Prepared by: Ng Mei Shan

Types of Building Contracts used in Malaysia

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

Development of PAM Forms of Building Contract

PAM/ ISM 1969

PAM 1998

PAM 2006

PAM Forms of Building Contract

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

New Provisions in PAM 2006

Time

Money Matters

Quality

Dispute Resolution

Others

ITEM TIME

DESCRIPTION Clause 23.1 MC should beware of the time bar (28 Days) in respect of claims for EOT and ensure that notices and particulars are given in a timely manner. Architect either reject or issue a Certificate of EOT within 6 Weeks from the receipt of sufficient particulars from MC. Clause 30.7 MC may suspend work if the Employer fails to make timely payment and entitled to EOT (and loss and expense) for such suspension (Clause 23.8(v) & 24.3(m)). Clause 24.3 7 additional matters entitling MC to claim for Loss /Expense Clause 11.7 (additional variation), Clause 24.1 (Loss and/or expense) time bar, ensure notices and particulars are given in timely manner. Clause 11.6 substantial change in quantities of provisional quantities or due to Variation entitles the Employer/Contractor to a change in rates. Clause 11.8 and Clause 24.2 MC is required to keep contemporaneous records Clause 30.4 Employer is entitled to set off for costs incurred and or loss and/or expense. Employer required to give notice prior to withholding and deducting monies from payments due to contractor. Clause 30.17 A simple interest based on Maybank Base Lending Rate plus 1% shall be payable by the defaulting party who fails to make any payments to the other party ( Contractor or Employer).

Money Matters

ITEM QUALITY

DESCRIPTION Clause 15.1 defines Practical Completion. Clause 15.2 Architect required to either certify PC, or refuse with reasons within 14 days of receiving Contractors Notification. Extends the powers of Architect in terms of defects Clause 34.1 to Clause 34.4 Adjudication is introduced. Reference to adjudication is a condition precedent to arbitration for disputes under Cl. 30.4 (Set-off by Employer). Three (3) new clauses introduced in PAM 2006: a) Clause 36.0 Notices b) Clause 37.0 Performance Bond c) Clause 38.0 Governing Law

Dispute Resolution

Others

THE COMPARISON

ARTICLES OF AGREEMENT

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

Articles of Agreement
Article 1 Contractors Obligations 2 Contract Sum 3 Architect 4 Engineer 5 Quantity Surveyor 6 Specialist Consultant 7 - Definitions 8 - Meanings PAM 1998 to PAM 2006 Re-wordings. No significant impact

The term Employer shall nominate and appoint is removed. MC no longer has the rights to object or arbitrate on the nomination & appointment of any person by the Employer.

The defined terms had increased from 18 nos. to 59 nos. New article

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

Clause 1.0 Contractors Obligations

PAM 1998 PAM 2006 Such quality and standard of materials, rephrased and shortened goods and standard workmanship provided MC shall provide materials, goods and by MC shall be to the reasonable standards of workmanship of the quality satisfaction of the Architect and standard described in the Contract Document and/or required by the Architect in accordance with the provision of Contract (Cl. 1.1) ..The Contractor shall be fully responsible for the adequacy, stability and safety of all site operations and methods of construction.. Temporary works not included Expended from the second half of PAM98 Cl. 1.1 Temporary works included Mc not fully responsible for the temporary works if it is designed by the Architect/Consultants. Site operation excluded (falls within methods of construction)

PAM 1998

PAM 2006

Clause 2.2: If within seven (7) days upon receipt of the Architects instruction in writing the Contractor does not comply therewith then the Employer may employ and pay other.

Clause 2.4: Failure of Contractor to comply with AI. The time of compliance under an AI shall not be less than 7 days from the date of receipt of AI In case the MC did not comply, the cost of employing other Person to give effect to such instruction shall be set off by the Employer under Clause 30.4

PAM 1998 Title: Contract Documents There is no priority of documents under PAM 98 One copy certified on behalf of the Employer of the Contract Documents Submission of Work Programme is 14 Days upon issue of Letter of Acceptance. As- built Drawings and operation and maintenance manual (O & M) to be submitted within 3 months of the commencement of DLP.

PAM 2006 Title: Contract Documents, Programme and As Built Drawing Contract Documents are mutually explanatory, with the priority of documents as set out In Cl. 3.1. There shall be 2 signed original copy of Contract Documents. Submission of Work Programme is 21 Days from the Letter of Award. Architect may request for revised Works Programme The as-built Drawings and and operation and maintenance manual (O & M) to be supplied before the Completion Date when the time is not specified.

PAM 1998

PAM 2006

Clause 6.4 Only 2 subclauses which entitle architect to deal with defective works

Clause 6.5 Widening the powers of the Architect to deal with defective works through 3 new Sub clauses 6.5 (c), (d) & (e) New clause 6.8 Warranties in respect of materials and goods

PAM 1998 (Clause 10.2)

Any directions given to the Contractor or his Site Agent upon the Works by the Site Staff shall be of no effect unless given in regard to a matter in respect of which the Architect is expressly empowered by the Conditions to issue instructions and unless confirmed in writing by the Architect within three (3) working days such direction being given. If any such directions are so given and confirmed in writing by the Architect then as from the date of issue of that confirmation it shall be deemed to be an Architects instruction

PAM 2006 (Clause 10.2) Any directions given to the Contractor or his Site Agent by the Site Staff shall be of no effect, unless given in writing in regard to a matter in respect of which the Site Staff have been expressly authorized in writing by the Architect. All such directions involving a Variation shall be of no effect, unless confirmed by an AI

PAM 1998 (Clause 13.1)

PAM 2006 (Clause 13.1)

The Contract Sum shall not be The Contract Sum shall not be adjusted or altered in any way adjusted or altered in any way whatsoever otherwise than in whatsoever, other than in accordance with the express accordance with the express provisions of the Conditions provisions of the Contract. Any and subject to Clause 12.3 arithmetical errors or any errors any error whether of in the prices and rates shall be arithmetic or not in the corrected and/or rationalised computation of the Contract by the Architect or Consultant Sum shall be deemed to have without any change to the been accepted by the parties Contract Sum before the hereto. signing of the Contract.
Consultants be aware! Post-rationalisation (if any) should be stated in the Letter of Award itself to avoid later arguments

PAM 1998 Practical Completion not defined Less procedural for the issuance of CPC and CMGD (Without proper time frame)

PAM 2006
New clause 15.1 Practical Completion is defined New procedures and requirements to be complied by both the Architect and Contractor. Refer to Figure 3: Flow chart for practical completion Refer to Figure 4: Flow chart for issuance of CMGD

PAM 1998 (Clause 18.1)

PAM 2006 (Clause 18.1)

The Contractor shall be liable for and shall indemnify the Employer against any expense, liability, loss, claim or proceedings whatsoever in respect of personal injury to or the death of any person whomsoever arising out of or in the course of or caused by the carrying out the Works, unless it is solely due to any act or neglect of the Employer or of any person for whom the Employer is responsible. In that event, the Employer shall be liable

The Contractor shall be liable for and shall indemnify the Employer against any damage, expense, liability, loss, claim or proceedings whatsoever whether arising at common law or by statute in respect of personal injury to or death of any person arising out of on in the course of or caused by the carrying out of the Works and provided always that the same is due to any negligence, omission, default and/or breach of Contract by the Contractor or of any Person whom the Contractor is responsible

Clause 22.0 Damages For Noncompletion

PAM 1998 Without issuance of Certificate of Non Completion (CNC) by the Architect Liquidated and Ascertained Damages (LAD) PAM 2006 Clause 22.1 Certificate of Non Completion (CNC) is introduced, and the CNC is the conditions precedent to deduction of LD Liquidated Damages (LD) Clause 22.3 New clause. CNC can be revoked by a subsequent Certificate of Extension of Time.

PAM 1998 No time limit. Procedures and decision within a reasonable time Relevant Events: 12 numbers

PAM 2006
2 - tier procedures - a notice within 28 Days of Relevant Event, followed by supporting particulars within 28 Days of cessation of the delay Time limit Architect to assess and make decision 6 weeks after receipt of sufficient particulars Relevant Events: 24 numbers

Clause 24.0 Loss And/or Expenses Caused by Matters Affecting the Regular Progress of the Works
PAM 1998 Without time bar for procedure involved Ascertainment provision Clause 24.1 Clause 24.3 term circumstances used 8 numbers of circumstances PAM 2006
2 tier procedure a notice within 28 days of matters referred to in clause 24.1. Followed by supporting particulars within 28 Days upon ending of the matter. Ascertainment provision Clause 24.4 Clause 24.3 term matters used 14 numbers of matters additional 6 new events

Clause 25.0 Determination of Contractors Employment by Employer

PAM 1998 Clause 25.4 Time compliance 14 Days PAM 2006
Clause 25.4 rephrased , time compliance 21 Days New Clauses: - Clause 25.5 (Records of Works) - Clause 25.6 (Final Account upon determination) - Clause 25.7 (Remedy limited to damages only) - Clause 25.8 (Employers rights and remedies not prejudiced)

Clause 26.0 Determination of Own Employment by Contractor

PAM 1998 A single notice is required to be delivered to the Employer or Architect by registered post or recorded delivery

PAM 2006
New default under Cl. 26.1 failure of the Employer to nominate a succeeding Architect or Consultant in accordance with Articles 3, 4 , 5 and 6 New clause 26.2 Procedure for determination 2 tier determination process Step 1: MC shall give written notice by hand or registered post specifying default by Employer Step 2: Termination days (14 days) Void and accept default (24 days) 24-14 days = 10 days (grey period) 2nd notice by MC to Employer Step 3: If the Employer rectify within 14 days, MC do not have determination rights

PAM 1998

PAM 2006
Clarified that IC shall be issued after Practical Completion IC is issued to Employer with a copy to the Contractor New Clause: i. Cl. 30.3 Errors in payment certificate ii. Cl. 30.4 Set Off by Employer iii. Cl. 30.7 Suspension of Works for non-payment

Interim Certificate is issued to the Contractor with a copy to the Employer Certified Value Retained is now called Retention Fund(PAM 2006)

Refer Figure 5 for Final Account Procedures

Refer Figure 6 for Summary of Certificates and Payment

Clause 34.0 Adjudication and Arbitration

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

Clause 36.0 Notice Clause 37.0 Performance Bond Clause 38.0 Governing Law

Permit issuing of notice through facsimile transmission (not applicable to Cl. 23.2 & 24.2 All written notice or doc sent by facsimile shall also be sent by hand or ordinary mail or registered post soonest possible after such facsimile transmission

The performance bond to be valid until Completion Date + 3 months If Sub-contract Works is not completed by the expiry date of Performance Bond, the bond is to be extended until the expected Practical Completion Date + 3 months

Self - explanatory Standard provision in most contract

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

Conclusion