Law of restitution in Malaysian construction contract

Abstract

Construction contracts normally set out conditions and procedures that contractors should comply with when claiming payments. For example, for claiming payment for additional work, the contractor must submit the written instruction and the notice to claim as condition precedent. Employers may refuse to make payment when these requirements are not fulfilled. The main issue is whether the employer is allowed to benefit from the contractors’ works without paying for them. In other words does the principle of restitution or unjust enrichment applicable in the construction contract? The objective of this research is to identify whether the law of restitution, specifically the principle unjust enrichment, applies to the construction contract. The approach adopted in this research is documentary analysis of case law in Malaysian construction industry. The relevant cases were extracted from Lexis Malaysia online database, and other sources as well. The finding is that the courts in Malaysia have applied principles of law of restitution and unjust enrichment in construction contracts. There are three constitutive elements for the establishment of the unjust enrichment. The first element is that whether the defendant is enriched and received a benefit. The second element is whether the benefit received is at the expenses of the plaintiff, where it suffered a loss regarding monetary or suffer an “accusation of wrongdoing or breach of duty” against the plaintiff. The third element is whether the retention of the benefit actionably unjust according to the existing case law, which brings the valid legal grounds for the reversal of the benefit received. In conclusion, the Malaysian courts have consistently allowed contractors to recover their payments for additional works and do not allow employers to benefit the works without having to pay for them.