Subcontractor Agreement (Malaysia)
SUBCONTRACTOR AGREEMENT
CIDB Act 1994 (Act 520) | CIPAA 2012 (Act 746) | Contracts Act 1950 (Act 136) | OSHA 1994 (Act 514)
THIS SUBCONTRACTOR AGREEMENT is entered into on [Contract Date]
BETWEEN:
(1) [Main Contractor Name] (SSM No. [Main Contractor SSM], CIDB: [Main Contractor CIDB]) of [Main Contractor Address] (hereinafter referred to as the "Main Contractor"); AND
(2) [Subcontractor Name] (SSM No. [Subcontractor SSM], CIDB: [Subcontractor CIDB]) of [Subcontractor Address] (hereinafter referred to as the "Subcontractor").
RECITALS
A. The Main Contractor has been appointed under the [Main Contract Reference] (the "Main Contract").
B. The Main Contractor desires to subcontract a portion of the Main Contract Works to the Subcontractor, and the Subcontractor is willing to carry out those works on the terms and conditions herein.
C. The Subcontractor is a [Subcontractor Type].
1. SUBCONTRACT WORKS
1.1 The Subcontractor shall carry out and complete the following subcontract works (the "Subcontract Works") at [Project Site]:
[Subcontract Works]
1.2 The Subcontract Works form part of the Main Contract Works. The Subcontractor shall comply with all obligations of the Main Contractor under the Main Contract to the extent they relate to the Subcontract Works.
1.3 The Subcontractor warrants that it holds valid CIDB registration ([Subcontractor CIDB]) under CIDB Act 1994 (Act 520) appropriate to the Subcontract Works and shall maintain such registration throughout the subcontract period.
2. SUBCONTRACT SUM AND PAYMENT
2.1 The Main Contractor shall pay the Subcontractor the Subcontract Sum of [Subcontract Sum] for the complete execution of the Subcontract Works.
2.2 Payment terms: [Payment Terms]. Retention: [Retention Terms].
2.3 Pay-when-paid and pay-if-paid provisions are void under Section 35 of the Construction Industry Payment and Adjudication Act 2012 (CIPAA 2012, Act 746). The Main Contractor must respond to the Subcontractor's payment claim within 14 working days under CIPAA 2012.
2.4 An unpaid Subcontractor may refer payment disputes to adjudication at the Asian International Arbitration Centre (AIAC) under CIPAA 2012. Adjudication decisions are binding and enforceable as High Court orders under Section 28 of CIPAA 2012.
3. PROGRAMME AND DEFECTS
3.1 The Subcontractor shall commence the Subcontract Works on [Commencement Date] and complete by [Completion Date].
3.2 The Subcontractor shall submit a subcontract programme within 7 days of commencement aligned with the Main Contract programme.
3.3 The defects liability period for the Subcontract Works is [Defects Liability Period]. During this period, the Subcontractor shall rectify at its own cost all defects in workmanship or materials notified by the Main Contractor.
4. SAFETY, INSURANCE, AND COMPLIANCE
4.1 The Subcontractor shall comply with the Occupational Safety and Health Act 1994 (Act 514) and all DOSH regulations. The Subcontractor shall attend site safety briefings, comply with the Main Contractor's site safety rules, and maintain a safety officer for works involving more than 20 workers.
4.2 All Subcontractor workers on site must hold valid CIDB Green Cards under the Construction Personnel Registration System (CPERS). Foreign workers must also hold valid work permits under the Immigration Act 1959/63.
4.3 The Subcontractor shall maintain its own public liability, employer's liability, and works insurance as specified by the Main Contractor. The Main Contractor's CAR policy does not automatically cover the Subcontractor's liabilities.
5. DISPUTE RESOLUTION AND GOVERNING LAW
5.1 Payment disputes shall be referred to adjudication under CIPAA 2012 at the AIAC as a mandatory first step.
5.2 All other disputes shall be resolved by arbitration under the AIAC Arbitration Rules 2021, or by litigation at the Kuala Lumpur High Court.
5.3 This Agreement is governed by the laws of Malaysia, including the Contracts Act 1950 (Act 136), CIDB Act 1994 (Act 520), CIPAA 2012 (Act 746), and OSHA 1994 (Act 514).
Main Contractor
________________
Signature
Subcontractor
________________
Signature
What Is a Subcontractor Agreement (Malaysia)?
A Subcontractor Agreement in Malaysia records the terms the parties accept and the commitments each makes to the other.
The Construction Industry Payment and Adjudication Act 2012 (CIPAA 2012, Act 746) applies to written subcontract agreements and provides critical protections for subcontractors. Section 35 of CIPAA 2012 expressly voids 'pay when paid' clauses — contractual provisions making the main contractor's obligation to pay the subcontractor conditional on receipt of payment from the employer. This statutory protection prevents main contractors from indefinitely withholding subcontractor payments by citing non-payment by the upstream employer. An unpaid subcontractor may issue a payment claim under CIPAA 2012 and, if the dispute is unresolved, refer it to adjudication before an AIAC-registered adjudicator with a binding decision within 45 working days.
Malaysian construction practice distinguishes between domestic subcontractors (engaged by the main contractor on its own account) and nominated subcontractors (specified by the Architect or employer under PAM 2018 Clause 27, where the employer has a primary interest in the specialist supplier). Nominated subcontractors under the PAM 2018 form have a dual relationship with both the main contractor and the employer, creating more complex contractual chains. The PAM Nominated Sub-Contract Form is the standard back-to-back subcontract for nominated works.
The Occupational Safety and Health Act 1994 (OSHA 1994, Act 514) imposes health and safety duties on both main contractors and subcontractors. Under Section 15 of OSHA 1994, every employer must confirm the safety, health, and welfare at work of all their employees. The main contractor's duty of care extends to subcontractor workers on site. The Department of Occupational Safety and Health (DOSH) enforces OSHA 1994 and may issue improvement notices or prosecution where site safety is inadequate.
The legal framework governing the Subcontractor Agreement (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 Subcontractor Agreement (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 Subcontractor Agreement (Malaysia)?
A Subcontractor Agreement in Malaysia is required whenever a main contractor engages a specialist or trade contractor to carry out a defined portion of construction works.
A Subcontractor Agreement is needed when a main contractor engaged under a PAM 2018 Building Contract appoints a mechanical and electrical (M&E) subcontractor for the building services installation. The back-to-back subcontract must mirror the main contractor's obligations to the employer on M&E-related matters including programme, variations, and defects liability.
A Subcontractor Agreement is required when specialist works such as piling, structural steelwork, façade installation, fire suppression, or lift installation are subcontracted to specialist firms. CIDB Act 520 registration in the relevant specialist category (G1-G7 for general building, CE for civil engineering, ME for mechanical and electrical) is mandatory.
A Subcontractor Agreement is needed for labour-only subcontracts where the main contractor supplies materials and the subcontractor provides a labour gang for specific trade works such as concreting, brickwork, plastering, or tiling. CIPAA 2012 (Act 746) applies to these arrangements, protecting workers' payment rights.
A Subcontractor Agreement is required for government infrastructure projects subcontracted by the appointed main contractor. Treasury Circulars governing government procurement impose requirements on main contractors to pass down obligation terms to subcontractors, including anti-bribery, anti-money laundering, and financial integrity obligations under the Malaysian Anti-Corruption Commission Act 2009 (Act 694).
A Subcontractor Agreement is needed when a main contractor managing multiple building projects retains a preferred panel of specialty subcontractors under framework agreements, allowing call-off orders for individual projects without renegotiating terms each time.
Parties in Malaysia should prepare a Subcontractor Agreement (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 Subcontractor Agreement (Malaysia)
A valid Subcontractor Agreement in Malaysia must contain the following key elements.
Parties and CIDB Registration: Full legal names, SSM company registration numbers, and CIDB registration grades and categories of both the main contractor and subcontractor under CIDB Act 520. Both parties must maintain valid CIDB registration throughout the subcontract period.
Subcontract Works Scope: A precise description of the subcontract works, referencing main contract drawings, specifications, and bills of quantities. The scope must be consistent with and not exceed the subcontracted portion of the main contract works to confirm proper back-to-back alignment.
Subcontract Sum: The subcontract price in Malaysian Ringgit (MYR), whether lump sum or schedule of rates. The subcontract sum must be consistent with the main contract pricing for the relevant works scope.
Back-to-Back Payment Terms Compliant with CIPAA 2012: Progress payment provisions that comply with CIPAA 2012 (Act 746). Payment claims must be responded to within the CIPAA 2012 statutory timeframe (14 working days). 'Pay when paid' clauses are void under Section 35 of CIPAA 2012. Retention money of up to 5% is permitted and must be released in two tranches: 50% on practical completion of subcontract works, 50% on expiry of the defects liability period.
Programme and Milestones: The subcontract programme aligned with the main contract programme, including key milestones, access dates, and the consequence of main contractor-caused delay on subcontract obligations.
Variations: The procedure for instructing subcontract variations, consistent with the main contract variation regime under PAM 2018 Clause 11. Subcontract variations must be instructed in writing and valued using the same methodology as main contract variations.
Health and Safety: Obligations under the Occupational Safety and Health Act 1994 (Act 514) including maintaining a site safety plan, complying with the main contractor's site rules, and holding valid insurance.
Dispute Resolution: Payment disputes adjudicable under CIPAA 2012 at the AIAC; other disputes by arbitration under the AIAC Arbitration Rules or litigation.
Additional compliance elements for a Subcontractor Agreement (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). Subcontractor Agreement (Malaysia) (Malaysia) [Legal document template]. Forms Legal. https://forms-legal.com/malaysia/business/construction/subcontractor-agreement-malaysia
"Subcontractor Agreement (Malaysia) (Malaysia)." Forms Legal, 2026, https://forms-legal.com/malaysia/business/construction/subcontractor-agreement-malaysia.
@misc{formslegal-subcontractor-agreement-malaysia,
author = {{Forms Legal}},
title = {Subcontractor Agreement (Malaysia) (Malaysia)},
year = {2026},
howpublished = {\url{https://forms-legal.com/malaysia/business/construction/subcontractor-agreement-malaysia}},
note = {Free legal document template. Based on Companies Act 2016 (Act 777)}
}
Frequently Asked Questions
Pay when paid clauses are expressly void under Section 35 of the Construction Industry Payment and Adjudication Act 2012 (CIPAA 2012, Act 746). Section 35 provides that a provision in a construction contract making payment conditional on the paying party receiving payment from another person is void. This means a main contractor in Malaysia cannot withhold payment from a subcontractor by claiming it has not been paid by the employer. CIPAA 2012 applies to all written construction contracts in Malaysia regardless of the parties' agreement. Before CIPAA 2012 came into force in 2014, 'pay when paid' and 'pay if paid' clauses were common in Malaysian subcontracts and frequently exploited by main contractors. An unpaid subcontractor may now issue a payment claim under CIPAA 2012 and, if the main contractor fails to respond within 14 working days, the claimed amount becomes immediately due and payable, enforceable through adjudication at the Asian International Arbitration Centre (AIAC).
A subcontractor in Malaysia must maintain its own independent CIDB registration under the CIDB Act 1994 (Act 520) at a grade and category appropriate for the subcontract works. The main contractor's CIDB registration does not extend to its subcontractors. CIDB registration grades range from G1 (for contracts up to MYR 200,000) to G7 (unlimited value), with specialist categories including CE (civil engineering), ME (mechanical and electrical), and specialist sub-categories for works such as piling, steel structures, and glazing. An unregistered subcontractor carrying out works above the CIDB threshold commits an offence under Section 27 of CIDB Act 520. Main contractors should verify subcontractor CIDB registration validity at the CIDB online portal before engagement and include a contractual warranty of valid registration throughout the subcontract period. CIDB also requires all construction site workers to hold a valid CIDB Green Card under the Construction Personnel Registration System (CPERS).
A nominated subcontractor in Malaysia is a specialist subcontractor selected by the Architect or employer and included in the main contract as a nominated sub-contractor under PAM 2018 Clause 27. The employer typically nominates specialist subcontractors for works such as curtain walls, lifts, or specialist mechanical systems where the employer has a specific interest in the supplier. A domestic subcontractor, by contrast, is engaged entirely by the main contractor without employer involvement. The distinction has important legal consequences: for nominated subcontractors, the Architect may issue instructions directly to the nominated subcontractor, and the employer bears some risk if the nominated subcontractor defaults under PAM 2018 Clause 27.6. For domestic subcontractors, the main contractor bears full responsibility for the subcontractor's performance. Nominated subcontractors are typically engaged under the PAM Nominated Sub-Contract Form, which is designed to be back-to-back with the PAM 2018 Main Contract.
A subcontractor in Malaysia can claim for loss and expense caused by delay attributable to the main contractor, provided the subcontract agreement includes appropriate compensation provisions. Under the Contracts Act 1950, Section 74, the subcontractor is entitled to damages that naturally arose from the main contractor's breach of the obligation to provide proper access, instructions, or coordination. If the subcontract is back-to-back with the PAM 2018 Main Contract, the subcontractor's entitlement to claim for delay is typically limited to cases where the delay is a relevant event under the main contract. For payment aspects of delay claims — including prolongation costs and loss and expense — the subcontractor may invoke CIPAA 2012 (Act 746) adjudication at the Asian International Arbitration Centre (AIAC). The subcontractor must preserve its rights by giving timely written notice of delay and its cause under the subcontract terms, as courts strictly apply contractual notice requirements.
A Subcontractor Agreement (Malaysia) does not legally require a lawyer in Malaysia, and individuals and businesses may draft and execute the document independently. The Companies Act 2016 (Act 777) does not mandate legal representation for the creation or signing of this type of document. However, seeking independent legal advice from a qualified Malaysia lawyer is recommended for transactions involving substantial financial value, complex regulatory requirements, or cross-border elements where multiple legal jurisdictions may apply. A lawyer can verify that the document complies with all applicable statutory requirements, identify potential risks specific to the transaction, and confirm that the terms adequately protect the interests of all parties involved. The Federal Court of Malaysia has jurisdiction over disputes arising from this type of document, and Companies Commission of Malaysia (SSM) may impose additional compliance obligations depending on the nature of the underlying transaction. Professional legal review is particularly advisable where the document will be submitted to government agencies or used as evidence in legal proceedings.
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:
Construction Contract (Malaysia)
A Construction Contract for Malaysia governing the engagement of a contractor to carry out building works under the Construction Industry Development Board Act 1994 (CIDB Act 520), PAM 2018 Standard Form of Building Contract, and the Housing Development (Control and Licensing) Act 1966. Covers scope of works, contract sum in MYR, progress payments, variations, and dispute resolution.
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.
Performance Bond (Malaysia)
A Performance Bond for Malaysia issued by a bank or insurance company as security for a contractor's performance obligations under a construction contract. Governed by the Contracts Act 1950, CIDB Act 520, and Bank Negara Malaysia requirements. Covers on-demand and conditional bond structures, bond sum in MYR, demand conditions, and expiry mechanisms.