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/ PAM PAM

ISM
1969
1998 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

Money
Time Quality
Matters

Dispute
Others
Resolution
 ITEM DESCRIPTION
TIME • 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)).
Money • Clause 24.3 – 7 additional ‘matters’ entitling MC to claim for Loss /Expense
Matters • 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).
 ITEM DESCRIPTION
QUALITY • Clause 15.1 – defines ‘Practical Completion’.
• Clause 15.2 – Architect required to either certify PC, or refuse with
reasons within 14 days of receiving Contractor’s Notification.
• Extends the powers of Architect in terms of ‘defects’

Dispute Resolution • 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).

Others • 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
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 PAM 1998 to PAM 2006

1 – Contractor’s Obligations • Re-wordings. No significant impact

2 – Contract Sum

3 – Architect • The term ‘Employer shall nominate and appoint’ is removed.

4 – Engineer • MC no longer has the rights to object or arbitrate on the
5 – Quantity Surveyor nomination & appointment of any person by the Employer.
6 – Specialist Consultant

7 - Definitions • The defined terms had increased from 18 nos. to 59 nos.

8 - Meanings • New article

THE COMPARISON

Conditions of Contracts
Clause by Clause

PAM 1998 PAM 2006

• 35 Clauses • 38 Clauses
• Green Booklet • Yellow Booklet
 Clause 1.0 – Contractor’s 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) • Expended from the second half of PAM98
…..The Contractor shall be fully responsible for Cl. 1.1
the adequacy, stability and safety of all site • ‘Temporary works’ included
operations and methods of construction….. • Mc ‘not fully’ responsible for the temporary
• ‘Temporary works’ not included works if it is designed by the
Architect/Consultants.
• ‘Site operation’ excluded (falls within
‘methods of construction’)
 PAM 1998
• Clause 2.2: ‘If within seven (7) days upon
receipt of the Architect’s instruction in
writing the Contractor does not comply
therewith then the Employer may employ
and pay other….’
PAM 2006
• 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 sub- • Clause 6.5 – Widening the
clauses which entitle powers of the Architect to
architect to deal with deal with defective works
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 Architect’s
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 PAM 2006

• Practical Completion not • New clause 15.1 – Practical

defined Completion is defined
• Less procedural for the • New procedures and
requirements to be complied
issuance of CPC and CMGD
by both the Architect and
(Without proper time Contractor.
frame)
• Refer to Figure 3: Flow chart
for practical completion
• Refer to Figure 4: Flow chart
for issuance of CMGD
 PAM 1998 (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
PAM 2006 (Clause 18.1)
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 Non-
completion
PAM 1998 PAM 2006
• Without issuance of • Clause 22.1 – ‘Certificate of
‘Certificate of Non Non Completion’ (CNC) is
Completion’ (CNC) by the introduced, and the CNC is
Architect the conditions precedent to
• Liquidated and Ascertained deduction of LD
Damages (LAD) • Liquidated Damages (LD)
• Clause 22.3 – New clause.
CNC can be ‘revoked’ by a
subsequent Certificate of
Extension of Time.
 PAM 1998 PAM 2006
• No time limit. Procedures • 2 - tier procedures - a notice
and decision within a within 28 Days of Relevant
‘reasonable time’ Event, followed by supporting
particulars within 28 Days of
• Relevant Events: 12 cessation of the delay
numbers
• 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 PAM 2006
• Without ‘time bar’ for • 2 – tier procedure – a notice
within 28 days of ‘matters
procedure involved referred to in clause 24.1’.
• Ascertainment provision – Followed by supporting
Clause 24.1 particulars within 28 Days
upon ending of the ‘matter’.
• Clause 24.3 – term • Ascertainment provision –
‘circumstances’ used Clause 24.4
• 8 numbers of • Clause 24.3 – term ‘matters’
circumstances used
• 14 numbers of matters –
additional 6 new events
 Clause 25.0 – Determination of
Contractor’s Employment by Employer
PAM 1998 PAM 2006

• Clause 25.4 – Time • Clause 25.4 – rephrased , time

compliance 21 Days
compliance 14 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 (Employer’s 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

• Interim Certificate is issued to • Clarified that IC shall be issued

the Contractor with a copy to after Practical Completion
the Employer • IC is issued to Employer with a
• ‘Certified Value Retained’ is copy to the Contractor
now called ‘Retention • New Clause:
Fund’(PAM 2006) 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

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
 • Permit issuing of notice through facsimile transmission
Clause 36.0 (not applicable to Cl. 23.2 & 24.2
• All written notice or doc sent by facsimile shall also be
Notice sent by hand or ordinary mail or registered post soonest
possible after such facsimile transmission

Clause 37.0 • The performance bond to be valid until Completion Date

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

Clause 38.0 • Self - explanatory

• Standard provision in most contract
Governing Law
 Conclusion

 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 employer’s exposure and burden in

terms of claims and payments

 PAM 2006 provide more possible grounds for disputes

between Contractor and Employer