DEFECT LIABILITY PERIOD
AND
ACCOUNT CLOSING
W. Mohd. Saipallah bin W. Kadir
Head of Project Team 2
Cawangan Kerja Kesihatan
DEFECT LIABILITY PERIOD
DEFECT LIABILITY PERIOD
A common feature in all the standard form of
construction contracts in Malaysia
PAM 98 / JKR PWD 203 / IEM / CIDB 2000
DEFECT LIABILITY PERIOD
A common feature in all the standard form of
construction contracts in Malaysia
PAM 98 Clause 15 – Practical Completion & Defects Liability
JKR PWD 203A (Rev 1-2010) Clause 48 – Defects After Completion
CIDB Standard Form of Contract for Building Works 2000 Edition
Clause 27 - Defects Liability After Completion
DEFECT LIABILITY PERIOD
PAM
DEFECT LIABILITY PERIOD
JKR 203A
DEFECT LIABILITY PERIOD
CIDB Standard Form of Contract
DEFECT LIABILITY PERIOD
JKR PWD FORM DB (Rev.2007)
Defect Liability Period
DEFECT LIABILITY PERIOD
Deemed to have commenced on the date on which
the client (Government) shall have taken possession
and occupied the works.
1. Completion of works – issuance of CPC
2. Sectional completion of works – issuance of CPO
Defect Liability Period
DEFECT LIABILITY PERIOD
i. Issuance of Certificate of Practical Completion (CPC)
ii. Completion of outstanding works and remedying defects.
iii. Default in remedying defects
iv. Diminuation in value of works
v. Certificates of completion of making good defects
Completion of Works
Defect Liability Period
DEFECT LIABILITY PERIOD
i. Certificate of Partial Occupation. (within 7 days)
ii. Start of DLP for parts occupied
iii. Certificates of completion of making good defects (relevant parts)
iv. Reduction in LAD
v. Default in remedying defects
vi. Diminuation in value of works
vii. Insurance (contractor to notify insurer)
viii. Performance Bond (realeased after CMGD for whole works)
Partial Occupation
Defect Liability Period
DEFECT LIABILITY PERIOD
S.O. : issue instructions requiring any defects,
shrinkages or other faults appearing
within DLP due to materials or
workmanship not in accordance with the
Contract.
Contractor : obliged and liable to rectify defects that
appear between the period the
Certificate of Practical Completion
(CPC) is issued and the expiry of the
DLP.
DEFECT LIABILITY PERIOD
In General : Instruction for rectifying defects,
shrinkages or other faults can no
longer be issued after 14 days from
expiry of the DLP.
Unless otherwise stated in the Contract
Defect Liability Period
In general terms defects or defective works is
where the standard and quality of
workmanship and materials as specified in
the contract is deficient.
DEFECT LIABILITY PERIOD
Defects
Defects
DEFECT LIABILITY PERIOD
Patent Defects :
Latent Defects :
defects that can be discovered by normal
examination or testing.
defects that are not discoverable by
normal examination or testing which
manifests itself after a period of time.
Defects
DEFECT LIABILITY PERIOD
Construction Defects :
Usage Damages :
defects arising from poor worksmanship or
defective materials.
damages due to incorrect operating
by users.
defective materials.
Defects
DEFECT LIABILITY PERIOD
Defects
DEFECT LIABILITY PERIOD
DEFECT LIABILITY PERIOD
Start
Issuance of Certificate of Practical Completion
CPC
i. End of Contractor’s contractual liabilitiy : except of making good defects;
ii. One moiety of Retention Fund released;
iii. End of insurance period;
iv. End of Contractor’s liability for further Liquidated Damages;
v. End of Contractors’s possession of site except to make good defects.
Defects Libility Period begins
S.O./Engineer may issue written instruction to
Contractor to make good defects
S.O./Engineer may issue Schedule of Defects not
later than 14 days after expiry of DLPFlowchart
Flowchart
DEFECT LIABILITY PERIOD
Contractor makes
good defects at his
own cost, within 3
months after the
receipt of the
Schedule
S.O./Engineer ascertains the
diminution in the value of
defective works if impracticable
and inconvenient for Contractor
to rectify
ORS.O. may employ third party to
make good the defective works
No
Start
Issuance of Certificate of Practical Completion
CPC
i. End of Contractor’s contractual liabilitiy : except of making good defects;
ii. One moiety of Retention Fund released;
iii. End of insurance period;
iv. End of Contractor’s liability for further Liquidated Damages;
v. End of Contractors’s possession of site except to make good defects.
Defects Libility Period begins
S.O./Engineer may issue written instruction to Contractor to make good defects
S.O./Engineer may issue Schedule of Defects not later than 14 days after expiry of DLP Employer may recover cost
incurred from the amount
due to the Conractor of
from Performance Bond
Yes
S.O./Engineer issues
Certificate of
Making Good Defects
S.O./Engineer issues Final Certificate within 3
months from DLP / 3 month after Certificate
of Making Good Defects (whichever is later)
Release of Performance Bond
Final Certificate
ENDFlowchart
FINAL ACCOUNT
ACCOUNT CLOSING
Final Account
Construction contracts generally provide some
mechanism for the final payment to be made to
the contractor on completion of the works
described in the contract.
Generally this payment will be made at the end
of the defects liability period provided that all
defects have been rectified.
Final Account
DEFECT LIABILITY PERIOD
Normally mentioned in all the standard form of
construction contracts in Malaysia
PAM 98 / JKR PWD 203 / IEM / CIDB 2000
Final Account
CIDB Standard Form of Contract
Final Account
PAM
Final Account
JKR 203A
Final Account
Preparing the final account is the process of calculating and agreeing
any adjustments to the contract sum (the amount originally set out in
the contract to be paid to the contractor for completion of the works)
so that the amount of the final payment can be determined. The
amount of the final payment is then set out in the final certificate
(or final statement).
It is possible for the final certificate to show that money is owed to the
client, rather than due to the contractor.
Final Account
Final Account
The contract sum may need to be adjusted for a number of reasons,
including:1. Variations.
2. Fluctuations.
3. Prime cost sums.
4. Provisional sums.
5. Payments to nominated sub-contractors or nominated suppliers.
6. Statutory fees.
7. Payments relating to the opening-up and testing of the works.
8. Loss and expense.
9. Liquidated and ascertained damages.
10. Contra claims imposed as a result of the contractor's operations (such as a third-party claim
resulting from contractor negligence or contractual breach, for example, flooding a neighbour's
property, third party works as instructed by S.O.).
11. The release of any remaining retention.
Final Account
Final Account
Agreeing the final account can be a complicated,
time consuming and adversarial process,
often resulting in disputes.
The process can be made easier if adjustments to
the contract sum are agreed as the project
progresses rather than saving them up for the end.
Final Account
Final Account
1. Finalizing of the account is not a one sided activity
2. Entails necessary input of the contractor especially in
terms of the provision of the relevant documents,
substantiation each in regard to his claims and also of
those pertaining to his sub-contractor
3. Must be a proactive approach on both sides
4. Strict adherence to any programmed or deadlines set
Final Account
Final Account
1. The Contractor shall submit full particulars complete with supporting
documents within but not more than three (3) months after issuing of
the Certificate of Practical Completion (CPC).
2. The Superintendent Officer (S.O) shall issue the Final Certificate within
three (3) months after the expiry of the Defect Liability Period for the
whole of the Works or three (3) months after the issuance of the
Certificate of Completion of Making Good Defect (CMGD).
Final Account
In Majority of contract :
Issue of the final account can remain open for years after the
Certificate of Making Good Defect (CMGD)
Conclusion
1. Read And Understand The Contract
2. Justly Interpret The Clauses
3. Precise description of defects in report
4. Follow The Latest Guidelines
5. Resolve Disputes Amicably
6. Document All Action Taken
Conclusion
Conclusion
No certificates of the S.O. under any provision of this Contract shall be
considered as conclusive evidence as to the sufficiency of any works, material
or goods to which it relates, nor shall it relieve the Contractor from his ability to
amend and make good all defects, imperfections, shrinkages, or any other
faults whatsoever as provided in this Contract. In any case, no certificate of the
S.O. shall be final and binding in any disputes between the Government and
the Contractor if the dispute is brought before an arbitrator or in the Courts.
Clause 55 - PWD Form DB (Rev.2007)
Clause 43 - CIDB Standard Form of Contract for Building Works 2000 Edition
Clause 34 - PAM Contract 2006 (without quantities)
(Adjudication and Arbitration)
Clause 32.0 - JKR 203 (Effect of S.O. Certificates)
DEFECT LIABILITY PERIOD & FINAL ACCOUNT
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