In the Malaysian construction industry it is a common practice that many contractors sub-let their works to subcontractors on ‘pay-when- paid’ or ‘pay-if-paid’ basis. This means that unless the Contractor receives payment from the Employer, the Sub- Contractor will not receive its corresponding payment. Unfortunately, sub-contractors are often burdened and suffered financially as a consequence of such practice, particularly when non-payment by the Employer to the Contractor bears no relation to the Sub-Contractor’s payment entitlement for its sub-contract works.
In many cases, when the Contractor is related to the Employer directly or indirectly, such payment provision is often introduced into the sub-contracts, with an ulterior motive or ill-intent of delaying or simply not paying the subcontractors. Unfortunately, the courts which have been deciding on such payment provisions on payment disputes by the contracting parties have so far ruled and decided in favour and have enforced them, literally.
In this three parts Article, BK Entrusty aims to provide readers with an appreciation of the past and present payment practices and provisions of conditional payment in Malaysia in the First Part, review the payment provisions and their implementation and practices in countries like United Kingdom, Australia and Singapore, which have their own statutory adjudication act in the Second Part and introduce Construction Industry Payment and Adjudication Act (“CIPAA”) on its pertinent features and provisions, including the issues, challenges and implications in the Third and Final Part
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