MALAYSIA Law and Practice Contributed by: Natalie Ooi and Nicholas Ooi, Ooi & Ooi
The responsibilities are as follows: • The employer provides performance/output specs; and • the D&B contractor is responsible for the design and construction. Engineering, Procurement and Construction (EPC)/Turnkey This is common for infrastructure and energy projects where the contractor delivers a fully operational facility that is ready to use. The responsibilities are as follows: • the employer sets the functional specs; and • the EPC contractor is responsible for every - thing, including design, construction, pro - curement and commissioning. 7.3 Management of Construction Risk Risk allocation tools include indemnifications, warranties, limitations of liability, and waivers of certain types of damages. These devices are used in Malaysian construction projects as fol - lows, with relevant legal considerations. • Indemnities – courts in Malaysia generally uphold indemnity clauses unless they are deemed unfair, unconscionable or against public policy. • Warranties – express warranties are enforce - able but contractual disclaimers may limit implied warranties. Courts typically enforce express warranties unless they are proven to be misleading or fraudulent. • Limitations of liability – these are generally enforceable, but must not be ambiguous and cannot exclude liability for fraud or gross neg - ligence, and must not be unlawful or against public policy.
• Waivers of damages – these are valid if they are unambiguous and clearly worded. They are not allowed if fraud or illegality are involved, or if they violate public policy. • Liquidated damages clauses – these are valid if they are unambiguous and clearly worded. They are not allowed if fraud or illegality are involved, or if they violate public policy. • Performance bonds – these are standard practice. • Insurance requirements – these are contrac - tually required and are enforceable. 7.4 Management of Schedule-Related Risk Generally, an employer will likely impose liqui - dated and ascertained damages (LAD) upon the contractor for delays attributable to said con - tractor. Contractors and employers may come to an agreement on LAD quantum. 7.5 Additional Forms of Security to Guarantee a Contractor’s Performance In Malaysia, it is essential and standard practice that the contractor provides a performance bond to protect the interests of the employer in the event the contractor fails to comply with its obli - gations under the contract. Performance security may comprise bank guarantees, corporate or par - ent company guarantees or retention securities. 7.6 Liens or Encumbrances in the Event of Non-Payment The concept of “lien” as used in other jurisdic - tions – where contractors or designers can auto - matically register a lien on a property for unpaid work – does not exist in the same form in Malay - sia. No such right of lien exists in a contractor- principal relationship unless expressly provided for in the contract.
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