Introduction
In the high-stakes world of construction, employers often have a simple playbook, i.e., squeeze as much as possible from the contractor, especially after the work has been completed. While the project is still in progress, the employer depends on the main contractor to finish the job and may even reassure the contractor with promises—sometimes just orally—that they would not enforce the Liquidated Ascertained Damages (“LAD”). Upon completion of the works, and once the employer’s reliance on the contractor has ceased, the employer may take a rigid and literal approach to contractual compliance, withholding the balance sum and asserting the LAD by way of set-off.
This behaviour underscores the importance of contractual safeguards, particularly Extension of Time (“EOT”) claims, which operate as the contractor’s primary defence against LAD. However, contractors may themselves become exposed if the application is not properly made or strictly complied with, thereby handing the employer a clear opportunity to strike — using technical non-compliance as a weapon to reject claims, refuse payment, and impose LAD. In practice, this is one of the most common and straightforward ways for employers to refuse payment, namely by relying on the contractor’s non-compliance with contractual condition precedents.
Contractors must therefore be mindful of the need for strict compliance when submitting EOT applications to avoid suffering the same unfortunate consequences faced by others before them. More often than not, the issue does not lie in any failure on the contractor’s part; in fact, the works are frequently carried out in accordance with the contract. Nevertheless, due to a lack of awareness or understanding of the procedural and notice requirements, contractors may inadvertently forfeit their contractual entitlements. For these reasons, proper knowledge of these requirements and careful adherence to them are essential for all contractors.
Further, EOT plays a crucial role in managing construction projects when unexpected delays occur. This mechanism helps prevent disputes and ensures projects are completed without unnecessary interruptions. Standard construction contracts usually include EOT clauses to deal with delays that are outside the contractor’s control. In addition, contractors are generally expected to take reasonable steps to minimise the impact of delays, even when the delays are caused solely by the employer.[1]
Non-Compliance: The Hidden Trap!
The PAM Contract 2018 (With Quantities) is one of the common forms used in Malaysia, and it contains specific clauses that are often overlooked or downplayed by contractors. Clause 23 of the PAM Contract 2018 (With Quantities) sets out strict requirements for claiming an EOT. For example, if a delaying event occurs, the contractor must give written notice of their intention to claim an EOT to the Architect within 28 days of the event, including an initial estimate of the extra time needed and details of the cause of the delay. They must then submit a final, fully detailed claim within 28 days after the delay ends so the Architect can assess it. Failure to meet these deadlines is treated as if the event will not delay the completion date.
Nevertheless, even if the contractor is factually entitled to an EOT, missing these procedural steps can result in losing the right to claim for work rightfully performed, which demonstrates how technical non-compliance can have serious and sometimes drastic consequences.
Case in Point
(i) Yuk Tung Construction Sdn Bhd v Daya CMT Sdn Bhd
Take the case of Yuk Tung Construction Sdn Bhd v Daya CMT Sdn Bhd[2] as an example. The issue before the Court was whether the contractor was entitled to extensions of time even though it did not comply with the notice provisions in the contract.
In that case, the contract imposed strict procedural requirements before any entitlement could arise. The Court emphasised that Clause 43 of the Conditions of the Principal Subcontract, being the clause which prescribes the procedure for applying for an EOT, required “the requirement of written notice by the contractor to the Superintending Officer of the causes of any delay” and that the contractor must show it had used “its best endeavours to prevent delay.” The wording of the clause was mandatory, stating that the contractor “shall forthwith give written notice of the causes of delay,” which the Court interpreted strictly. Significantly, the contractor failed to comply with these requirements in respect of certain delayed events.
The Court answered in the negative, holding that “written notice was certainly a pre-requisite for any consideration of extension of time” and that “there can be no re-assessment of time for completion if the contractor does not avail itself of the EOT provisions.” Consequently, the contractor “is not entitled to any further extension of time beyond the Extended Completion Date” and, having failed to comply with the notice requirements, “could not assert prevention or seek for extension of time many years down the road.” As a result, the employer was entitled to impose LAD.
In this case, the contractor faced the harsh reality of losing out on an EOT due to non-compliance with the condition precedents stipulated in the contract. Despite having a legitimate claim for an EOT, the contractor’s failure to strictly adhere to the notice requirement meant they were not entitled to the EOT. The result? The employer was able to impose LAD, leading to significant financial losses for the contractor. It is a real loss, and truly unfortunate!
(ii) KL Eco City Sdn Bhd v Tuck Sin Engineering & Construction & Anor
In a similar vein, in the case of KL Eco City Sdn Bhd v Tuck Sin Engineering & Construction Sdn Bhd & Anor,[3] the Court further emphasised that the wording of Clause 23.1 of the PAM Contract was clear and mandatory. The giving of timely notice was expressly described as a “condition precedent”, and failure to comply was fatal to the contractor’s claim. The Court reaffirmed that strict compliance with contractual notice provisions is required, even if the outcome appears harsh. Parties are bound by the bargain they have agreed to.
As the contractor failed to prove that its notices were given within the prescribed time, it lost its entitlement to further extensions of time. Consequently, the Court declined to review or reassess the delay analysis, holding that no EOT could be granted in the first place.
Protect Yourself: Don’t Let This Happen to You
To avoid falling into this trap, contractors must be vigilant and ensure strict compliance with all contractual requirements, especially when it comes to EOT applications. Ignoring these conditions can be costly and unfair, as even a strong factual entitlement to an EOT can be wiped out by technicalities.
For further information, please contact:
Yap Chean Hong, Partner, Azmi & Associates
yapcheanhong@azmilaw.com
- Aminuddin, F. A., Ch’ng, W. T., & Ismail, A. S. (2024). Condition precedents to the extension of time (EOT) claims in building and infrastructure projects: A review of the Malaysian litigation cases. International Journal of Real Estate Studies.
- [2020] MLJU 1084.
- [2020] MLJU 2457.
