the project starts (Hallellis, 2021).
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● Cost of the project can be affected depending on the rate of liquidated damages
set by the developer. Cost of the project turns out to be very high if the developer
sets the rate of liquidated damages too high. Tower & Baccarini (2008) had stated
some contractors may choose not to tender and lesser tenderers are involved in
the bidding and the developer may only have a few choices in choosing which
contractor to be chosen with the best price. Some of the contractors will choose
not to bid on the project because the risks faced by the contractor are way too
high. On the other hand, if the developer sets the liquidated damages too low, the
contractor may not work according to the schedule effectively and accelerate their
work to complete the work on time. Therefore, although some developers may
still price high the liquidated damages but the market forces can ensure liquidated
damages is set appropriately (Sorbara Law, 2015).
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2.4.2 Contractor
2.4.2.1 Benefits
● Liquidated damages helps in weighing the cost performance against the cost of a
breach. (Mathias, 2022). The contractor is fully aware of the monetary rights and
liabilities and the amount that the contractor could price for the risk.
● Contractors get to know early from the beginning as much as possible about risks
they bear on the amount to be paid if they fail to complete on time. They will
estimate the amount and find a way to price a certain item at a higher price to
cover that amount. At least they will have a clear mind and confidence in their
financial capability if they breach the date stated in the contract (PropertyGuru,
2021) and limit their liability to a specific amount in the event of delay
(DesigningBuildings, 2021).
● It also provides contractors useful information for analysing their risks and
deciding what steps to take during the construction process. For example, if the
subcontractor knows the information of the contract that the amount of liquidated
damages is RM5000 per day, then they will try their best to accelerate and
complete the project on time without delaying the project to prevent paying the
liquidated damages (Carney & Felsen, 2022).
● Liquidated damages act as a motivator to the contractor so that they will complete
the project on time or within the specified time stated in the contract (SorbaraLaw,
2015). The contractor will try their best endeavour to prevent breaching contract
because it may be robbing company’s profit in the job and sometimes make things
become even worst such as facing financial problems and bankruptcy (Michael,
Ian, Crystal, Sean & Gilda, 2015)
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2.4.2.2 Disadvantages
● It may bring unfairness to the contractor as some of the clients may set the amount
of liquidated damages way too high and not calculate proportionately. Sometimes
the client will abuse the clause to extract an unreasonable amount that is greater
than the actual loss (Hallellis, 2021).
● It is very time consuming and difficult for the contractor to prove that liquidated
damages is not genuine pre-estimate if the contractor wants to challenge the
calculation of liquidated damages due to the amount of liquidated damages is too
high and unreasonable but employers do not need to prove to the contractor. It is
a tough task that causes contractor work not effectively and efficiently (Mathias,
2022).
2.4.3 Summary
Liquidated damages provide certainty to the parties. It acts as a motivation and reminder
to the contractor in order to complete their work on time. A clear deadline for completing
a construction project with the rate of liquidated damages is important and beneficial to
both developer and contractor. This is due to the fact that developer always wishes to use
the final product as soon as possible so that he can have full enjoyment of the benefits
from his investment. While on the other hand, the contractor may also want to complete
the job as soon as possible but still ensure to make good use of all the resources properly
so that contractor can move on to another project (SorbaraLaw, 2015). Therefore, in order
to solve this problem properly, deciding on damages at the outset allows both parties to
settle on an amount that they think is fair instead of leaving this decision to the courts.
Besides the uncertainty of litigation, it is also time-consuming and costly.
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2.5 The application in enforcing Liquidated Damages during pre-stage
and final account negotiation and the factors affecting liquidated
damages enforce due to delay
2.5.1 Negotiation
Although there is a provision in the contract stating the breached parties shall pay
liquidated damages and all the rate is being set and agreed upon by both parties at the
early stage in the contract anyhow negotiation of the final account is still required to
protect financial status of both parties. Instructing negotiation is to prevent lengthy
alternative dispute resolution procedures (ADR) such as arbitration, mediation, litigation
and vice versa. The settlement should be carried out professionally, calmly and fairly so
that the discussion can be carried out successfully but quantity surveyors are not entitled
to be involved in the negotiation unless instructed by the employer. Both parties will
clarify their own goals to allow each other to understand and conclude a reasonable
outcome which in this situation we call it as “win - win situation.” All the final decisions
made during the settlement by both parties shall be bound in the contract and written form.
A successful negotiation needs to be in a mutual agreement and depends on the employer's
willingness and kindness (RICS, 2015). However, it is not always amount of liquidated
damages can be agreed by both parties. There might be a few reasons cause both parties
are not in a mutual agreement. One of the reasons that negotiation is unsuccessful is due
to the time for completion and Extension of Time (EOT). There are some disputes
between both parties about the number of days the contractor is entitled to claim EOT.
As we know, liquidated damages will be charged once EOT are not granted and EOT can
be claimed when the contractor fails to delay the project due to others’ default or mother
nature. There are several relevant events stated in the standard form of contract such as
PAM Contract 2018, PWD 203A CIDB and others form. In fact, some unforeseeable
22
relevant events can be claimed but not stated in the standard form of contract. Therefore,
negotiation is required in this situation (Tan, 2020). For example, the weather conditions
are unpredictable and unforeseeable. For this reason, no construction project is free from
problems and when problems are not immediately solved as they arise, they can become
major issues that eventually end up in court or before an arbitrator for resolution.
A breaching parties may attempt to avoid payment for non-completion by attributing the
overrun on the contract programme to the following number of failings by the employer
and consultants such as:
● Employer fail to give possession of site to the contractor within the specified time
● Architect late issue Architect Instruction (AI) to the contractor
● Architect untimely issue variation works to the contractor
● Disruption and disturbance contractor’s work by the employer
● Inequitable extension of time awarded by the Architect to the contractor
However, if the architect fails to grant EOT when delay occurs caused by the employer,
then the contractor can claim for time is at large and there is no longer a completion date.
The contractor can complete his work in a reasonable time. If both parties are unable to
come to a final decision, then both parties will go for dispute resolution to resolve
conflicts. When a project is involved in protracted dispute, it may result in no longer
meeting the original goal and expectation. The employer may suffer from the payment of
high legal fees and delayed completion, which lead to late occupation and affect sales and
result in incur loss of revenue.
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2.5.2 Calculation of Liquidated Damages
2.5.2.1 Developer to Purchaser
Source: Joseph (2018)
2.5.2.2 Main Contractor to Sub-Contractor
Sub Contract
Sum Rate of Client Charge
= X Main Contractor
Total Contract
Liquidated Damages
Sum
Normally if the total amount is below RM 500, then they will charge RM 500 as the
minimum rate of liquidated damages per day to be charged to the sub-contractor.
However, if it is above RM500, then the rate of liquidated damages per day will follow
that specified calculated amount.
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** If the calculated amount is less than RM 500, paid amount shall be equal or exceed
RM 500, whichever is higher.
2.5.2.3 Developer to Main Contractor
Preparation an estimate of liquidated damages
Liquidated damages clause is required to be in the contract. Most developers may use the
amount of liquidated damages received from the main contractor to recover his loss of
damages. When the employer is estimating and calculating the liquidated damages, some
costs that need to be considered by the employer.
For example, we are assuming there is a mixed development with the concept that the
total contract sum (RM 800,000,000) has been divided proportionally to the Block A
(hotel), Block B (service apartment), Block C (commercial shop lot) and 3-storey podium
car park with the percentage ratio of 51%, 33%, 9% and 7% respectively. The assumption
or conception for liquidated damages per day is calculated on a 30 days' basis. The criteria
and calculation of Liquidated Damages that can claim by all types of buildings are listed
below (Malconlaw, 2012):
Table 2. 1 Direct Cost Incurred under the Contract
Description Cost per month Cost per day

Extra Wages of Workers (Internal Employee such RM 180,000.00 RM 6,000.00
as Manager, Clerk and Site staff and others)
Transportation Fee RM 12,000.00 RM 400.00
Rental of Developer Office RM 60,000.00 RM 2,000.00

TOTAL (RM) RM 252,000.00 RM 8,400.00
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Table 2. 2 Additional Project Administration Costs
Description Professional Fee per month Professional Fee per
day
Project Manager RM 18,000.00 RM 600.00
Architects RM 20,000.00 RM 667.00
Engineers RM 18,000.00 RM 600.00
Clerk of Work RM 10,000.00 RM 334.00
TOTAL (RM) RM 66,000.00 RM 2,201.00
Table 2. 3 Interest and Financing Costs

Description Interest per month Interest per day
Interest of Construction Loan RM 1,300,000,00.00 x interest rate 8% RM 28,888.00
= RM 10,400,000.00 per annum
RM 10,400,000.00/12 months
= RM 866,667.00 per month
TOTAL (RM) RM 866,667.00 RM 28,888.00
Table 2. 4 Assumption of Liquidated Damages

Liquidated Hotel Service Apartment Commercial Shop
Damage Lot
1. Direct costs RM 8,400.00 x RM 8,400 x 33% RM 8,400 x 9%
incurred under the 51% =RM2,772.00 =RM756.00
contract =RM4,284.00
2. Lost revenue and Assume 10 No assumption of cost. No assumption of
profit rooms / floor, cost.
RM250/room/ni
ght, 70% hotel
occupancy rate,
30% net profit
margin, Hence,
(10 rooms x 28
stories) x
RM250 x 70% x
30% =
RM14,700.00
3. Additional project RM 2,201.00 x RM 2,201.00 x 33% RM 2,201.00 x 9%
administration costs 51% =RM726.33 =RM198.09
=RM1,122.51
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4. Damages and No assumption No assumption of cost. No assumption of
penalties to which of cost. cost.
they may be liable
5. Interest and RM 28,888 x RM 28,888 x 33% RM 28,888 x 9%
financing costs 51% =RM9,533.04 =RM2599.92
=RM14,732.88
6. Cost implications No third party Assume there are 20 Assume there are 16
to third-party involved. units in each floor, units in each floor,
contract RM750,000.00/unit, RM 900,000.00 per
85% sold, 10% of unit, 75% sold, 10%
purchase price for late of purchase price for
delivery of property, 2% late delivery of
of purchase price for property
late delivery of common
property Expected
Compensation to the
Expected purchaser of Shop
Compensation to the Lot:
purchaser:
(16 units x 5 stories) x
(a) Building RM 900,000 x 75% x
10% / 365days
RM 750,000 x 85% x = RM14,794.52
10% / 365days
= RM 62,876.71
(b) Common
Property
RM 750,000 x 85% x
2% / 365days
= RM 12,575.34
Total Cost per day =
RM62,876.71
+ RM12,575.34 =
RM75,452.05
7. Losses for tax or Assume: Daily No tax and incentives. No tax and incentives.
investment income=RM
incentives 50,000
Incentives= 10%
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Hence, RM
50,000 x 10%
=RM5,000
Total: RM 39,839.39 RM 88,483.42 RM 18,348.53
2.5.3 Type of damages caused by delay
The delaying of the project may bring lots of loss and damages to the developer and
contractor. According to Malconlaw (2012) and ACPG (2019), there are several types of
damages caused by delay:
a) Indirect cost
It is a cost which are required to be used to support the work in the site such as:
- Rental expenses
● The land may belong to the developer and the developer is just rent the land from
the landowner. When the contract ends, the developer may need to negotiate with
the landowner on renting the land for the further few months. However, the
expenses may be more expensive than previous.
● Site vehicles, site office rental
-Insurance
● Insurance needs to be extended such as Contractor’s All Risk (CAR), Erection All
Risk (EAR), Workmen Compensation, Employees’ Social Security Scheme,
Public Liability Policy and others.
- Salaries and Wages
● Site office staff, Sub-contractor and general workers
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- Utilities
● Site office utilities and telephones
● Utilities such as electricity, water supply and sewer usage
b) Direct costs incurred under the Contract
c) Lost revenue and profits
● Daily operating profit
d)Additional project administration costs
● Quantity surveyor need to do extra work and a longer period of time to close the
account.
e) Damages and penalties to which they may be liable from the Local Authority
f) Interest and financing costs
● Bridging loan from bank
g) Cost implications to third-party contracts
● The developer fails to hand the commercial building to the third party due to the
contractor default on delaying the project and it causes the developer to breach
the third-party contract and liquidated damages is required to pay.
● For example, based on the sell then built form, numerous purchasers have been
purchasing the residential property and the date for handed over property has been
set, if the contractor delays in progress, the developer would likely delay handing
over the property as well.
● This scenario may bring a big effect to the third party as they are unable to operate
their business on time and lose the chance to earn profit.
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h) Losses for tax or investment incentives
i) Others
● Inspection fees for the project
● Cost for ongoing design services
● Cost for maintaining current facilities
● Cost for additional storage
● Additional relocation cost
● Inflation cost
● Idling of labour and equipment
● Additional material storage
2.6 Enforcement of Liquidated Damages due to Covid-19 Pandemic
During the lockdown, everyone was unable to go out to work and unable to perform their
obligation. The Temporary Measures for Reducing the Impact of Coronavirus Disease
(COVID-19) Act 2020 can be used to reduce the unforeseeable and unprecedented impact
caused by the Covid-19 pandemic such as lack of manpower and supply chain disruptions.
This act is used to protect parties or businesses which are unable to perform their
obligations due to the Covid-19 pandemic. It will give some time to both parties to
negotiate and proceed with their work. This act will be enforced for two years starting
from 23rd October 2020 or until the Prime Minister gives another order for extension
(Tan, 2020).
2.6.1 Relationship Between the Developer and Main Contractor
Construction operations frequently comprise actions that are sequential, corresponding
and interrelated to determine which activity falls within or outside of the relief in Section
7 of the Covid-19 Act because it may not always be approved in a construction contract.
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There is only limited protection due to the requirement of inability to comply is
attributable to the measures prescribed by the authority under PCID Act to control the
spread of Covid-19. The provision under the PCID Act may apply during the MCO,
CMCO and RMCO.
For example, a project is unable to construct completely the basement level due to the
government imposing the MCO which caused delaying the further work of the project.
Level 1 is unable to commence and construct as the basement level is not completed yet.
In this situation Extension of Time is granted to the contractor due to consideration of the
“inability to perform” under Section 7 of Covid-19 Act. However, Section 7 of Covid-19
Act does not protect the relevant event in the work programme which is not affected by
the critical path. Starting from 29th March 2020 onwards, the exemption will be given to
the critical path events only such as cleaning and removing stagnant water and insecticide
spraying at building sites to prevent the spawning of Aedes mosquitoes and other pests,
and other tasks that may put people in danger (Tan, 2020).
According to the standard form of contract like PAM Contract 2018, there is also force
majeure clause but inside only states limited relevant events that can be claimed by the
contractor. Section 7 Covid-19 Act does not contain any force majeure events but it would
not invalidate the relevant event in the standard form of contract. Furthermore, it even
covers others those events which are not stated under the force majeure clause (Tan, 2020).
Moreover, the Covid-19 Act covers any contract cancellation, loss of performance bond,
or damages obtained before the Covid-19 Act's enforcement on 23rd October 2020. This
has been criticised since it jeopardises the contracting parties' interests, which are really
harmed by the PCID Act's provisions before the Covid-19 Act takes effect. Section 10 of
the Covid-19 Act would have worked as a catalyst for non-defaulting parties to file legal
31
actions before the Covid-19 Act's enactment. Furthermore, it encourages parties to pursue
their contractual rights before the enforcement date because such measures will be
recognized as valid (Tan, 2020).
However, the provisions under Covid-19 Act do not help much to the contractor and
subcontractor. For instance, the contractor is unable to suspend or terminate the contract
between the employer. They may face financial problems due to the employer fail to make
payment and the contractor forced to complete the work without being paid. Moreover,
the provision of Covid-19 Act does not protect contractors from enforcing liquidated
damages by the employer as a result of the delay caused by the PCID Act's provisions
(Tan, 2020).
Thus, when the contractor is entitled to claim extension of time due to the Covid-19
pandemic causes the contractor delay in completing the project and without Certificate of
Non-Completion required to be issued by the Architect. This shows that contractor will
no longer need to compensate the amount of liquidated damages to the employer due to
there being extra time given and a new completion date will be fixed by the Architect
under PAM Contract 2018 Clause 22.3.
Nevertheless, the contractor needs to notify the Architect of events causing delayed.
When it becomes reasonably apparent that the progress of works is likely to be delay
beyond the Completion Date, the Contractor shall submit a notice to the Architect on his
intention to claim for extension of time not later than 28 days and state the event to claim
with all the details and documents under PAM Contract 2018 Clause 23.1(a). All the
detail and contemporary records shall be kept properly and given one set to the Architect.
All the records are very important and useful for when disputes happen (Yasmin,2022).
The notice also needs to state the estimate of extension of time required. According to
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PAM Contract 2018 Clause 23.1(b), if the contractor fails to submit notice within 28 days,
the contractor waived his right to claim extension of time where the contractor still needs
to comply with Architect’s Instruction (AI) to cure any default of the contractor himself.
As a result, this may turn out to be that the contractor shall pay liquidated damages to the
employer.
2.6.2 Relationship between Developer and Purchaser
According to the relationship between the developer and purchaser, liquidated damages
is essential due to the Covid-19 pandemic as the developers were unable to deliver the
key to the purchaser. The different schedules signed by the purchaser will have different
duration times in delivering the key. The Sales and Purchase Agreement (SPA) under
Schedule G and H is a contract for the purchase of new uncompleted properties while
Schedule I and J is a contract to purchase completed properties. It is an important
instrument that will protect the buyer by ensuring the housing developer cannot change
the terms and conditions to their benefit whichever they like.
However, the modification of Housing Development Act 1966 will be effective on 18th
March 2020. Hence, those agreements that sign before 18th March 2020 will be covered
while for the other type of sales and purchase agreement such as commercial properties
are not entitled for modification (Tan, 2020).
Schedule G is for the sale and purchase of landed property which is delivered in a ‘sell
then build’ concept. In Clause 23(1) of the SPA, the time for delivery of vacant possession
is 24 months for landed buildings. The property units under the category are sold under
individual titles which will be issued to the homebuyers.
In Clause 25 of the SPA, Schedule H is for strata properties and in the ‘sell then build’
concept. It is even more complicated than the Schedule G as it includes ownership of
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common properties and owners’ rights. It is a high-rise building in which its parcel is
subdivided from a piece of land such as service apartment, condominium, flats and others.
Once the buyer owns the strata title, he or she will have the right of ownership to the
specific unit and a parking space but the land is still belonging to the developer. The time
for delivery of vacant possession is 36 months for high rise buildings. The developer also
can apply for an application for extending the delivery time period from 36 to 48 months.
If the developer fails to deliver vacant possession on time, liquidated damages will be
charged and paid to the buyer. According to the Clause 22(2) of the SPA, liquidated
damages is a late payment charge which calculated from day to day at the rate of ten per
centum (10%) per annum of purchase price from the expiry of the period until the date
the purchaser takes vacant possession of the said property.
For example:
[(Purchase Price x 10%) x 365 days] x number of date has delay
To quote an example, a developer shall deliver the vacant possession of property to the
buyer on 18th February 2020 but he passes the key on 26th November. However, the
Malaysian Government has announced a partial lockdown from 18 March to 31st March
2020. After that, the government further extended 4 times from 14th April to 9th June 2020
(the exemption period), enforced under Prevention and Control of Infectious Disease Act
1988 (“PCIDA”). Although the buyer and developer have the agreement on the liquidated
damages, the judge disallowed liquidated damages during the exemption period from 18th
March to 31th August 2020 (Md Saad, & Yaacob, 2022) by examining the Section 32 and
35 of Covid-19 Act (Tan, 2021).
There are also some exceptions under Section 37 of Covid-19 Act. Any legal proceedings
commenced, or any judgement or award obtained to recover late payment charges payable
34
by the purchaser, liquidated damages payable by the developer, or any other sum between
18th March 2020 and the date of publication of this Act shall be unaffected by the
modifications in sections 34, 35, and 36. The Section 37(1) is a saving clause for the
buyers who did not realise the Section 35. Hence, the developer is unable to use Covid-
19 Act to relieve their obligation of paying liquidated damages due to the exemption date
to the buyer for the late delivery of vacant possession. It is only limited to the Part II of
Covid-19 Act which is “Inability to perform contractual obligations” (Tan, 2021).
However, the developer can submit an application to the minister of urban wellbeing,
housing and local authority to extend the time for delivery of vacant possession. The
decision is based on the case Bludream City Development Sdn Bhd v Kong Thye & Ors
and other appeals [2022] MLJU 74 (Tan, 2021). According to this case, the judgement of
the court grants a second extension of time of 17 months for the developer to complete
the service apartment as the developer does not try to take advantage to delay vacant
possession. The delay is caused by the Stop Work Order (SWO) which was imposed by
the minister instead of developer default (Annabel, 2022).
2.7 Conclusion
In conclusion, construction parties are allowing to be exempt in paying liquidated
damages due to the Covid-19 pandemic, but it is only entitled for those parties who meet
the provisions stated by the government.
35
Chapter 3 Research Methodology
3.1 Introduction
This chapter will cover research methods. The research methodology should achieve the
research aims. It also collects, analyses, and interprets data to answer questions. This
chapter will also cover the research process, data collection method, research sample, and
data analysis methodologies for this study. In short, research methodology describes how
we take an idea and turn it into a study that produces an accurate and reliable finding that
meet your research's objectives. To get the desired response, we must also ask
ourselves why, how, and what. Additionally, research samples are chosen depending on
data from the construction parties.
Figure 3. 1 Research Journey (Kumar, 2010, p.37)
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3.2 Research process
Figure 3. 2 Eight Steps Model in Research Process (Kumar, 2010, p.39)

The research process outlines the entire research process.
The Kumar (2010, p.36) stated that there are eight steps in carrying out research. The
steps include:
a) Formulating a research problem
b) Conceptualising a research design
c) Constructing an instrument for data collection
d) Selecting a sample
e) Writing a research proposal
f) Collecting data
g) Processing data
h) Writing a research report
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3.3 Techniques for Data Collection
In order to get the correctness and validity of the data, two stages of data collecting,
namely primary and secondary data. Secondary research has been obtained since the
researcher introduced secondary data analysis 50 years ago, in which previously obtained
qualitative and quantitative data are extracted to gain useful information about the study's
scope (Andrews, et.al. 2012). Data collection techniques allow us to collect data
systematically. There are two types of major approaches to information gathering which
are primary and secondary data.
3.3.1 Secondary Data Collection
On the other hand, secondary data is the information that is already being collected and
analysed by others. It is also taken and used by other researchers and we can directly
extract the data that is needed for our own research only. This data can be obtained from
articles, journals, reports, publications from professionals and others. It saves cost, time
and effort than conducting the primary data. Similarly, the data is taken from the writings
of the top scholars in the globe (Roy Rabindra, Saha & Roy, 2013). The secondary data
that was gathered has been reviewed before by others.
3.3.2 Primary Data Collection
Primary data collection method is used when you are planning to collect data by your
own specifically for that particular study. Meanwhile, primary research is essential in
conducting this study since the uniqueness of the data acquired is high, but it must be
relevant to the study's scope. Through this method, the researcher is able to confirm all
the data collected are in the standards of quality, availability and statistical power (The
World Bank, 2022). Large amounts of data are obtained by quantitative research methods
in the aforementioned primary research approach which is using questionnaire surveys.
However, collecting this data may be time consuming, expensive and complicated
38
compared with the secondary data such as case study, observation and questionnaire
survey (Kumar, 2011).
3.4 Development of Research Instrument
The research instrument to be used in this research is referring to questionnaire form.
Most of the content will be focused on the literature review as a basis. The questionnaire
is created through Google Forms and will be distributed to the targeted respondents
through electronic communication like email. The survey will be divided into four
sections which include Section A, B, C, and D. The three objectives are addressed in part
B, C, and D. The questionnaire survey form will be included in the appendices.
3.4.1 Questionnaire Design
Questionnaire survey is a data collection technique that is commonly used by most of the
researchers. Questionnaire is not suitable for collecting information related sensitive topic
such as sexual or illegal activities. It is a commonly used descriptive and analytical survey
to find out answers on asking the 5W and 1H questions including which, what, who,
where, when and how. Mostly the questionnaire will ask ‘closed-ended’ questions such
as ‘yes’ or ‘no’ or giving the ranking from 1 to 5. There will be a list of questions to be
asked from a huge number of respondents. Using this technique is to save cost and time
but the question cannot be too difficult to answer. Normally people would not talk too
much about their privacy and put them at risk.
Besides, the questions shall be formed carefully and clearly without any mistakes. A
questionnaire survey is only useful if the respondents are able to understand the
information and are capable of answering the questions. Respondents must have the
information and ability to answer questions that are relevant to them. Children are
typically excluded from surveys because they lack the information needed to respond to
39
the questions, the issues under research are often irrelevant to them, and young children
may lack the cognitive ability to respond to complex questions (Preston, 2019).
3.4.1.1 Section A
Section A is made up of six questions. Closed-ended questions are commonly used in
Section A that are based on the respondent profile, such as the participant's gender,
educational level, years of experience, and working firm. Only a few of the questions in
this section. The demographics of the respondents will be obtained through the questions
in this section. This section contains five questions, some of which have only two options,
while the others have multiple choices. Respondents were simply asked to check a box
next to the answer that they preferred. Here's an example of a question that was asked:
Figure 3. 3 Section A Question

3.4.1.2 Section B
Section B is regarding to objective 1, which is the type, advantages and disadvantages of
having a Liquidated Damages clause in a contract to the developer and contractor. In this
section of survey, respondents are asked to choose which statement that they agree on the
advantages and disadvantages of the liquidated damages to the specific construction
parties. Besides, the survey will ask about the preference of companies having liquidated
damages in the contract while signing during the tender stage because as we know that
there is some difference between liquidated, unliquidated damages and so forth.
40
3.4.1.3 Section C
Apart from that, Section C is relating to the objective 2 which is the application in
enforcing Liquidated Damages during pre-stage and final account negotiation and the
factors affecting liquidated damages enforce due to delay. In this section will find out the
detailed information which related to the enforcing liquidated damages during the pre-
stage and final account negotiation. There are certain things that need to be considered by
the employer while estimating the rate of liquidated damages in order to be able to recover
back the loss once damages happen in the future. Therefore, from this survey it discussed
the type of damages occur which caused by delay to the developer and contractor.
3.4.1.4 Section D
In section D, it will be related to the enforcement of liquidated damages due to the Covid-
19 pandemic. As we know, the government had regulated a new act called as Temporary
Measures for Reducing the Impact of Coronavirus Disease (COVID-19) Act 2020 in
order to reduce the impact caused by the Covid-19 pandemic.
Table 3. 1 Research Design of this thesis

Questionnaire Objective Description
Section B Objective 1 To identify the types, advantages, and disadvantages of
having a Liquidated Damages clause in a contract to the
developer and contractor.
Section C Objective 2 To investigate the application in enforcing Liquidated

Damages during pre-stage and final account negotiation and
the factors affecting liquidated damages enforce due to
delay.
Section D Objective 3 To investigate the enforcement of liquidated damages under
Covid-19 pandemic.
41
3.4.2 Type of Questions
3.4.2.1 Closed and Open - Ended Question
In an open-ended question, there is no answer given to the respondents. The respondents
are required to write down answers by their own words. Hence, all the answers given by
respondents most slightly would not be the same.
On the other hand, answers will be provided in the questionnaire for the closed-ended
question. Respondents just have to choose the best answer according to the questionnaire.
However, if the both answers given are not respondents choice, then respondents are
allowed to write down their choices in the ‘Other/please explain’ category.
For this research, there will be part of the question and demographic information used in
closed-ended questions. The targeted group of respondents will be construction parties,
so closed-ended questions suit them because most of the construction parties are busy and
have insufficient time to entertain us in doing research. Therefore, respondents just need
to tick their answer between the specific answer given by the researcher. Below are
closed-ended question and open-ended question as shown in Figure 3.3 and Figure 3.4.
Figure 3. 4 Closed-Ended Question
42
Figure 3. 5 Open-Ended Question
3.4.2.2 Checklist Question
A checklist question is essentially a list of items designed specifically for a group of
respondents who have accurate information and can answer it with a high degree of
certainty (Naoum ed. 2007). To achieve the first goal of this research study, checklist
questions will be used. A checklist question is formed by designing various defects for
various components. The checklist question requires respondents to tick. The following
is an example of a checklist question from Figure 3.5.
Figure 3. 6 Checklist Question
43
3.4.2.3 Likert Scale
The Likert scale is also known as summated rating scale. It is given the respondent some
statement and required the respondents to give a rating in ranking order to show their
preference, priorities and importance (Naoum ed. 2007). The likert scale can be in
different forms such as five-point categorical scale or seven-point numerical scale. From
this research study, 5-point likert scale will be used in section B to achieve Objective 2
which is to investigate the advantages and disadvantages of liquidated damages clause in
the contract to the construction parties. Respondents can express their preference by
giving a tick to that specific statement on strongly disagree to strongly agree. There are
several choices to be choose such as:
• 1 = Strongly Disagree
● 2 = Disagree
● 3 = Neutral
● 4 = Agree
● 5 = Strongly Agree
3.5 Pre-testing Research Instrument
After a research instrument is constructed, a testing research instrument is a must before
using it to carry out an interview or questionnaire in order to obtain the actual data
collection (Kumar, 2010). It is an essential step as it helps in increasing validity and
reliability of the testimonial survey evidence. Pre-testing ensures that respondents
perceive and respond to questions according to the research plan. Pre-testing will allow
us to see if responders comprehend the questions, as well as if they are capable of
performing the tasks or possessing the information needed to answer them. For most items,
pre-tests also provide the most direct proof of the validity of the questionnaire data (GAO,
44
2009). Not only that, pre-testing is able to reduce the sample errors while at the same time
increasing the rate of response. However, the purpose of doing pre-test is to identify
problems instead of just collecting data. In order to identify whether the question can be
understood by the respondent, the appropriateness of its communication. If there are
problems met during the pre-test, rephrasing the wording to make it clearer and easy to
understand (Kumar,2010).
3.6 Sampling Method
Sampling is a process of selecting a few samples from a big group so that information is
able to be obtained to answer research questions. This method is able to help in reducing
the time consumed, cost and manpower in the research process. There are several types
of sampling such as:
• Random sampling
- It is also called as probability sampling. It increases the study's validity
because each element in the sample was chosen at random, without any bias or
personal preferences.
• Non-random sampling
- It also calls as non-probability sampling design as it is not taken according to the
probability instead of asking for the permission and if they willing to do so then
only take observations or interviews such as quota sampling, judgemental
sampling, snowball sampling and others (ReadingCraze, 2014).
For this research, simple random is used. This is to ensure that each of the population
has the equal chance to be picked.
45
3.6.1 Population
A population is a group of people or things that are the focus to carry out research. A
population is also defined as a well-defined group of individuals or objects with similar
characteristics. In this research the population are construction parties. Main focus will
be the developer and contractor. Developer is a client and also known as paymaster which
involves payment directly. Contractor is act as a ‘worker’ who is required to comply with
his obligation by providing services to complete the project which is employed by the
developer. The questionnaire will mainly focus on them. The contractors which involve
shall be registered with the Construction Industry Development Board (CIDB). The
population for this study concentrates on people in Malaysia.
3.6.2 Sample
Furthermore, the questionnaire survey form will be sampled using a simple random
sampling method as every member in the population will have a fairly equal chance to be
selected (McCombes, 2020). This is because the respondents for this research paper may
come from a variety of firms or companies. As a result, the random sampling method will
be the most efficient way to distribute the questionnaire survey form. In addition, the
majority of the questionnaire survey form will be e-mail to the respondents because
respondents may not have enough time for a face-to-face interview, it will be more
efficient. All the respondents shall be the parties which are involved in the construction
industry. The Cochran’s formula is mostly used for large populations. Below is the
Cochran’s formula for sample size (Stephanie Gan, 2022):
46
Where:
• e = desired level of precision
• p = (estimated) proportion of the population which has the attribute in question
• q=1–p
• Z = Z-score to determine the confidence level
Table 3. 2 Z - table
The formula assumes to find 95% confidence level with ±5% precision. The proportion
of 50% gives maximum level of variability in population. Hence, p=0.5.
Calculation:
Form calculation we know that sample size is found to be 384 respondents from the
population of 1875 respondents. However, if the sampling fraction exceed 5%, finite
population correction (FPC) has to be made (Cochran, 1977).
47
The sampling fraction is 20.5%. Therefore, the modification for the sample size is
required by using equation below:
Where
• n₀ = Corrected sample size
• N = sample size
• N = population size
Calculation:
In conclusion, the sample size required in this research is 319 respondents. The sample
size used can be used for any size of target population (as long as the sampling fraction
does not exceed 5%) and the yield is accurate.
3.7 Technique for Data Analysis
Data analysis can be defined as a systematic procedure for defining, evaluating, analysing,
and transforming data using statistical and intellectual skills. After the respondents' data
48
has been collected, the data will be analysing through the Excel. The data analysis will
be provided in the form of a graphs, and pie chart, all of it will make the data analysis
clearer and understandable.
3.7.1 Univariate Analysis
The descriptive statistical approach will be used on Section A of the questionnaire to
analyse demographic background of respondents. Some of the questions in Section B and
D also applies it too. According to Naoum (2012), descriptive statistics is the simplest
technique of data analysis. It offers a broad overview of the results by summarising the
data collection, which can be a reflection of the full population or a sample of it. It will
be evaluated using central tendency and interpreted in the form of a pie chart, bar chart,
or table. The central measure is made up of three key estimates which include mean and
standard deviation.
3.7.2 Relative Importance Index (RII)
In Section B, there is 3 questions will be requiring to use this formula to obtain the relative
satisfaction rating on the criteria shown in Section B. The rating scale is in five-point
categorical scale. The method of calculating RII is shown below:
Where
W = weights given to each factor by respondents
N = total number of respondents
A = highest weight (5)
49
3.8 Research Model / Conceptual Framework
This research is to establish the relationship between the Covid-19 Act and the application
of Liquidated Damages. This is done by first establishing the current state of liquidated
damages to the construction parties, rate of liquidated damages and reason chosen.
Comparison between opinion and years of working experience of respondents is done for
several question. The agreement on advantage and disadvantage of having liquidated
damages to the developer and contractor are rated. Then, the type of damages caused by
delay are selected. The entitlement of liquidated damages impose to main contractor and
reason are chosen according to their experience, thus lead to the result of this study. Refer
to Figure 3.7 for the research framework diagram.
50
Establish the relationship between COVID-19
and the application of Liquidated Damages
between Developer and Contractor
Usage of Frequency Usage of Preference Usage of RII
Comparison between Identify and justify Rate relative importance
the opinion and years the rate of LD per day of selection benefits of
of working experience and reason chosen having LD in contract to
the Developer
Identify the current

Rate relative importance
Justify type of damages
status of LD in the
of benefits of having LD
caused by delay to the
construction industry
in the contract to the
Developer and Contractor
Contractor
Entitlement Developer Justify the reason Rate relative importance

impose LD due to unable impose LD of drawbacks of having
lockdown
LD in the contract to the
Figure 3. 7 Research Framework Diagram
51
Figure 3. 8 Programme Chart for PD I
52
Figure 3. 9 Programme Chart for PD II
53
3.9 Summary
In this chapter is to describe the way of research to be conducted. It concluded that
research methodology is very important as it helps us in resolving problems with a better
solution. Methodology clarifies the research inquiry and why it is necessary. It clarifies
the research's beginning stage, the research's bearings, and the potential ramifications of
the research when it is completed. Therefore, methodology is one of the crucial steps
which is required to be carried out in the research progress.
54
CHAPTER 4 Data Analysis
4.1 Introduction
This chapter is to explains data collection and analysed data collected in this research
according to the format presented in the questionnaire, which referring to the content
arrangement in Chapter 2.
4.2 Data Collection
All the data in questionnaire survey which received from the respondent will be analyse
in this chapter. There are 5 sections require to be analyses and there are some questions
are set as ‘required question’. It is a function in the Google Form to ensure respondents
answer specific question before proceed to others. This is to prevalent 100% valid cases
and 0% missing data happen. Section 4.2 will be elaborate on the result of respondent rate
of the questionnaire survey, followed by Section 4.3 shows the outcome result analysis
and findings of the questionnaire survey. The last section will be Section 4.4. It will
summarize the overall conclusion on the analysis of the actual respondents’ data analysis.
4.3 Response Rate
4.3.1 Response Rate for Pre-Test Survey
On 1st June 2022, 30 sets of pre-test questionnaires were distributed to relatives, friends,
and the general public via invitations sent through LinkedIn, WhatsApp, and email prior
to the distribution of the questionnaire to respondents. Fortunately, the response rate for
the pre-test survey was a perfect 100%, as all respondents did their best to participate. All
respondents for the pre-test survey must be at least 24 years old to ensure they can notice
any questionnaire inaccuracies. The survey spanned nearly one month, beginning on
1st June 2022 and ending on 29th June 2022.
55
4.3.2 Response Rate for Questionnaire Survey
A total of 319 sets of questionnaires were sent through email to the construction parties,
with a total of 114 responses received. The response rate was calculated at 35.7%. The
questionnaire survey was started at 30th June 2022 and cut-off on 03rd August 2022.
4.4 Result Analysis of Pre-Test Survey
Respondents’ Feedback for Pre-Test Survey
Feedback 1:
Feedback 2:
After pre-test by the respondents, it was found out that there were a few inappropriate
wordings in the instructions of Section D, which confuse the responders to answer the
question. However, after amendment of the Section D’s instruction, there shall be good
enough.
4.5 Result Analysis of Questionnaire Survey
Data collected from the questionnaire survey is detailed and analysed in section according
to the format presented in questionnaire. The below data are analysed through frequency,
Relative importance index (RII) and mean. The higher the RII value, the higher the mean
56
value. Some of the question will use RII to analyses the level of significant and rank of
the factors and with the support.
4.5.1 Demographic Information
The backgrounds of respondents are sorted and presented in the form of frequency tables.
The analysed information includes the respondents’ gender, highest education level, type
of firm and years of working experience in the construction industry.
Table 4. 1 Respondents’ Gender
Gender Male Female Total
Frequency 74 40 114
Percent 64.9 35.1 100.0
Cumulative Percent 64.9 100.0
Figure 4. 1 Respondents’ Gender

Table 4.1 reveals that 64.9 percent of the respondents are male, whereas only 35.1 percent
of the respondents are female.
57
Table 4. 2 Respondents’ Highest Education Level
Bachelor
Highest Education Level SPM Diploma Master Total
Degree
Frequency 2 11 93 8 114
Percent 1.8 9.6 81.6 7.0 100.0
Cumulative Percent 1.8 11.4 93.0 100.0
Figure 4. 2 Respondents’ Highest Education Level

Table 4.2 shows that 81.6% of the respondents are Bachelor Degree holders, followed by
9.6% of Diploma holders and 7.0% of Master holders, while just 1.8 percent of
respondents are SPM holders. According to the finding shows that there is no any
respondent are from the STPM and Doctor of Philosophy (PhD) holder.
58
Table 4. 3 Respondents’ Type of Firm
Type of Firm Frequency Percentage ( % )
Developer 15 13.16
Contractor 44 38.60
Engineer 3 2.63
Quantity Surveyor 46 40.35
Supplier 1 0.88
Architect Engineer 1 0.88
Telecommunications 1 0.88
Interior Designer 1 0.88
Student 1 0.88
Government 1 0.88
Total 114 100.00
Frequency
Developer
13.2%
Contractor
0.9%
0.9%
0.9%
0.9%
0.9%
0.9% Engineer
Quantity Surveyor
Supplier
40.4% Architect Engineer

Telecommunications
38.6%
Interior Designer
2.6% Student
Government
Figure 4. 3 Respondents’ Type of Firm
59
According to the data presented in table 4.3, the vast majority of respondents are
employed in the capacity of quantity surveyor, with 46 out of 114 respondents
representing a percentage of 40.4%. This is followed by those who are employed in the
capacities of contractor, developer, and engineer, with 44 out of 114 respondents
representing 38.6%, 15 out of 114 respondents representing 13.2%, and 3 out of 114
respondents representing 2.6% respectively.
Nevertheless, there is only one respondent for the government, the student, the architect
engineer, the telecommunications, the interior designer, and the supplier as well. On the
other hand, it was discovered that this finding does not contain any architects who
responded to the survey.
60
Table 4. 4 Respondent’s Years of Working Experience
Years Frequency Percentage (%)

Less than 5 years 94 82.46
5 to 10 years 15 13.16
11 to 20 years 3 2.63
More than 20 years 2 1.75
Total 114 100.00
Figure 4. 4 Respondent’s Years of Working Experience
The respondent’s years of working experience in the construction industry were
categorised in four ranges. As per table 4.4 reveals that there is a vast majority of
respondent having less than 5 years working experience with the result of 94 out of 114
respondents in total (82.5%). Followed by that, there are 15 out of 114 respondents
(13.2%) are having 5 to 10 years working experience, followed by 3 respondents out of
114 respondents (2.6%) and 2 respondents out of 114 respondents (1.8%) with 11 to 20
years working experience and more than 20 years working experience respectively.
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4.5.2 Findings in Relation to Objective One: Types, Advantages and
Disadvantages of Having Liquidated Damages Clause in Contract to Developer and
Contractor
This section seeks to determine the current perspective of construction industry players
on the liquidated damages. All the information provided by the respondents is their
thoughts are based on their working experience in the construction industry. In this
section, data collected were analysed using frequency, Relative Importance Index (RII)
and mean. Those criteria that were arranged in the ranking were in ascending order.
Table 4. 5 Frequency and Percentage of whether Paying Liquidated Damages to

the Innocent Parties in Common Scenario
Opinion Yes No Total
Frequency 94 20 114
Percent 82.5 17.5 100.0
As per table 4.5, clarifying that there are large proportion of the respondents agree that
paying liquidated damages to the innocent party is a common scenario in the construction
industry which is 94 out 114 respondents and with 82.5%. Only 17.5% of the remaining
respondents disagreed with this assertion with only. As the table shows that the numbers
of contracting parties who choose no as not a common scenario are varied and no linear
relationship with different range of years of working experience.
62
Table 4. 6 Relationship between Thoughts of Construction Parties on whether
Paying Liquidated Damages is a Common Scenario and the Years of Working
Experience
Years of Percentage
Opinion Total
Experience (%)
Yes No
< 5 years 77 17 94 82.46
5 to 10 years 14 1 15 13.16
11 to 20 years 1 2 3 2.63
>20 years 2 0 2 1.75
Total 94 20 114 100
As the table above shows that the rating results from majority of the respondent thinking
that paying liquidated damages is a common scenario in the present construction industry.
Majority of the respondent in the category years of experience of less than 5, 5 to 10 years
and more than 20 years choose ‘yes’ with the total rating of 94 vote. While in the category
of 11 to 20 years’ experience of respondent, choosing ‘no’ has the higher vote than ‘yes’.
From the table above, we do able to see that all the respondents with more than 20 years
experiences chose ‘yes’. This is to say that most of the construction parties used to face
the issue of project delay and lead to pay liquidated damages during their working life.
63
Table 4. 7 Preference of Construction Parties on Having Liquidated Damages
Clause in the Contract
Preference Yes No Total
Frequency 107 7 114
Percent 93.9 6.1 100.0
Figure 4. 5 Preference of Construction Parties on Having liquidated damages

Clause in the Contract
The question asked for the respondents’ preference on having liquidated damages in a
contract, either yes or no. According to the table 4.6 shows that 107 out of 114
respondents prefer to have liquidated damages clause in the contract and with the
percentage of 93.9%. Meanwhile, there is only 6.1% of the respondents disagree and wish
to contract out from the main contract. Many of them think that liquidated damages
clause is necessary to the contract.
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Table 4. 8 Preference of Construction Parties on Having Liquidated Damages
Clause in Contract Throughout the Years of Experience
Years of Preference of having liquidated damages in

Total Percentage
Experience contract
Yes Percentage No Percentage
< 5 years 89 78% 5 4% 94 82%

5 to 10 years 14 12% 1 1% 15 13%
11 to 20
years 2 2% 1 1% 3 3%
>20 years 2 2% 0 0% 2 2%
Total 107 94% 7 6% 114 100%
According to the data presented in the table above, majority of the respondents (107
responses) were agreeing on the adoption of a liquidated damages clause in a contract. It
was found that there are 89 out of 114 respondents (78%) of less than 5 years’ experience
agree on having liquidated damages clause in contract. This was followed by respondents
who prefer having liquidated damages in contract with working experience of 5 to 10
years by 14 out of 114 respondents (12%). At the same time, there are total of 4
respondents (4%) with working experience within 11 to 20 years and more than 20 years
agree on having liquidated damages clause in contract. In contrast, according to the result
indicated that there are up to 7 out of 114 respondents (6%) which are acquire less than 5
years, 5 to 10 years, and 11 to 20 years working experience were disagreeing adoption of
liquidated damages clause in the contract.
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Table 4. 9 Benefits of Having Liquidated Damages in the Contract to the
Developer
Benefits of having liquidated damages in the

N RII Mean Rank
contract to the developer
Act as a type of insurance to give protection to
114 0.828 4.14 1
the employer from risk
Helps to reduce any unnecessary ambiguity
114 0.775 3.88 2
over the project
Save time and cost of arbitration and litigation 114 0.749 3.75 3
Able to get back his possession on time 114 0.740 3.70 4
Not required to prove actual damages to the

114 0.637 3.18 5
contracting parties
This question has been set through Likert scale with several choices from strongly
disagree to strongly agree. Therefore, the variable of this question will be analysing by
using the mean, RII and standard deviation to determine the overall result from the
questionnaire survey. Mean gives the average (centre) of a data set in order to find the
tendency. While standard deviation reveals which of the data sets has a wider range of
values.
According to Table 4.9 shows the respondents’ perspective on advantages of having
liquidated damages in the contract to the Developer. This table reveals that of 5 selections,
liquidated damages act as a type of insurance to provide protection has the highest rating,
the greatest mean value (µ:4.14) and the highest RII value is 0.828. In contrary, without
proof of actual damages to the contracting parties has the lowest mean value of 3.18 (µ),
lowest RII value of 0.637 and is located at ranked fifth.
Many respondents believe that liquidated damages act as a protection due to the fact it is
a compensation to cover the losses faced by the developer. One of the respondents stated
that when the contractor fails to comply his obligation on hand over the site possession
66
to the developer on time, developer might face some losses such as late vacant possession
to the homebuyer, require to extend the rental for storage material if developer does not
own land.
Table 4. 10 Benefits of Having Liquidated Damages in the Contract to the

Contractor
Benefits N RII Mean Rank
Allow analysing their risks 114 0.811 4.05 1
Get to know early the amount to be pay if delay

114 0.781 3.90 2
project
Help in weighing the cost performance against
114 0.760 3.80 3
the cost of a breach
Act as a motivator 114 0.698 3.49 4
According to the table 4.10, it shown that allow analysing their risks has the highest mean
value of 4.05 and highest RII value of 0.811. While the statement of liquidated damages
act as motivator has the lowest ranked with the lowest mean value and lowest RII value
which are 3.49 and 0.698 respectively.
67
Table 4. 11 Drawbacks of Having Liquidated Damages in the Contract to the
Drawbacks N RII Mean Rank
Tender price of the project can be affected based

114 0.772 3.86 1
on the rate of liquidated damages
The liquidated damages might not be sufficient

to pay for the specific breach as the amount is 114 0.739 3.69 2
fixed
Difficult for the contractor to prove that
liquidated damages is not genuine pre-estimate
114 0.714 3.57 3
if the contractor wants to challenge the
calculation of liquidated damages
Unfair to the contractor as amount of liquidated

114 0.704 3.52 4
damages way too high
The majority of respondents agree with the statement that one of the drawbacks of having
liquidated damages in contract is that it causes the tender price to be affected by the
liquidated damages, with the highest mean and RII value of 3.86 and 0.772 respectively,
placing at first ranked. These findings are based on the data that is presented in table 4.9.
Ranked third is difficulties of contractor prove liquidated damages is genuine pre-
estimate with the RII value of 0.714 and mean value of 3.57 which is higher than ranked
forth, unfair to the contractor as liquidated damages is too high. It has the lowest RII and
mean value which are 0.704 and 3.52 respectively.
Based on all the table above, we can see that first ranked will have the highest RII value
and mean value. The higher the RII value means it is the most influential and significance
factor. A factor with more vote, the higher RII value, the higher the ranking.
68
Table 4. 12 Rate of Liquidated Damages Per Day
RM RM RM More
Rate of liquidated damages per 10,000 to 30,001 50,001 than
Total
day RM to RM to RM RM
30,000 50,000 100,000 100,000
Frequency 54 27 20 13 114
Percent 47.4 23.7 17.5 11.4 100.0
Cumulative Percent 47.4 71.1 88.6 100.0
Rate of Liquidated Damages
11%
18% 47%
24%
RM 10,000 to RM 30,000 RM 30,001 to RM 50,000

RM 50,001 to RM 100,000 More than RM 100,000
Figure 4. 6 Rate of Liquidated Damages Per Day

According to table 4.10, which demonstrates that the RM10,000 to 30,000 has the highest
ranked rating among respondents which is more than half (54 people chose this rate).
While RM30,001 to RM50,000, RM50,001 to RM100,000 and more than RM100,000
has a lower rate compared to the range of RM10,000 to 30,000 and it is decreasing which
are 27, 20 and 13 respectively. However, it does not mean that liquidated damages must
be in this range. It is depending on the project involve by the respondents. Liquidated
damages can be affected by the types of projects. The larger the project, higher the risk,
the higher the liquidated damages. There is a lot reason that affect the amount of
liquidated damages. This complication is later addressed in 4.3.2.7.
69
Table 4. 13 Reason Choosing the Rate of Liquidated Damages Base on the Above
Question
Number of Percentage
Reasons Rank
Agreement (%)
Project cost and contract sum 12 35.29 1
Size of project 7 20.59 2
Experience 4 11.76 3
Type of project 4 11.76 3
Reasonable rate 3 8.82 5
Common in construction industry 2 5.88 6
Market rate 2 5.88 6
Based on contract 1 2.94 8
Based on Gross Development Value of the project 1 2.94 8
Client liability 1 2.94 8
Duration of project 1 2.94 8
Inflation 1 2.94 8
No fixed rate 1 2.94 8
scale of project 1 2.94 8
Potential losses generated 1 2.94 8
Reasons
40
35
30
25
20
15
10
5
0
Number of Agreement Percentage ( % )
Figure 4. 7 Reason Choosing Rate of Liquidated Damages Base on Above Question
70
This question is not set as required question in Google Form. Therefore, it only
contains 34 respondents answer it. According to the data presented in the table that is
located above, the vast majority of respondents indicated the cost of the project and the
total value of the contract is the reason that led them to select the rate of liquidated
damages. It has the highest percentage of 35.29%, which is remarkable. Meanwhile, there
are 8 reasons with the same ranking and with 2.94%, placing rank eighth such as based
on contract, Gross Development Value of the project, client liability, duration of project,
inflation, no fixed rate and scale of project. This is because all these reasons only contain
one respondent.
One of the respondents mentioned that the standard rate for a mixed development project
(commercial and residential), which could be somewhere between RM50,001 and
RM100,000. Other than that, a respondent had stated that some of the projects’ Liquidated
Damages can be reach to RM1,000 only. Furthermore, respondent 5 noted that there are
various factors that could influence the amount of liquidated damages. Client liability is
one of the reasons. For example, a contractor fails to complete and hand over site
possession to the client. It means that the client is require to continue rent the factory to
manufacture and in store material. Therefore, the client requires to pay the extra rental
and all the losses faced by the client will be claim through imposing Liquidated Damages
to the contractor. Some of the respondents had shown their calculations on different
approaches to compute the rate of Liquidated Damages which are stated below.
71
Calculation
Respondent 2:
= 0.35% x [Contract sum / 365 days]
Respondent 4:
= (Total construction cost / Construction period) x 0.1
Respondent 19:
= Contract sum x certain %
Respondent 22:
= (10% x Estimated construction cost) / 365 days
Therefore, the amount of liquidated damages can be affected different types of reason and
it is very wide range and without a fixed rate. However, the most significant reason is
cost of the project and contract sum. This is because the larger the project, higher the risk
and higher the amount of liquidated damages required to impose to recover developer’s
losses in construction project.
72
Liquidated Damages Enforce Due to Delay
In this section, respondents were asked to rate their agreement on 8 different types of
damages where these 8 criteria were analysed using frequency and arranged in ascending
order.
Table 4. 14 Agreement of Respondents Towards Type of Damages Caused by

Delay
Type of Damages Rank
Agreement (%)
Lost revenue and profits 97 85.09 1
Additional project administration cost 88 77.19 2
Direct cost incurred under the contract 84 73.68 3
Indirect cost (E.g: rental expenses, insurances,
salaries & utilities) 83 72.81 4
Interest and financing costs 78 68.42 5
Damages and penalties charges by local
authority 76 66.67 6
Cost implications to third-party contract 70 61.40 7
Losses for tax or investment incentives 46 40.35 8
Type of Damages caused by the delay of the Developer

and Contractor
Percentage ( % ) Number of Agreement
Losses for tax or investment incentives 40.35

46
Cost implications to third-party contract 61.40
70
Damages and penalties charges by local authority 66.67
76
Interest and financing costs 68.42
78
Indirect cost (Eg: rental expenses, insurances,… 72.81
83
Direct cost incurred under the contract 73.68
84
Additional project administration cost 77.19
88
Lost revenue and profits 85.09
97
0 20 40 60 80 100 120
Figure 4. 8 Agreement of Respondents Towards Type of Damages Caused by Delay
73
This is a multiple selection question. Therefore, all the respondents are allowed to
select more than one answer. According to the table 4.14, the majority of respondents
believe that lost revenue and profit is the most significant sort of damage caused by the
Developer and Contractor's delay, with 97 agreeing and with the percentage of 85.09%,
placing it top. Meanwhile, losses for tax or investment incentives have the lowest rating
with 46 agreeing and with the percentage of 40.35%, which is under ranked eighth.
Additional project administration cost is rated second highest, with 88 agreeing and
77.19%. While the direct cost of the contract is the third highest with 84 agreeing, the
percentage is 73.68%. As we can see, the higher the percentage, the higher the ranking,
the more respondents choose that factor.
In short, the major damages caused by the developer's and contractor's delays are lost
revenue and profit.
74
Enforcement of Liquidated Damages
This section is to determine the thoughts of the respondents regrading whether employer
is entitled to impose liquidated damages due to lockdown which the lockdown impose is
due to the Covid-19 pandemic.
Table 4. 15 Entitlement of Developer to Impose Liquidated Damages Due to

Lockdown
Yes, but there

Yes, developer No, unable
is certain
entitled to impose to impose
Opinion condition Total
for all liquidated liquidated
should be
damages damages
complied
Frequency 11 51 52 114
Percent 9.6 44.7 45.6 100.0
Cumulative
9.6 54.4 100.0
Percent
Entitlement of Developer To Impose Liquidated Damages

Due To Lockdown
9.6%
45.6%
44.7%
Yes Yes but with certain condition No
Figure 4. 9 Entitlement of Developer to Impose Liquidated Damages Due to

Lockdown
The opinions of the respondents are displayed in the table above on whether the developer
can impose liquidated damages on the contractor because of the lockdown. We can see
from the table that 52 persons voted against being able to impose liquidated damages,
which places them in the top position among the rankings. Although the answer of yes,
75
there are some conditions that must be met in order to comply with them has received 51
votes, which is one vote less than the statement that says no.
Table 4. 16 Opinion of Construction Parties on whether Developer Entitled to

Impose Liquidated Damages to Main Contractor
Years of Percentage
Experience Opinion Total (%)
Yes, but with
Yes condition No
< 5 years 11 46 37 94 82.46
5 to 10 years 0 4 11 15 13.16
11 to 20 years 0 1 2 3 2.63
>20 years 0 0 2 2 1.75
Total 94 51 52 114 100.00
According to the table above shows that there is linear relationship with different range
of years of working experience. As there are only 11 respondents stated yes on able to
impose for all liquidated damages and all the 11 respondents are having less than 5 years’
experience.
In this survey questionnaire,15 respondents have 5 to 10 years of working experience, 3
have 10 to 20 years of experience, and 2 have more than 20 years of experience. Meaning
to say that there are 20 respondents required 5 years and above experiences. According
to the survey questionnaire, the majority of construction industry experience respondents
(15 respondents) agree that liquidated damages cannot be imposed, while 5 respondents
voted yes but with certain conditions that must be met.
As a result, the majority of respondents with less than 5 years of experience chose yes but
with certain requirements that must be met.
Below table states the responses of respondents on whether developer entitled to impose
liquidated damages to main contractor.
76
Table 4. 17 Table Respondents’ Responses
Respondent Comments
Chosen
Some are only 1k per day, it
1 RM10,000 to RM30,000
depends on project cost.
Depends on contract sum, the
2 RM10,000 to RM30,000 calculations are 0.35% * contract
sum / 365 days.
3 RM10,000 to RM30,000 Based on experience.
Based on total construction cost
percentage for normal factory (total
4 RM10,000 to RM30,000
construction cost/construction
period*0.1.
This depending on the project type,
project size which to reason will
affecting the amount of the LAD.
moreover, the client liability may
have affected the LAD Amount
also. For example, the client
required to rent the Land for storing
good and material is the project is
5 RM50,001 to RM100,000 for factory or another case which
retail shop, developer unable hand
over key to the purchaser due to
contractor delay and cause those
purchasers unable to operate their
business on time. Amount will be
determined through estimated
number of customers may come to
consume.
6 RM30,001 to RM50,000 Common
LD calculation is solely based on
7 More than RM100,000 the GDV of the project in relative
to scale of project as well.
8 RM50,001 to RM100,000 There is not fixed rate.
It's based on the calculation of total
9 RM30,001 to RM50,000
contract award amount.
The rate I normally encounter in a
10 RM10,000 to RM30,000
project.
11 RM10,000 to RM30,000 NIL
The rate was chosen based on the
practice in the construction industry
12 RM30,001 to RM50,000
on the amount of LD to be charged
per daily on contractor.
77
Respondent Comments
Chosen
The rate of LD shall be different for
13 More than RM100,000 every project based on the project
size, type, and contract sum amount.
The rate of LD is calculated based
on the percentage of property price.
14 RM10,000 to RM30,000
The rate chosen is a common rate
for common residential property.
15 RM10,000 to RM30,000 Reasonable rate
I think that is the reasonable for
16 RM50,001 to RM100,000 both parties and amount over that
would be too high for developer.
17 RM50,001 to RM100,000 Based on my experience.
Various factor to be considered
including potential losses generated
18 RM50,001 to RM100,000
by delay of vacant possession and
price hike of raw material.
19 RM30,001 to RM50,000 Based on contract sum x certain %.
20 RM50,001 to RM100,000 Based on project sum price.
Depend on the estimated
21 RM10,000 to RM30,000
construction cost.
LD very much depend on the
size/cost of project and subject to
22 RM50,001 to RM100,000 developer. Normally we propose
10% of estimate construction cost /
365 days.
Help to cover over the construction
23 RM30,001 to RM50,000
period.
Based on a mixed development
24 RM50,001 to RM100,000
project (commercial + residential).
Actually, the LD amount will be
25 RM10,000 to RM30,000 depending on the contract sum or
the scale of project.
The question above is hard to justify
as the rate provided above are too
26 RM10,000 to RM30,000
generalized considering all types of
projects, contacts, duration, etc.
27 RM10,000 to RM30,000 Fair rate
Based on the project of the contract
28 RM50,001 to RM100,000
sum.
The rate of LAD is still depending
29 RM30,001 to RM50,000
on the size of the project.
Reasonable
30 RM10,000 to RM30,000
78
Respondent Comments
Chosen
Eventually rate of liquidated
damages are varies for every
31 RM50,001 to RM100,000 construction project due to the size
of the project. But not to determine
by range.
Average market rate, can be higher
32 RM50,001 to RM100,000
for big development.
33 RM50,001 to RM100,000 Based on the size of project.
34 RM30,001 to RM50,000 Size of project.
79
Table 4. 18 Agreement on Reason Unable to Impose Liquidated Damages
Reasons Rank
Agreement (%)
Do not comply the requirement under
Prevention and Control of Infectious Diseases 67 58.77 1
Act 1988 Act (PCID)
Relevant event in the work programme which
36 31.58 2
is not critical path
Contractor fails to submit notice to the
35 30.70 3
Architect during lockdown
Government decision 14 12.28 4
EOT shall be granted 5 4.39 5
It depends on the context of the contract 2 1.75 6
Number of Agreement
It depends on the context of the contract 2
EOT shall be granted 5
Government decision 14
Contractor fail to submit notice to the Architect 35

during lockdown
Relevant event in the work programme which is not 36
critical path
Do not comply the requirement under Prevention and 67
Control of Infectious Diseases Act 1988 Act (PCID)
0 10 20 30 40 50 60 70
Figure 4. 10 Number of Agreement on Reason Unable to Impose Liquidated

Damages
80
This is also a multiple-choice question but include “other” answer option which allow
respondents state their own opinion. This can avoid from bias due to the limit of answer
to the question.
According to the table 4.18 shows the agreement on the reason that unable to impose
Liquidated Damages. Do not comply with the requirement under the Prevention and
Control of Infectious Diseases Act 1988 Act (PCID) has received the highest ranking
from respondents, with 67 agreeing and with 58.77%. While second highest is relevant
event in the work programme which is not critical path with 36 votes, following by
contractor fail to submit notice to the Architect during lockdown which is ranking third.
The percentages of those in ranks two and three are 31.58% and 30.70% respectively.
Meanwhile, 21 respondents voted for the 'other' option, followed by their own opinions,
which are listed below.
As we can see, 14 respondents think that government decision is the reason that lead to
developer unable to impose Liquidated Damages. Below is the overall opinion stated by
the respondents.
Respondents’ Response:
Government Decision:
Responses 1: The developer was unable to implement because the Malaysian
government had officially ordered the contractor to stop work in order to
reduce the spread of COVID -19 disease.
Responses 2: Everyone involved in the project will face the same challenging
circumstances throughout the lockdown period, in terms of time, money,
and quality. Overall, it is not the contractor's fault because this might be
deemed an unforeseen event, which the developer should take into account.
81
There should be no Liquidated Damages charged to the contractor. When
a contractor is granted an Extension of time, liquidated damages are not
charged as well.
Responses 3: Ministry of Housing had granted an extension for the vacant possession to
the purchaser which also allowed developer to grant Extension of Time to
contractor as well. While for others lockdown which does not
getting the consent from Ministry of Housing, EOT shall not be eligible
and Liquidated Damages will still have incurred to the contractor if they
delay upon the extended completion date. This statement can be related to
the Chapter 2.6 that some activities which falls outside the relief in Section
7 of the COVID-19 Act may not always be approved in a construction
contract. There is only limited protection due to the requirement of
inability to comply condition.
Contract:
Responses 1: It depends on the context of contract to see whether entitled Extension of

Time.
Responses 2: Refer to the contract which use in the project. Extension of Time shall be
entitled due to lockdown.
4.6 Summary of Quantitative Data Analysis
As shown in demographic information, majority of the respondents are involving in
quantity surveyor and contractor firm with the percentage of 40.4% and 38.6%
respectively. Most of them are having less than 5 years working experience. However,
we can clearly compare the responses of experience and non-experience workers as these
two groups of population have a very clear difference on their responses. Some of the
respondents even give their own opinion base on their experience and project involved.
82
CHAPTER 5 CONCLUSION
5.1 Introduction
This chapter brings this research to a close. The research findings recap discussion on the
three objectives and findings from the questionnaire survey which has been answered by
the relevant construction parties to the study.
5.2 Research Findings
5.2.1 Findings in Relation to Objective One: Types, Advantages and
Disadvantages of Having Liquidated Damages Clause in Contract to Developer
and Contractor
This objective is regarding to the perspective of respondents on preference of liquidated
damages to the contract. While it was apparent that the industry prefers contracts with
liquidated damages clause. The literature review has also reflected that liquidated
damages clause is the most significant provision in the construction contract since it
compensates the affected parties in the event of a breach of contract. From the developers’
standpoint in this survey, liquidated damages act as a type of insurance to give protection
to the developer in order to cover their loss that incurred. This is due to the fact that when
a contractor unable to complete project on time, it may lead to loss of profits and cost
overruns. In addition, the developer was unable to make good use of the site to make
profit too. From the questionnaire survey data shows that the amount of liquidated
damages should not be set at whatever number the developer desires, but rather at a
reasonable amount, even though the developer has the right not to prove actual harm to
the contractor. This statement can be related to the Cubic case as stated in the Chapter 2
Literature Review. The judgement in Cubic case overturns the decision in Selva case and
affects the liquidated damages clause in the main contract. As we know, a condition of
83
contract must be fair to both parties. Besides, the factor of tender price of project can alter
the rate of liquidated damages has highest vote. This is due to the risk that is taken on by
the contractor increases proportionally with the amount of liquidated damages paid by the
developer. When every contractor raises their tender price in an effort to offset their losses,
this is not a good indicator for the developer because it means that they will need to spend
more money on that particular project. Moreover, from the data collected from
questionnaire survey, it was found that the rate of liquidated damages per day can be can
be vary widely and without fixed rate because it affected by many factors as it is
depending on the type of the project deal by the construction parties. According to the
respondents’ responses, they stated that the amount cannot be determine through range
because it can be any amount but as long as it is reasonable. For example, a renovation
company used to deal with a smaller amount of liquidated damages then design and build
construction company. This is because the larger the project, the more difficulties faced,
the higher the risk, the higher rate of liquidated damages may impose by the developer.
There is a lot of way to calculate the amount of liquidated damages. Every company has
their own method but there is no right or wrong as long as contract has been agreed and
signed by both parties.
Damages during Pre-Stage and Final Account Negotiation and the Factors
Affecting Liquidated Damages Enforce Due to Delay
According to the data collected from questionnaire survey, it was found that majority of
the respondents voted for lost revenue and profits as the type of damages that caused by
delay to the developer and contractor. In the Chapter 2 Literature Review has stated that
it is regarding to the daily operating profit. While this factor has supported by one of the
responses in the questionnaire survey objective 3, which is purchasers unable to operate
84
their business on time due to developer fail to hand over key to them. Their losses will be
determined through the estimated number of customers that may come to purchase. This
is because the longer the time contractor delay, the buyers unable to start their business
and loss their chance in making profit.
Enforcement of Liquidated Damages
There is a very close vote between ‘yes, the ability to impose liquidated damages under
specific conditions’, and ‘no, the inability to impose liquidated damages’. While the
statement of developer unable to impose liquidated damages has the highest ranking and
it is one vote higher than the statement of ‘yes but with condition’. However, according
to the objective 3 Literature Review stated that contractor is entitle to request Extension
of Time and developer unable impose liquidated damages, though certain conditions
required to be complied. It is not compulsory that all contractor is able to avoid from
paying liquidated damages due to delay project during lockdown as it is not all the
lockdown are approved. The exemption was given and valid to those event that happen
from 29th March 2020 until 23rd October 2020. Although contractor has right to claim
Extension of Time, but he is required to give written notice to the Architect his intention
to claim for such extension of time together with supporting documents with all
particulars of the cause of delay. Giving a notice to Architect shall be a condition
precedent to an entitlement of extension of time and lead to avoid from paying liquidated
damages.
85
5.2.4 Summary of Research Findings
From the information collected in questionnaire survey, a conclusion can be reached on
the importance of liquidated damages clause existing in the contract, as it able to protect
both parties including the purchaser. Besides, there are certain circumstances in which
developers are unable to impose liquidated damages due to the government’s order to
execute lockdown which is a restriction movement order and stop work order to everyone
in Malaysia. This is because the decision was made by government, not by contractors.
Therefore, contractors are permitted to request Extension of Time but with the condition
precedent of giving notice to the Architect.
5.3 Limitation of Study
The results of this study is subject to a few limitations. Firstly, the questionnaire results
were only targeted towards parties that involved in the construction industry. While
contractors must be registered with the Construction Industry Development Board
(CIDB). Quantity surveyor, contractor and developer form the major sector of the
construction industry, this may reflect the actual view on the entire industry. The usage
of questionnaire may also pose problem of misrepresentations and dishonestly, both of
which will affect the accuracy of data collected.
86
5.4 Recommendations of Future Studies
The government are no longer implement lockdown anymore. However, Covid-19 is still
continuously spread all around the world and people are still struggling on it. Therefore,
all the construction parties shall go through all the contract properly before sign as it may
bring a big effect towards parties when emergency activities happen such as Covid-19
pandemic and the lockdown impose by government.
The researcher recommends future researchers to undertake the study to investigate any
other emergency issues that have the possibility to develop in future which regarding to
the Covid-19 in the construction industry and the ways to be solve when disputes occur.
5.5 Conclusion
Liquidated damages is not a penalty to contractor. It is a compensation to the innocent
parties when breach of contract occurs. Liquidated damages is very important in a
contract to both parties as it able to give protection to both parties. There is no bias as the
amount of liquidated damages shall be reasonable and fair to both parties. Therefore,
everyone should be careful on forming and signing a contract including contract out the
liquidated damages from the contract. This is due to the contract is the main document to
be refer once anything happen.
87
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APPENDICES
Appendix A: Questionnaire
The Effects of COVID-19 Act on the Application of Liquidated Damages in

Malaysian Construction Industry
The survey has been developed to identify the level of understanding of Liquidated
Damages Clause (LD) among the Malaysian construction parties and focus on the types
of liquidated damages, advantages and disadvantages of the construction parties to
enforce the liquidated damages clause in the Malaysian construction industry and to find
out how the Covid-19 Act affects the enforcement of Liquidated Damages
Section A: Demographic Profile
1. Gender * Kindly select one only
( ) Male
( ) Female
2. What is your highest education level? * Kindly select one only
( ) SPM
( ) STPM
( ) Diploma
( ) Bachelor Degree
( ) Master
( ) PHD
3. What is the type of firm you are working at? * Kindly select one only
( ) Developer
( ) Contractor
( ) Architect
( ) Engineer
( ) Quantity Surveyor
( ) Supplier
( ) Any others, please state: ___________________________
92
4. How many years of working experiences in the construction industry? * Kindly
select one only
( ) Less than 5 years

( ) 5 to 10 years
( ) 11 to 20 years
( ) More than 20 years
Section B: The Relationship of Liquidated Damages Between Developer and Contractor

5. Is delay of the project and paying Liquidated Damages to the innocent party
is a common scenario in the construction industry? * Kindly select one only
( ) Yes
( ) No
6. Do you prefer to have Liquidated Damages clause in the contract? * Kindly

select one only
( ) Yes
( ) No
7. Please indicate your extent of agreement on the following benefits of having

Liquidated Damages in the contract to the Developer. * Kindly select one for
each criterion
Benefits Strongly Disagree Neutral Agree Strongly

Disagree Agree
1 2 3 4 5
Not required to prove
actual damages to the
contracting parties
Save time and cost of
arbitration and
litigation
Act as a type of
insurance to give
protection to the
employer from risk
helps to reduce any
unnecessary ambiguity
over the project
Able to get back his
possession on time
93
8. Please indicate your extent of agreement on the following benefits of having
Liquidated Damages in the contract to the Contractor. * Kindly select one for
each criterion

Disagree Agree
1 2 3 4 5
Help in weighing the
cost performance
against the cost of a
breach
Get to know early the
amount to be pay if
delay project
Allow analysing their
risks
Act as a motivator
9. Please indicate your extent of agreement on the following drawbacks of

having liquidated damages in the contract to the Developer and Contractor.
* Kindly select one for each criterion

Disagree Agree
1 2 3 4 5
LD might not be
sufficient to pay for
the specific breach as
the amount is fixed
Tender price of the
project can be affected
based on the rate of
LD
Unfair to the
contractor as amount
of liquidated damages
way too high
Difficult for the
contractor to prove
that LD is not genuine
pre-estimate if the
contractor wants to
challenge the
calculation of LD
94
10. How much is the rate of liquidated damages mostly set in the construction?
* Kindly select one for each criterion
( ) RM 10,000 to RM 30,000
( ) RM30,001 to RM 50,000
( ) RM 50,001 to RM 100,000
( ) More than RM 100,000
11. Reason choosing the rate of liquidated damages base on above question?
___________________________
Section C: Type of Damages
12. Please indicate your agreement on the type of damages caused by delay to
the developer and contractor.
Type of Damages Please Tick

(✓)
Indirect Cost (eg. rental expenses, insurances, salaries &
utilities)
Direct costs incurred under the Contract
Lost revenue and profits
Additional project administration costs
Damages and penalties charges by Local Authority
Interest and financing costs
Cost implications to third-party contracts
Losses for tax or investment incentives
Section D: Enforcement of Liquidated Damages towards to COVID-19 Act
13. Is developer entitled to impose liquidated damages to main contractor due

to the delay of the project during lockdown which impose by the
government and why? * Kindly select one for each criterion
( ) Yes, developer entitled to impose for all liquidated damages

( ) Yes, but there is certain condition should be comply
( ) No, unable to impose liquidated damages
95
14. Please indicate your agreement on the reason that unable to impose liquidated
damages. * Kindly select one for each criterion
( ) Do not comply the requirement under Prevention and Control of

Infectious Diseases Act 1988 Act (PCID)
( ) Relevant event in the work programme which is not critical path
( ) Contractor fails to submit notice to the Architect during lockdown
( ) Other: ___________________________
96

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BTQS3063 PROJECT AND DISSERTATION II

THE EFFECTS OF COVID-19 ACT ON THE APPLICATION OF

DEPARTMENT OF QUANTITY SURVEYING

LEONG KHAR YEE

Supervisor: Mr. Pang Khai Shuen

of the Bachelor of Quantity Surveying (Honours)

Department of Quantity Surveying

Faculty of Built Environment

Tunku Abdul Rahman University

College, Kuala Lumpur

Copyright © 2023 by Tunku Abdul Rahman University College.

All rights reserved. No part of this dissertation may be reproduced, stored in a

permission of Tunku Abdul Rahman University College.

subjected to disciplinary actions.”

Leong Khar Yee

Date: 25th September 2022

opportunity to be involved in this project dissertation I as a part of my degree programme.

information during the research progress in order to complete my research successfully.

DECLARATION OF ORIGINALITY .............................................................ii

ACKNOWLEDGEMENT ................................................................................ iii

TABLE OF CONTENT .....................................................................................iv

LIST OF FIGURES ............................................................................................ x

LIST OF TABLES .............................................................................................xi

LIST OF SYMBOL / ABBREVIATION ...................................................... xiii

1.1 Research Background .................................................................................................. 1

1.2 Problem Statement ...................................................................................................... 3

1.3 Previous Similar Studies ............................................................................................. 5

1.4 Research Aim .............................................................................................................. 6

1.5 Research Question ....................................................................................................... 6

1.6 Research Objective ...................................................................................................... 6

1.7 Scope and Limitations ................................................................................................. 6

1.7.1 Scope .................................................................................................................... 6

1.8 Importance of Research ............................................................................................... 7

1.9 Research Design .......................................................................................................... 8

Chapter 2 Literature Review ........................................................................... 11

2.1 Introduction ............................................................................................................... 11

2.1.1 Section 75 Contract Act 1950 ............................................................................ 11

2.2 Enforceability of Liquidated Damages ..................................................................... 12

2.2.1 Case Study ......................................................................................................... 12

2.2.1.1 Malaysia Law ............................................................................................. 12

2.2.1.2 Foreign law ................................................................................................. 13

2.3 Types of liquidated damages ..................................................................................... 15

2.3.1 Liquidated damages ........................................................................................... 15

2.3.2 Unliquidated damages ........................................................................................ 16

2.4.1 Developer ........................................................................................................... 17

2.4.1.1 Benefits ....................................................................................................... 17

2.4.1.2 Disadvantages ............................................................................................. 18

2.4.2 Contractor .......................................................................................................... 20

2.4.2.1 Benefits ....................................................................................................... 20

2.4.2.2 Disadvantages ............................................................................................. 21

2.4.3 Summary ............................................................................................................ 21

2.5.2 Calculation of Liquidated Damages................................................................... 24

2.5.2.1 Developer to Purchaser ............................................................................... 24

2.5.2.2 Main Contractor to Sub-Contractor ............................................................ 24

2.5.2.3 Developer to Main Contractor .................................................................... 25

2.5.3 Type of damages caused by delay ..................................................................... 28

2.6 Enforcement of Liquidated Damages due to Covid-19 Pandemic ........................... 30

2.6.1 Relationship Between the Developer and Main Contractor .............................. 30

2.6.2 Relationship between Developer and Purchaser ................................................ 33

Chapter 3 Research Methodology ................................................................... 36

3.1 Introduction ............................................................................................................... 36

3.2 Research process ....................................................................................................... 37

3.3 Techniques for Data Collection................................................................................. 38