Employer right in the event of contractor's liquidation

Abstract

The current crisis in the world?s financial system has left the construction industry facing its toughest challenges for a generation. In regards to the construction industry, the sector that is currently experiencing a boom time perhaps more than any other is the one dealing with insolvency. Among the construction insolvency, the insolvency of a main contractor is the frequent occurrence. This has brought issues and problems to employer who would become unsecured creditor in the event of contractor?s liquidation. Furthermore, several clauses in standard forms of contract are unable to protect the interest of the employer and may jeopardize the interest of the employer when the contractor goes into liquidation. Therefore, the aim of this study is to recommend amendments to certain clauses that will protect the employer?s interest in the event of contractor?s liquidation. The standard forms of contract chosen for the research are PWD Contract 203A, PAM Contract 2006, and CIDB Contract 2000. This study focuses on the law cases that have been determine by the court to identify the critical issue arises during the contractor?s liquidation. However, this study only focuses on the critical issues specifically: direct payment, performance bond, unfixed materials and goods, set-off and determination. The critical issues are those issues that are commonly arising. Through getting familiar with those issues, the legal position of the issues can be easily determined and propose the recommendation amendments to several clauses in the standard forms of contract to protect the interest of the employer. The proposed recommendation able to give some guidance to parties involved in construction industry especially employer.