Construction Contract (Malaysia)
CONSTRUCTION CONTRACT
CIDB Act 1994 (Act 520) | CIPAA 2012 (Act 746) | Contracts Act 1950 (Act 136) | Street, Drainage and Building Act 1974 (Act 133)
THIS CONSTRUCTION CONTRACT is entered into on [Contract Date]
BETWEEN:
(1) [Employer Name] (SSM No. [Employer SSM]) of [Employer Address] (hereinafter referred to as the "Employer"); AND
(2) [Contractor Name] (SSM No. [Contractor SSM], CIDB Registration: [Contractor CIDB]) of [Contractor Address] (hereinafter referred to as the "Contractor").
1. PROJECT AND SCOPE OF WORKS
1.1 Project title: [Project Title]
1.2 Project site: [Project Site]
1.3 Local authority building permit: [Building Permit]
1.4 The Contractor shall design (if applicable), supply all materials, and carry out and complete the following works (the "Works"): [Scope of Works], in accordance with the contract documents, approved drawings, and specifications.
1.5 The Contract Administrator for this Contract is [Contract Administrator].
2. CONTRACT SUM AND PAYMENT
2.1 The Employer shall pay the Contractor the Contract Sum of [Contract Sum] ([Contract Type]) for the complete execution of the Works.
2.2 Progress payments shall be made on the basis of [Progress Payment Frequency]. Retention of [Retention Percentage] shall be deducted from each payment until the retention limits are reached.
2.3 All payment claims, responses, and adjudication rights are governed by the Construction Industry Payment and Adjudication Act 2012 (CIPAA 2012, Act 746). Pay-when-paid provisions are void under Section 35 of CIPAA 2012. The Employer must respond to a payment claim within 10 working days under CIPAA 2012 Regulations 2014.
2.4 Disputes arising from payment claims that are unresolved may be referred to adjudication at the Asian International Arbitration Centre (AIAC) under CIPAA 2012. Adjudication decisions are binding and enforceable as Kuala Lumpur High Court orders under Section 28 of CIPAA 2012.
3. PROGRAMME AND COMPLETION
3.1 The Contractor shall commence the Works on [Commencement Date] and shall complete the Works by [Completion Date] (the "Completion Date").
3.2 If the Works are not completed by the Completion Date (as extended by the Contract Administrator for relevant events), the Contractor shall pay liquidated damages at the rate of [Liquidated Damages]. This is agreed as a genuine pre-estimate of the Employer's loss under Section 75 of the Contracts Act 1950.
3.3 The Contractor shall submit a master programme within 14 days of commencement. Extensions of time for relevant delay events (including force majeure, exceptionally inclement weather, and Employer's default) shall be assessed by the Contract Administrator under the applicable standard form provisions.
4. DEFECTS LIABILITY
4.1 The defects liability period shall be [Defects Liability Period] commencing from the date of Practical Completion.
4.2 During the defects liability period, the Contractor shall rectify at its own cost any defects in workmanship or materials notified by the Contract Administrator. If the Contractor fails to rectify defects within a reasonable time after written notice, the Employer may engage others to carry out the remedial works and deduct the cost from the retention monies.
5. PERFORMANCE BOND AND INSURANCE
5.1 Within 14 days of the Contract Date, the Contractor shall provide a [Performance Bond Type] performance bond in the amount of [Performance Bond Amount], issued by a licensed Malaysian bank or insurance company regulated by Bank Negara Malaysia under the Financial Services Act 2013 (Act 758).
5.2 The Contractor shall maintain Contractors' All Risk (CAR) insurance, public liability insurance, and such other insurance as required by law and as specified in the Contract Documents throughout the construction period.
5.3 The Contractor shall comply with the Occupational Safety and Health Act 1994 (Act 514) and all DOSH regulations on site safety. All construction workers on site must hold valid CIDB Green Cards under the Construction Personnel Registration System (CPERS).
6. VARIATIONS
6.1 The Contract Administrator may instruct variations to the scope of Works in writing. Oral instructions do not bind the Employer unless subsequently confirmed in writing by the Contract Administrator within 7 days.
6.2 Variations shall be valued using the schedule of rates or bills of quantities where applicable; failing which, by a fair valuation agreed between the Parties or, if not agreed, determined by the Contract Administrator.
7. DISPUTE RESOLUTION AND GOVERNING LAW
7.1 Payment disputes are subject to adjudication under CIPAA 2012 (Act 746) at the Asian International Arbitration Centre (AIAC) as a mandatory first step before arbitration or litigation.
7.2 All other disputes shall be resolved by arbitration at the AIAC under the AIAC Arbitration Rules 2021, or by litigation at the [Governing Law Courts] High Court.
7.3 This Contract is governed by the laws of Malaysia, including the Contracts Act 1950 (Act 136), CIDB Act 1994 (Act 520), CIPAA 2012 (Act 746), and the Street, Drainage and Building Act 1974 (Act 133).
Employer
________________
Signature
Contractor
________________
Signature
What Is a Construction Contract (Malaysia)?
A Construction Contract in Malaysia fixes the respective duties and entitlements of the parties to the arrangement.
The PAM 2018 Standard Form of Building Contract, published by the Malaysian Institute of Architects (Pertubuhan Akitek Malaysia or PAM), is the most widely used standard form for building works in Malaysia, particularly for private sector projects. The PAM 2018 form (both the With Quantities and Without Quantities versions) allocates risks between employer and contractor, provides mechanisms for progress payments under the Construction Industry Payment and Adjudication Act 2012 (CIPAA 2012, Act 746), and includes provisions for extensions of time, liquidated damages, and dispute resolution by adjudication.
CIPAA 2012 is one of the most significant pieces of construction legislation in Malaysia. Section 4 of CIPAA 2012 grants a party to a construction contract the right to refer a payment dispute to a registered adjudicator at the Asian International Arbitration Centre (AIAC). Adjudication decisions are binding and enforceable as court orders under Section 28 of CIPAA 2012, providing a fast-track payment mechanism to address the endemic problem of late payment in the Malaysian construction industry.
For housing projects, the Housing Development (Control and Licensing) Act 1966 (Act 118) governs sale and purchase agreements and standard form building contracts between housing developers licensed by the Ministry of Local Government Development (KPKT) and house buyers. Schedule H of the Housing Development (Control and Licensing) Regulations 1989 prescribes the standard form for high-rise properties with compulsory liquidated damages of 10% per annum on late delivery. The Contractor must hold a valid CIDB Green Card registration, and all construction workers on Malaysian construction sites must possess a CIDB Green Card under CIDB's Construction Personnel Registration System (CPERS).
The legal framework governing the Construction Contract (Malaysia) in Malaysia draws on several key statutes and regulatory bodies. Under Malaysian law, the Contracts Act 1950 (Act 136) governs contractual obligations. The Companies Act 2016 (Act 777) regulates corporate entities through the Companies Commission of Malaysia (SSM). The Employment Act 1955 (Act 265) and the Department of Labour govern employment matters. The Personal Data Protection Act 2010 (Act 709) and the Personal Data Protection Department protect personal data. The Inland Revenue Board of Malaysia (LHDN) administers tax obligations. The Industrial Court adjudicates employment disputes under the Industrial Relations Act 1967 (Act 177). Parties executing a Construction Contract (Malaysia) in Malaysia should confirm the document reflects current law, including any amendments enacted since the original drafting date. The Companies Act 2016 (Act 777) sets the foundational requirements.
When Do You Need a Construction Contract (Malaysia)?
A Construction Contract in Malaysia is required whenever a party engages a contractor to carry out construction, renovation, or civil engineering works.
A Construction Contract is needed when a property developer commissions a main contractor to build a residential, commercial, or mixed-development project in Malaysia. The contract must comply with CIDB Act 520 contractor registration requirements and, for housing projects, with Schedule H or Schedule G of the Housing Development (Control and Licensing) Regulations 1989.
A Construction Contract is required when a government agency or statutory body procures construction works. Public sector construction contracts in Malaysia are governed by Treasury Circulars (Surat Pekeliling Perbendaharaan) and standard forms issued by the Public Works Department Malaysia (JKR) including the JKR 203 standard form, which differs from the PAM 2018 form in its payment and dispute resolution provisions.
A Construction Contract is needed for infrastructure projects by Prasarana Malaysia, Tenaga Nasional Berhad (TNB), Indah Water Konsortium, or other concessionaires, where sector-specific technical and regulatory requirements must be incorporated into the contract terms.
A Construction Contract is required when a private individual commissions a licensed contractor to build or substantially renovate a residential property. The local authority (pihak berkuasa tempatan) building permit issued under the Street, Drainage and Building Act 1974 (Act 133) must be obtained, and the contractor must be registered with CIDB.
A Construction Contract is needed for industrial building construction under the Industrial Building System (IBS) promoted by CIDB, where prefabricated components are manufactured off-site. The contract must address IBS-specific risks including manufacturing defects, transportation damage, and on-site erection responsibilities.
Parties in Malaysia should prepare a Construction Contract (Malaysia) proactively rather than waiting for a dispute to arise. Courts interpret agreements based on the written terms rather than oral representations. Under Malaysian law, the Contracts Act 1950 (Act 136) governs contractual obligations. The Companies Act 2016 (Act 777) regulates corporate entities through the Companies Commission of Malaysia (SSM). The Employment Act 1955 (Act 265) and the Department of Labour govern employment matters. The Personal Data Protection Act 2010 (Act 709) and the Personal Data Protection Department protect personal data. The Inland Revenue Board of Malaysia (LHDN) administers tax obligations. The Industrial Court adjudicates employment disputes under the Industrial Relations Act 1967 (Act 177). Where the transaction involves regulated activities, prior approval from the relevant authority may be required before execution.
What to Include in Your Construction Contract (Malaysia)
A valid Construction Contract in Malaysia must contain the following key elements.
Parties and CIDB Registration: Full legal names, SSM company registration numbers, and CIDB contractor registration grade and category numbers as required under CIDB Act 520. The contractor's registration must be valid and appropriate for the project scope and value.
Scope of Works and Specifications: A detailed description of all works to be performed, referencing drawings, bills of quantities, specifications, and schedules. Ambiguity in scope is the most common source of construction disputes in Malaysia adjudicated under CIPAA 2012.
Contract Sum: The total contract price in Malaysian Ringgit (MYR), whether fixed-price (lump sum) or remeasurable. The contract sum must be consistent with the bills of quantities or schedule of rates. Under PAM 2018 Clause 30, the Architect certifies interim valuations for progress payments.
Progress Payments and CIPAA 2012 Compliance: Payment terms aligned with Section 4 of CIPAA 2012 (Act 746), which requires timely payment and grants adjudication rights for payment disputes. Payment claims must be submitted in the format required by the CIPAA 2012 Regulations 2014 and responded to within the statutory timeframes.
Liquidated Damages: A genuine pre-estimate of loss for delayed completion, expressed as MYR per day or per week. For housing projects, Schedule H prescribes a rate of 10% per annum of the purchase price under the Housing Development (Control and Licensing) Act 1966.
Variations: A mechanism for instructing, valuing, and agreeing variations to the original scope under PAM 2018 Clause 11. Variations must be instructed in writing by the Architect or Contract Administrator to be binding.
Extensions of Time: Grounds entitling the contractor to an extension of time (e.g., exceptionally inclement weather, employer's default, force majeure) and the procedure for claiming extensions under PAM 2018 Clause 23. Time at large consequences and re-setting of the completion date must be addressed.
Defects Liability Period: The duration (typically 18-24 months for Malaysian building contracts) during which the contractor must rectify defects at its own cost following practical completion under PAM 2018 Clause 15.
Dispute Resolution: Adjudication under CIPAA 2012 as a mandatory first step for payment disputes, followed by arbitration under the Asian International Arbitration Centre (AIAC) Arbitration Rules or litigation at the Kuala Lumpur High Court.
Additional compliance elements for a Construction Contract (Malaysia) used in Malaysia include: Under Malaysian law, the Contracts Act 1950 (Act 136) governs contractual obligations. The Companies Act 2016 (Act 777) regulates corporate entities through the Companies Commission of Malaysia (SSM). The Employment Act 1955 (Act 265) and the Department of Labour govern employment matters. The Personal Data Protection Act 2010 (Act 709) and the Personal Data Protection Department protect personal data. The Inland Revenue Board of Malaysia (LHDN) administers tax obligations. The Industrial Court adjudicates employment disputes under the Industrial Relations Act 1967 (Act 177). Forms-legal.com provides this template as a starting point for Malaysia-compliant documentation.
Cite this page
Reference this free template in an article, syllabus, or research note:
Forms Legal. (2026). Construction Contract (Malaysia) (Malaysia) [Legal document template]. Forms Legal. https://forms-legal.com/malaysia/business/construction/construction-contract-malaysia
"Construction Contract (Malaysia) (Malaysia)." Forms Legal, 2026, https://forms-legal.com/malaysia/business/construction/construction-contract-malaysia.
@misc{formslegal-construction-contract-malaysia,
author = {{Forms Legal}},
title = {Construction Contract (Malaysia) (Malaysia)},
year = {2026},
howpublished = {\url{https://forms-legal.com/malaysia/business/construction/construction-contract-malaysia}},
note = {Free legal document template. Based on Companies Act 2016 (Act 777)}
}
Frequently Asked Questions
All contractors engaged for construction works in Malaysia with a contract value exceeding MYR 200,000 must be registered with the Construction Industry Development Board Malaysia (CIDB) under the CIDB Act 1994 (Act 520). CIDB registration is categorised into grades G1 to G7, with G7 contractors permitted to tender for contracts of unlimited value. Grade categories also cover specialist works including electrical and mechanical work. An unregistered contractor engaging in construction works above the threshold commits an offence under Section 27 of CIDB Act 520 and may be fined. Employers who knowingly engage unregistered contractors may also face regulatory consequences and may find their building permit compliance compromised. For government projects, Treasury Circular No. 9 of 2009 makes CIDB registration a mandatory tender prerequisite. All construction site workers must also hold a valid CIDB Green Card under the Construction Personnel Registration System (CPERS).
The PAM 2018 Standard Form of Building Contract, published by the Malaysian Institute of Architects (Pertubuhan Akitek Malaysia), is the standard contract form for private sector building projects in Malaysia. Published in 2018, it is available in two versions: With Quantities (for contracts with bills of quantities) and Without Quantities (for lump-sum contracts). PAM 2018 covers appointment of the Architect as contract administrator, progress payment certification under Clause 30, variations under Clause 11, extensions of time under Clause 23, liquidated damages under Clause 22, defects liability under Clause 15, and dispute resolution by mediation, adjudication under CIPAA 2012, or arbitration. The PAM 2018 form incorporates CIPAA 2012 compliance, reflecting the Construction Industry Payment and Adjudication Act 2012's mandatory application to all written construction contracts in Malaysia above the prescribed threshold. Amendments to the standard form require negotiation and must be incorporated by way of a special conditions appendix.
The Construction Industry Payment and Adjudication Act 2012 (CIPAA 2012, Act 746) is a mandatory statutory regime that applies to all written construction contracts in Malaysia, whether or not the parties have agreed to it. CIPAA 2012 grants any unpaid party to a construction contract the right to refer a payment dispute to adjudication before a registered adjudicator, bypassing the courts for a fast-track decision. The adjudicator must be registered with the Asian International Arbitration Centre (AIAC) and must make a decision within 45 working days of appointment. An adjudication decision is immediately enforceable as a Kuala Lumpur High Court order under Section 28 of CIPAA 2012. The losing party can pay under protest and refer the substantive dispute to arbitration or litigation subsequently. CIPAA 2012 also prohibits 'pay when paid' clauses under Section 35, which were previously common in Malaysian construction subcontracts. Any construction contract clause attempting to exclude CIPAA 2012 is void by virtue of Section 38.
Liquidated damages (LD) in a Malaysian Construction Contract are a pre-agreed sum payable by the contractor for each day or week of delay in completing the works beyond the contractual completion date. Under the Contracts Act 1950, Section 75, a liquidated damages clause is enforceable provided it represents a genuine pre-estimate of loss at the time of contracting and is not extravagant or unconscionable. Malaysian courts apply the principle from Dunlop Pneumatic Tyre Co v New Garage and Motor Co Ltd [1915] AC 79 (which Malaysian courts follow) to distinguish enforceable liquidated damages from unenforceable penalties. For housing developments, Schedule H of the Housing Development (Control and Licensing) Regulations 1989 prescribes a mandatory liquidated damages rate of 10% per annum on the purchase price from the date of delivery under the Housing Development (Control and Licensing) Act 1966, and parties cannot contract out of this statutory rate.
Disputes under a Malaysian Construction Contract are typically resolved through a multi-tiered process. Payment disputes must first be referred to adjudication under CIPAA 2012 (Act 746) before arbitration or litigation can proceed for those specific claims. The AIAC administers adjudication and arbitration proceedings. For non-payment technical disputes (defects, scope disagreements, extension of time), parties may attempt mediation under the PAM 2018 Clause 34 or direct negotiation. If unresolved, disputes proceed to arbitration under the PAM 2018 Clause 34.4, with the AIAC Arbitration Rules 2021 as the applicable rules and a sole arbitrator or three-arbitrator panel. Litigation at the Kuala Lumpur High Court is available for all disputes but is generally slower than AIAC arbitration. For government contracts under the JKR 203 form, the Dispute Resolution Boards (DRBs) mechanism applies to infrastructure projects.
This template is provided for informational purposes only and does not constitute legal advice. Laws vary by jurisdiction and change over time. Consult a qualified attorney for advice specific to your situation.Full disclaimer
Found an error? Let us knowRelated Documents
You may also find these documents useful:
Building Contract PAM (Malaysia)
A PAM-aligned Building Contract for Malaysia based on the PAM 2018 Standard Form of Building Contract published by the Malaysian Institute of Architects (Pertubuhan Akitek Malaysia). Covers architect administration, progress payments under CIPAA 2012, variations, extensions of time, defects liability period, and dispute resolution by adjudication or arbitration under AIAC rules.
Renovation Contract (Malaysia)
A Renovation Contract for Malaysia governing interior and exterior renovation, refurbishment, or fitting-out works by a licensed contractor. Governed by the Contracts Act 1950, CIDB Act 520, and local authority by-laws under the Street, Drainage and Building Act 1974. Covers scope of works, materials specification, contract price in MYR, payment schedule, and defects period.
Subcontractor Agreement (Malaysia)
A Subcontractor Agreement for Malaysia between a main contractor and a subcontractor for specialist construction, M&E, or trade works. Governed by CIDB Act 520, CIPAA 2012 (Act 746) prohibiting pay-when-paid clauses, and the Contracts Act 1950. Covers subcontract scope, back-to-back payment terms, CIDB registration, and AIAC adjudication.