Payment for off-site unfixed materials and goods

Abstract

Construction industry in Malaysia will usually involve the execution of a building contract between the owner (employer) and the contractor using the Standard Form of Contract. The contracts normally contain clauses stipulating the rights, duties, obligations and responsibilities of the employer and the contractor as well as remedies for the breach of any of the duties. One of the important elements in the construction contract is “payment” by employer to the contractor. Based on the Standard Form of Contract in Malaysia, the employer will pay the contractor according to the percentage value of work done including the percentage of unfixed materials and goods which are delivered to the site or adjacent to the site. But in practice, the Superintending Officer (S.O.) or employer did pay the contractor for materials and goods which are not delivered “on” or “adjacent” to the construction site. Thus, the objectives of the study are to determine whether employer may include value of the off-site unfixed materials and goods in the interim payment and to identify the circumstances that allow for the payment for unfixed materials and goods off-site. The analysis done is through analysis of documents such as Standard Form of Building Contract, Treasury Instruction, and Treasury Circular, Preliminaries item in Bills of Quantities, books, journals and articles. Based on the analysis of the documents, it is identified that the employer cannot pay the contractor for off-site unfixed materials and goods and cannot include the value of the stated items in the interim payment. The employer only can pay the contractor for the work he had properly executed and for the unfixed materials and goods which are delivered to or adjacent to the construction site. There are no circumstances that allowing the employer to pay for off-site unfixed materials and goods to the contractor. The finding of the study is hopefully can be reference to the employer and to the contractor especially on the issue of payment for off-site unfixed materials and goods and also to help the construction professional to understand the legal aspect of their work in the area of payment for unfixed materials and goods.