ARTICLE
16 November 2023

Malaysian Construction Law And Practice A Brief Overview

Generally, the Malaysian construction market is governed by laws of contract and tort. The laws are further developed through statutes and judicial decisions.
Malaysia Real Estate and Construction

1.1 Governing Law

Generally, the Malaysian construction market is governed by laws of contract and tort. The laws are further developed through statutes and judicial decisions. Reference is also made to foreign judicial decisions and statutes as a guide. The principal statutes governing the construction market include:

  • Contracts Act 1950;
  • Construction Industry Payment & Adjudication Act 2012 (CIPAA);
  • Federal Roads Act 1959;
  • Street, Drainage and Building Act 1974;
  • Town and Country Planning Act 1976;
  • Highway Authority Malaysia (Incorporation) Act 1980;
  • Uniform Building By-Laws 1984;
  • Federal Roads (Private Management) Act 1984;
  • Road Transport Act 1987;
  • Earthworks (Federal Territory of Kuala Lumpur) By-Laws 1988;
  • Occupational Safety and Health Act 1994;
  • " Construction Industry Development Board Act 1994; and
  • Town Planners Act 1995

General

Standard forms of construction contract are widely used in Malaysia. However, they are not mandatory in nature. The various standard forms of construction contract are commonly produced by the following institutions:

  • Malaysian Institute of Architects (Pertubuhan Akitek Malaysia) (PAM);
  • Institute of Engineers, Malaysia (IEM);
  • Construction Industry Development Board (CIDB);
  • Malaysian Public Works Department (PWD); and
  • Asian International Arbitration Centre (AIAC).

It is not uncommon for the standard forms of construction contract produced by PAM, IEM, CIBD, PWD or AIAC to be adopted by the parties. At times, it is not unusual for parties to adopt the FIDIC standard forms.

Private Sector Contracts

For works involving building contracts, it is not uncommon for parties to adoptthe standard forms of construction contract produced by PAM. Amongst others, the following forms are used.

  • Between the employer and contractor:
    1. Agreement and Conditions of PAM Contract 2018 (With Quantities);
    2. Agreement and Conditions of PAM Contract 2018 (Without Quantities);
    3. Agreement and Conditions of PAM Contract 2006 (With Quantities);
    4. Agreement and Conditions of PAM Contract 2006 (Without Quantities).
  • Between the contractor and subcontractor:
    1. Agreement and Conditions of PAM Sub Contract 2018;
    2. Agreement and Conditions of PAM Sub Contract 2006.

For works involving engineering projects, it is not uncommon for parties to adopt the standard forms of construction contract produced by IEM. Amongst others, the following forms are used:

ApartfromIEM and PAM,the AIAChas also released its standard forms of construction contract:

  • AIACStandard Formof Building Contract (2019 Edition);
  • AIAC Standard Form of Building SubContract (2019 Edition);
  • AIAC Standard Form of Minor Works Building Contract (2018 Edition);
  • AIAC Standard Form of Design and Build Contract (2018 Edition);
  • AIAC Standard Form of Sub-Contract for Design and Build Contract (2018 Edition)

Public Sector Contracts

For works involving public sector projects where the employer is a federal or state government, statutory body, or governmentlinked company, it is not uncommon for parties to adopt the standard forms of construction contract produced by PWD and CIBD.

For PWD

Where itis a build-only procurement model, amongst others the following PWD forms are used.

  • Between the government (as employer) and contractor:
    1. Standard Form of Contract To Be Used where Bills of Quantities Form Part of the Contract, PWD Form 203A (Rev. 1/2010);
    2. Standard Form of Contract To Be Used Where Drawings and Specifications Form Part of the Contract, PWD Form 203 (Rev.1/2010).
  • Between the contractor and the nominated subcontractor:
    1. Standard Form of Contract PWD Form 203N (Revised 1/2010) for Nominated Sub-Contractor Where the Main Contract Is Based Upon PWD Form 203 or 203A.
  • Between the contractor and the nominated supplier:
    1. Standard Form of Contract PWD Form 203P (Revised 1/2010) for Nominated Suppliers Where the Main Contract Is Based Upon PWD Form 203 or 203A.

Where it is a design and build procurement model, there is a separate PWD form that is used: the Standard Form of Design and Build Contract PWD Form DB (Rev. 1/2010).

For CIDB

Amongst others, the following CIDB forms are used.

  • Between the government (as employer) and contractor:
    1. CIDB Standard Form of Contract for Building Works (2000);
    2. Standard Terms of Construction Contract for Renovation and Small Projects (2015).
  • Between contractor and nominated subcontractor:
    1. CIDB Standard Form of Contract for Nominated Sub-Contractor (2002).
  • Between contractor and domestic subcontractor:
    1. Model Terms of Construction Contract between Contractor and SubContractor (2007).

To view the full article, click here.

Originally published by Chambers and Partners.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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