Should a Sub-contractor Sign a Sub-contract with
Pay-When-Paid Clause?

It is common in the Malaysian construction industry that many Contractors sub-let their works to their Sub-contractors on pay-when-paid/pay-if-paid basis. That is to say, unless the contractor receives payment from the Employer or client, the Sub-contractor/s will not receive theirs, correspondingly. Often, the Sub-contractors are burdened and suffer financially as a consequence of such practices, particularly when non-payment by the Employer bears no relation to the Sub-contractors works.

In the United Kingdom, the UK Housing Grants, Construction and Generation Act 1996 under Section 113 (1) has outlawed such pay-when-paid provisions, except in the case where the employer has become insolvent. Other Commonwealth jurisdiction have also followed suit or in the midst of doing so.

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