Set-Offs – A Revisit and Update

The Malaysian construction industry is notorious for set-off practices, both at main and subcontract levels, often imposed unilaterally and unfairly by the Employer on the Contractor and/or the Contractor on its subcontractors, respectively.

Consequently disputes often arise when monetary claims are set-off by withholding any payment due or extinguished through counterclaim arising from unfinished defective / non-conformance works, thus resulting in lesser or negative amount due from the paying party to the receiving party.
Generally, set-off can only be practiced when the contract between the parties contains provision providing for set-off and/or withholding of monies. It is therefore pertinent for the contracting parties to know how and when the right of set-off can be exercised and do so, correctly.
In this article, BK Entrusty aims to provide a better understanding of set-off issues and implications by revisiting its past article on “What is Set-Off Under Construction Contracts” and updating with further description and discussion on “set-off and counterclaim” and the relevant case law, by the following article contents: –
• Introduction
• Set-off and its Types
• Relevant Set-off Provisions
• Pre-Conditions for Set-off
• Excess, Recoverable?
• Summary/Conclusion

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