DETERMINATION BY

CONTRACTOR
SITI MANISAH BINTI MOHD MAZNI (2019848472)
AINA AQILAH BINTI MUHAMAD FAIZAL
(2019495838)
MOHAMAD FAIZ ADHA BIN JOHAR BAHAR
(2017354387)

http://www.free-powerpoint-templates-design.com
Termination of Contract
by Contractor
INTRODUCTION
The contractor has the right to terminate the contract
in certain circumstances.

In building contract, this refers to the determination

of the contractor’s own employment under the
contract.

Both parties still have the right and liability under

the contract until final settlement.
.

The contractor is entitled to claim for loss and

damage suffered by him due to the termination.
.
P.W.D. FORM
203A (Rev.
1/2010)
GROUND FOR TERMINATION
The grounds for termination by the contractor can
be divided by 2 categories:

1. Delay in giving
site possession

2. Default by the
Government
GROUND FOR TERMINATION
1.Delay in Giving in site Possession

Clause 38.5
GROUND FOR TERMINATION

1.Delay in Giving in site Possession

- Contractor has the right to terminate the contract in case of
delay in giving site possession to him exceeding 90days
- If the delay in giving site possession not exceed 90days
a) Contractor to be granted extension of time
b) Contractor has to proceed with the works when the site is
made available
c) Contractor is not entitled to terminate the contract.
GROUND FOR TERMINATION

1.Delay in Giving in site Possession (Cont’d)

The contractor is given the right to terminate the
contract if:
- there is a delay giving possession of the whole site
by the employer and the delay exceeds 90 days.
The contractor cannot terminate the contract if the
delay only involves part of the site.
i.e. not the whole site
GROUND FOR TERMINATION
2. Default by the Government

Clause 55 (a)
GROUND FOR TERMINATION

2. Default by the Government

• The contractor can terminate the contract if the government
fails to fulfill their obligation under this contract without any
reason.
• The default by the government includes failure to pay the
interim payment to the contactor.
• However, the right contractor to terminate the contract must
considered if the government had failed the remedy the default
within the period in the written notice issued by the contractor.
PROCEDURES FOR TERMINATION
1. Delay in Giving Site Possession

Delay S.O.’s notice Contractor’s reply

-causes of delay -to proceed or
- to terminate contract

>90 days ≤ 14 days

PROCEDURES FOR TERMINATION

1. Delay in Giving Site Possession (Cont’d)

• If the contractor does not give written reply in 14
days:
• The contractor is obliged to proceed with the work
• Contractor is considered as not taking the option to
determine his employment.
• Contractor cannot terminate the contract after
agreeing to proceed with the works.
PROCEDURES FOR TERMINATION
2. Default by the Government

Government’s Government received Notice of termination

default notice specifying may be issued
begins default

any duration/
any duration specified period agree
CONSEQUENCES OF TERMINATION

Clause 55(c)
CONSEQUENCES OF TERMINATION
Clause 55 (c)(i)
• Once the contract is terminated by the Contractor:-
a) Government pays value of completed works
b) Government pays preliminary items
c) Government pays the goods ordered and/or delivered
d) Government pays Contractor’s expenditure
Clause 55 (c) (ii)
• The Contractor is not entitled for any loss including loss of
profit, damages or other associated claims
 P.A.M
CONTRACT
2018
GROUND FOR TERMINATION

INSOLVENCY
EMPLOYER’S
OF
DEFAULT
EMPLOYER

DETERMINATION
BY
CONTRACTOR
 GROUND FOR TERMINATION
1. DEFAULT BY EMPLOYER

26.1 The Contractor may determine his own employment if the Employer defaults in any of the following:
26.1(a) if the Employer fails or neglects to pay the Contractor the amount due on any certificate
(less any Liquidated Damages and set-off which the Employer is expressly entitled to make
under the Contract) within Period for Honouring Certificates;
26.1(b) if the Employer interferes with or obstructs the issues of any certificate by the Architect;
26.1(c) if the Employer fails to nominated a succeeding Architect or Consultant in
accordance with Articles 3,4,5 and 6; or
26.1 (d) if before the date of Practical Completion, the carrying out of the whole or substantially the
whole of the uncompleted Works is suspended for a continuous period of time exceeding
the stated in the Period of Delay stated in Appendix by reason of:
26.1(d)(i) AI issued by the Architect under clause 1.4, 21.1 or 21.4…….
26.1(d)(ii) the Contractor not having received in due time the necessary
AI…..
2.6.1(d)(iii) delay on the part of craftmen, trademen or other contractors
employed or engaged by the employer…..
26.1(d)(iv) The opening up for inspection of any work covered up or to
arrange for to carry out any testing of any work……’
Contents

CLAUSE 26.0
 GROUND FOR TERMINATION
1. DEFAULT BY EMPLOYER (Cont’d)

 The Contractor have right to terminate his own employment if the

employer fails to fulfill their obligation according to the contract without
any reasonable excuse.

 The termination of contract is not mandatory and not limited to

determination only as the contractor can decided his decision to remedy
the default by employer to the court.

 The decision made by Contractor for determination of his own

employment should be based on the event that stated in clause 26.0
without involved with his own negligence and default.
 GROUND FOR TERMINATION
1. DEFAULT BY EMPLOYER (Cont’d)

NON-PAYMENT
BY EMPLOYER

FAILURE TO DEFAULT
NOMINATE INTERFERENCE
SUCCEEDING BY WITH ISSUANCE
CONSULTANTS EMPLOYER OF CERTIFICATE

SUSPENSION OF
WORK
 GROUND FOR TERMINATION
1. DEFAULT BY EMPLOYER (Cont’d)

a) Non-payment by employer (clause 26.1(a))

 All of work done by Contractor on Site should be stated in Interim Claim with complete details to
enable the Quantity Surveyor to make valuation on it before the Employer make the payment.

 The payment made by Employer should be exactly on the amount stated on the Interim
Certificate issued and if any deduction made due to Liquidated Damages or any set-off need to
be express clearly on the certificate to avoid any dispute.

 If the duration for the Period for Honouring Certificates is not stated on Appendix, it will be twenty
one (21) days from the date of the certificate have been issued.
 GROUND FOR TERMINATION
1. DEFAULT BY EMPLOYER (Cont’d)
b) Interferences with issuance of certificates c) Failure to nominated succeeding consultant
(clause 26.1(b)) (clause 26.1(c))

 All the certificate issuances should be made  The Employer should appoint any succeeding
by Architect with his own valuation of the work Architect or Consultant for the Contract
done without any interference by the purposes.
Employer.
 The appoinment should be made in earlier of 28
 The Architect need to be fair in make days as accordance in Article of Agreement
valuation for every certificate
 If the Employer decides to not appoint any
 The Employer have no right to obstruct any Architect for the project, it should be stated
issuance of the certificate prepared by the clearly on the agreement to disregard any
Architect as it might affected the Contractor approval or instruction that should be made by
performance of the work on site. preceding Architect.
 GROUND FOR TERMINATION
1. DEFAULT BY EMPLOYER (Cont’d)

d) Suspension of Work (clause 26.1(d))

 The uncompleted work has been suspended continuously and longer than stated period of the
Period of Delay in Appendix which not more than three (3) months due to:

i. The Architect issued AI for the following:

 Discrepancy or disagreement in the Contract Document and any related document that
issued by the Architect. (clause 1.4)
 Delay in giving possession of site will affected the progress of work. The possession of
the Site should be given to the Contractor on the date of Commencement (clause 21.1)
 of any part or all of works that need to be executed as stated in Contract foThe
postponement or suspension r a continuous period that exceed the Period of Delay as
stated.(clause 21.4)
 GROUND FOR TERMINATION
1. DEFAULT BY EMPLOYER (Cont’d)

d) Suspension of Work (clause 26.1(d)) (Cont’d)

 The uncompleted work has been suspended continuously and longer than stated period of the
Period of Delay in Appendix which not more than three (3) months due to:
ii. Not receiving any necessary AI on time such as further drawing, details, expenditure of P.C
Sum and Provisional Sum, or any important information regarding to the project.
iii. Delay cause by the other party that engaged by the Employer to execute the works that not
stated in the Contract to be done by the Contractor.
iv. Opening of the work tor inspection and testing of work or material that carried out by
Contractor.
 GROUND FOR TERMINATION
2. INSOLVENCY OF EMPLOYER

26.3. In the event the Employer become insolvent or making a composition or

arrangement with his creditors, or have a winding up order made, or (except for the
purposes of reconstruction or amalgamation) a resolution for voluntary winding up,
or having a liquidator or receiver or manager of his business or undertaking duly
appointed, or having possession taken by by or on behalf of the holders of any
debentures secured by a floating charge, the employment of the Contractor
shall be forthwith automatically determined.

CLAUSE 26.3
 GROUND FOR TERMINATION
2. INSOLVENCY OF EMPLOYER

 The contract will be terminated immediately due to the following event:

- The Employer become insolvent

- The Employer is having a winding-up order made by his creditors or

a resolution for his voluntary.

- The Employer is having a provisional liquidator or poseesion taken

by the holder of any debentures secured by a floating charge.

 It shows that the Employer have no stable financial to proceed the

construction and made the payment to the Contractor which will be the
risk to the Contractor to execute the works.
 PROCEDURES FOR TERMINATION
1. DEFAULT BY EMPLOYER

26.2. Upon the occurrence of any default under Clause 26.1, and if the Contractor decides
to determine his own employment then, the Contractor decides to determine his own
employment then, the Contractor shall give to the Employer a written notice delivered
by hand or by registered post specifying the default . If the Employer shall continue
with such default for fourteen (14) Days from the receipt of such notice then, the
Contractor may within ten (10) Days from the expiry of the expiry of the said fourteen (14)
Days, by a further written notice delivered by hand or by registered post forthwith
determine his own employment under the Contract. Provided always that such notice shall
not be given unreasonably or vexatiously.’
Contents

CLAUSE 26.2
PROCEDURES FOR TERMINATION

1. DEFAULT BY EMPLOYER (Cont’d)

Employer’s Employer’s receive Notice of determination Contractor’s option

default begin notice specifying default may be issued to determine end

Default end
Default continues

Any duration 14 days ≤10 days

Duration of procedure of determination by Contractor which Employer

continues default for 14 days.
 PROCEDURES FOR TERMINATION
1. DEFAULT BY EMPLOYER (Cont’d)

01 02 03 03 04 05
02
The Contractor If default continues, If default ends
The notice Employer resumes
needs to gives Contractor may issue within 14 days of
received by notice, the the default at any
written notice to the further written
the Employer notice regarding Contractor have no time after that, the
the Employer
need to take determination of his right to terminate Contractor have
stated the right to gives written
any action of employment within the contract as it
specifying one or will considered as notice on his
the default the continues ten
more event a brief period for determination within
stated within (10) days from the
relating to the Contractor to take 10 days without
14 days. expiry of the notice
default of the any actions of the need to wait for
. date.
Employer. default. another 14 days
.
 PROCEDURES FOR TERMINATION
2. INSOLVENCY OF EMPLOYER

26.3. ‘...the employment of the Contractor shall be forthwith automatically determined.’

Contents

CLAUSE 26.3

Employer become insolvent Notice of termination

Any Duration
Duration of procedure of determination by Contractor which Event of Insolvent’s
Employer
 PROCEDURES FOR TERMINATION

2. INSOLVENT OF EMPLOYER (Cont’d)

 The contract will be terminated right away after any event that related to the insolvency
happens.
 The termination can be issue by the Architect with written notice without need any warning
notices to the Employer specifying his default.
 As the Employer will be considered as not having stable financial and capability to pays
the Contractor for his completing work on site, the termination will be made immediately to
decrease the risk of Contractor to suffer any loss or damages.
 CONSEQUENCES OF TERMINATION
1. ACTION TO BE TAKEN BY CONTRACTOR

26.4(a) the Contractor shall within fourteen (14) Days or within

such longer period as may be agreed in writing by the
Architect, remove from the Site all his temporary buildings,
construction plant, tools, materials and goods and shall give
facilities for his Nominated Sub- Contractors to do the
same…ontents

CLAUSE 26.4
 CONSEQUENCES OF TERMINATION

1. ACTION TO BE TAKEN BY CONTRACTOR

 After the termination been made, the Contractor needs to fulfill his duties as according to
the Contract.
 The Contractor and his sub-contractor that involved in the project, need to remove all
their property on site such as temporary buildings, plant and machineries, materials and
goods within the 14 days after the notice of the determination.
 The materials and goods that have been paid by the Employer should be leaves on
the Site as the Contractor has no right to remove it.
 The period for removing such property can be longer than 14 days as agreed by the
Architect with the written notice according to the suitable of work load involved
 CONSEQUENCES OF TERMINATION
2. ACTION TO BE TAKEN BY EMPLOYER

26.4(b) the Employer shall allow or pay to the Contractor the total
value of work properly executed and the value of
materials and goods supplied including any loss and/or expense
suffered by the Contractor caused by such determination.’

CLAUSE 26.4
 CONSEQUENCES OF TERMINATION

2. ACTION TO BE TAKEN BY EMPLOYER

 After the termination been made, the Employer also needs to oblige his duties as
according to the Contract.
 The Employer are entitled to pay the Contractor of the value of his work done on
Site.
 Also, the Employer must made payment for materials and goods that have been
supplied to the site
 Upon determination, it is obligation of Employer to pays any loss and damages that
suffered by the Contractor.
 The Employer must responsible for any loss and damages happens due to the termination
that caused due to Employer’s default.
 RECORD OF WORKS
2. ACTION TO BE TAKEN BY EMPLOYER

26.5 The Contractor shall within twenty eight (28) days of the
determination of his own employment, give a written notice to the
Architect and Quantity Surveyor of the date of inspection on Site to
jointly record the extent of the Works executed and the materials
and the goods delivered to the Site. Upon completion of the
records by the Contractor, a copy shall be sent to the Employer,
Architect and Quantity Surveyor and such records shall
form the basis for the evaluation of the value of the works executed
and materials and goods delivered to the Site by the Contractor up
to the date of determination.’

CLAUSE 26.5
RECORD OF WORKS

 The Contractor need to issue a written notice to the Architect and Quantity Surveyor for
fixing the date for site inspection regarding the work done by the Contractor.
 Such written notice should be issue within 28 days from the date of the notice
determination.
 The Architect and Quantity Surveyor should involved in the joint evaluation to record of
all of the work done by the Contractor and the materials and goods delivered to the
site.
 Such records needs to be sent for all parties involved and will be the basis for the
evaluation of the value of works that have been completed by the Contractor and value of
the materials on the site until the date of the determination.
FINAL ACCOUNT
‘26.6 The Contractor shall within six (6) months after determination of his own employment, submit to the Employer, Architect and
Quantity Surveyor for the Employer’s agreement, a final account for the total value of work properly executed, the value of materials
and goods supplied and loss and/or expense suffered by the Contractor caused by such determination.

26.6(a) If nothing in the said final account is disputed by the Employer within three (3) months from the date of receipt
of the final account from the Contractor, the final account shall be conclusive and deemed agreed by the parties.
If the amount in the final account exceeds the sums previously paid to the Contractor under the Contract (less
any Liquidated Damages and set-off which the Employer is expressly entitled under the Contract), the balances
shall be a debt payable to the Contractor by the Employer within the Period of Honouring Certificates. If the said
amount is less than the said sum, the differences shall be a debt payable to the Employer by the Contractor or
where applicable, the Employer may recover such difference from the Performance Bond.

26.6(b) If the Employer disputes the final account, the Employer shall give written notice to the Contractor setting out
any disagreement complete with particulars within three (3) months of the date of receipt of the final account
from the Contractor. The Contractor shall within three (3) months from the date of receipt of the grounds of
dispute, either make such amendment to the final account as in his opinion may be appropriate, or decide not to
amend the final account. In the event the Employer disagrees with the amended final account or the decision
not to amend the final account, the Employer shall refer the dispute to arbitration under Clause 37.0 within three
(3) months from the date of receipt of the amended final account or decision not to amend the final account.
Failure to refer the dispute within the stipulated time, the final account or amended final account shall deem to
be conclusive and agreed by the parties.

CLAUSE 26.6
FINAL ACCOUNT
Determination Final Account

6 months
Duration of Issuance of Final Account

 Within 6 months of the determination, the Contractor required to submit the Final Account to
the Employer, Architect and Quantity Surveyor
 The Final Account should be included with:
- the total value of work done by the Contractor
- the value of materials and goods that have been supplied to the Site
- the total loss and expenses incurred by the Contractor including the cost of removal
their property on site due to the such determination.
 It purposes for Employer’s agreement to responsible of the losses that caused by the
Employer’s default.
 FINAL ACCOUNT
1. NO DISPUTE OCCUR ON FINAL ACCOUNT ISSUED
 Within 3 months - the Contractor did not received any dispute by the Employer, Final Account are
considered conclusive.
 The Employer needs to pay to the Contractor the total amount agreed by both parties that stated in
the Final Account.

- If the total amount on the Final Account is exceeds to the total amount previously paid
to the Contractor according to the Contract, the Employer must pays the balance
amount to the Contractor.
- The payment need to be made within the Period of Honouring Certificates as stared in
Appendix or should not more than 21 days after the certificate have been issued.
- Otherwise, if the total amount of previously paid to the Contractor exceeds the Final
Account, the excess amount will be a debt that should be paid by the Contractor to the
Employer.
- Such excess amount can be recovered by the Employer from the Performance Bond or
any monies due to or become due to the contractor such as retention fund.
FINAL ACCOUNT

Employer
Notice by Decision by
received Final
Employer Contractor Arbitration
Account
Disputes

≤3 Months ≤3 Months ≤3 Months

Duration of Disputed Final Account

 FINAL ACCOUNT
2. DISPUTE OCCUR ON FINAL ACCOUNT ISSUED
 Disagreement occur regarding the total amount on the Final Account submitted by the Contractor by
gives the written notice to the Contractor.
 Such written notice need to specify the grounds of dispute of the Final Account within 3 months of
the date Final Account submitted by the Contractor have been received by the Employer
 In the further 3 months after receiving the notice, the Contractor need to decides for any amendment
to be made on the Final Account.
 The Employer can refer the dispute to the Arbitration within 3 months of the date issued of the
amendment Final Account if the dispute continues for the amendment Final Account
 If there is no dispute or disagreement raised by the Employer within the stipulated time, dispute can
no longer be referred to the arbitration.
 As the results, the latest total amount of the Final Account whether have been amend or not by
Contractor will be conclusive and agreed by both parties.
 FINAL ACCOUNT
STATEMENT OF FINAL ACCOUNT
ITEM DESCRIPTIONS RM
1. Total value of work complete 4,500,000.00
2. Value of materials delivered on site 180,000.00
3. Value of materials ordered 85,000.00
4. Claims entitled under the contract
a) Opening for inspection 10,000.00
5. Loss and/or expense caused by the determination
a) Cost of removal of temporary buildings 45,000.00
b) Cost of removal of plant 25,000.00
c) Loss of profit 225,000.00
Total 5,070,000.00
LESS
TOTAL VALUE OF PREVIOUS PAYMENTS
(Interim payment No. 1-15) 4,250,000.00
AMOUNT DUE TO THE CONTRACTOR/EMPLOYER 820,000,00.00
CASE STUDY
Kesuma Murni Sdn Bhd vs Persatuan
Kemajuan Negeri Selangor
1. Corporation ("defendant") has received a summons from
Kesuma Murni Sdn Bhd ("the plaintiff"). Plaintiff is the contractor
appointed by the defendant to "Develop Project PKNS
2. If the defendant fails to meet these demands, damages
headquarters in Precinct 8.8 Section 14, Shah Alam".
amounting RM28,715,122.97 shall be paid along with interest on
the damages at the rate of 5% per annum and the interest on
the amount of RM4,545,000.00 at a rate of 16% per annum from
31 May 2013 until settlement.
3. The plaintiff failed to comply with the terms and conditions of
the contract (project delay), the defendant terminated the
services of contractors on 4 February 2013. The plaintiff then
filed a writ of summons against the defendant on 20 February
2013 and claimed that the termination of contract by the 4. On 17 June 2016, the decision was favorable to the defendant
defendant is not valid. by court granted defendant's counterclaim was rejected by
judgment of RM14,580,528.30 for recognition of
RM4,254,208.96. The plaintiff need only pay RM10,326,319.34
to the defendant. The cost of the actions to be paid to the
defendant amounting to RM60,000.00
Thank You