IEM FORM OF CONTRACTS

TERMINATION MATTERS
Prepared by Ir. Ang Kok Keng
Presented by Ir. Ang Kok Keng
Lau Lee Way
 IEM Form of Contract
Contractual Matters Site Management Variation & Payment Time & Cost Matters
PART 1 PART 2
• Engineer's Responsibilities • Patent Rights • Site Administration • Variation Order • Extension of Time and Delay Events
⚬ Cl 2, 3 ⚬ Cl 24, 25 ⚬ Cl 11, 15, 17, 18, 28, 32, 35, 36, 39 ⚬ Cl 51, 52 ⚬ Cl 5.4, 6.4, 10.3, 12.2, 17.1(5), 26.2
• Contractor's Responsibilities • Contractual Matters on Site • Drawings & Submissions • Payment Certificates (3), 33.1 (9), 41.2 (1), 42.2(1), 46.2(3),
⚬ Cl 6, 8, 13 ⚬ Cl 26, 33, 34, 40, 41, 45, 49, ⚬ Cl 5, 14 ⚬ Cl 58, 59, 60 57.4(8)
• Employer's Responsibilities 50, 54 • Site Safety, Environment & Quality • Additional Cost Events
⚬ Cl 7 • Suspension ⚬ Cl 19, 20, 27 ⚬ Cl 4.3, 17.2, 20.3, 20.4, 21B.3 (3&4),
• Contract Documents ⚬ Cl 42 • Site Technical Issues 24.2 (3), 24.3(2), 32.2(3), 57.2(4&7),
⚬ Cl 4, 9 • Liquidated Damages ⚬ Cl 16, 29, 30, 31, 37, 38 58.4(5)
• Performance Security ⚬ Cl 46 • Date for Completion
⚬ Cl 10 • Certificate of Completion ⚬ Cl 43, 44, 46.2(3)
• Tender ⚬ Cl 47 • Procedure for Claim (Cost)
⚬ Cl 12 • Defects Liability ⚬ Cl 53
• Insurances ⚬ Cl 48
⚬ Cl 21A, 21B, 22, 23 • Remeasurement
⚬ Cl 55

Termination Prime Cost, Provisional & NSC Dispute Resolution Option Modules
• Termination by the Employer • Prime Cost & Provisional Sums • Arbitration • Contract Sum Difference
⚬ Cl 61 ⚬ Cl 56 ⚬ Cl 10.1(6), 63 ⚬ Option Module A
• Termination by the Contractor • Nominated Sub-Contractors • Mediation • Price Fluctuation
⚬ Cl 62 ⚬ Cl 57 ⚬ Option Module D ⚬ Option Module B
• Termination without Default
⚬ Option Module C

Categories of IEM Form of Contract Clauses Synergy Building Solutions Sdn Bhd
Presentation Outline

TODAY'S TOPICS
Termination Matters found in IEM Form of
Contract for Civil Engineering Works:
• Termination by the Employer
⚬ Cl 61
• Termination by the Contractor
⚬ Cl 62

Synergy Building Solutions Sdn Bhd

Clause 61:
Termination By The Employer

Synergy Building Solutions Sdn Bhd

Termination Due to Breaches of the
Contractor
The Engineer may issue Certificate of Default to the Contractor if
he thinks the Contractor has committed any or a combination of the
following breaches of Contract:
• wholly suspending execution of Works/part of Works without
reasonable cause;
• not proceeding with construction works regularly and diligently;
• not beginning construction works without reason;
• persistently neglects to carry out obligations under Contract;
• abandoning Works and demobilising Constructional Plant and
Equipment, labours and workers out of Site;
• persistently ignores properly issued instruction issued by
Engineer;
• failing to provide required performance security; or
• assigning benefits of Contract to 3rd party without the
Employer’s consent.

CLAUSE 61: Termination By The Employer Synergy Building Solutions Sdn Bhd
Termination Due to Breaches of the
Contractor (Cont'd)
The Certificate of Default must specify the Contractor’s breaches of
Contract which prompted the issuance and must specify & state
that the Contractor must make good such breaches within 14 days
of its receipt by the Contractor.

The Certificate of Default must not be issued unreasonably /

vexatiously by the Engineer.

If the Contractor continues such breaches or does not take steps to

remedy it, the Employer may serve Termination Notice to
Contractor 7 days after the 14 days period above.

CLAUSE 61: Termination By The Employer Synergy Building Solutions Sdn Bhd
Termination Due to Breaches of the
Contractor (Cont'd)
Termination Notice takes effect as soon as it is receipt by the
Contractor and the Contract is immediately terminated.

Termination Notice must not be issued unreasonably/vexatiously by

the Employer.

Both Certificate of Default and Termination Notice may be served to

the Contractor by:
• AR Registered Post; or
• by delivering a copy to the Contractor’s notified
address/registered office / site office with the Contractor / Site
Manager acknowledging and confirming receipt.

CLAUSE 61: Termination By The Employer Synergy Building Solutions Sdn Bhd
Termination Due to Breaches of the
Contractor (Cont'd)
The Effect of Certificate of Default is deemed temporarily
suspended if the Contractor remedies/take steps to remedy the
breaches specified to the Engineer’s satisfaction within 14 days or
any extension of this period as agreed by the Engineer in writing.

If the Contractor repeats the same breaches where a Certificate of

Default was issued earlier, the Employer may serve Termination
Notice to terminate the Contract, effective immediately upon the
receipt by the Contractor. [For the same breach, it is not a
requirement to issue a new Certificate of Default]

CLAUSE 61: Termination By The Employer Synergy Building Solutions Sdn Bhd
Termination Due to Breaches of the
Contractor (Cont'd)
In invoking Clause 61.1 to terminate Contract, the Employer is also
waiving his right to terminate the Contract by way of common law.

CLAUSE 61: Termination By The Employer Synergy Building Solutions Sdn Bhd
Termination Due to Bankruptcy or
Insolvency of the Contractor
If the Contractor
• (being an individual) goes bankrupt;
• (being a company) applies to High Court section 176 of
Companies Act 1965 for a scheme of arrangement with his
creditors except if the application relates to a scheme for the
reconstruction or amalgamation of the Contractor and other
companies [need an update to Company Act 2016];
• (being a company) has a winding up order issued against him
by court of competent jurisdictions;

The Employer may then, by Termination Notice, terminate the

Contract without Certificate of Default issuance by the Engineer.

CLAUSE 61: Termination By The Employer Synergy Building Solutions Sdn Bhd
Termination Due to Bankruptcy or
Insolvency of the Contractor (Cont'd)
Termination of Contract is effective immediately upon serving and
receipt of Termination Notice by the Contactor.

Termination Notice may be served to the Contractor either by:

• AR Registered Post; or
• delivering a copy to the Contractor’s notified address/registered
office/site office with the Contractor/Site Manager
acknowledging and confirming receipt.

CLAUSE 61: Termination By The Employer Synergy Building Solutions Sdn Bhd
Effects of the Termination
Upon termination of the Contract, irrespective of the validity of
termination and irrespective if the Contractor intends to
dispute/challenge its validity, the following rules apply:
• the Employer is entitled to enter Site and Contractor no longer
has possession of Site.
• the Contractor must stop all operations and move out of Site
together with his personnel and labour.
• the Contractor must not remove any Constructional Plant and
Equipment and unfixed materials out of Site.
• the Engineer must write to the Contractor to attend joint survey
of Works completed, Constructional Plant and Equipment and
unfixed materials remaining on Site within 7 days after
termination of Contract.
• the Contractor can only remove Constructional Plant and
Equipment and unfixed materials out of Site after receiving
instruction from Engineer for the removal.

CLAUSE 61: Termination By The Employer Synergy Building Solutions Sdn Bhd
Effects of the Termination (Cont'd)
• if the Contractor fails/refuses to remove Constructional Plant
and Equipment and unfixed materials out of Site after
instruction from the Engineer, the Employer may remove and
sell them as he sees fit.
• The Employer must inform the Engineer in writing the value of
the proceeds of sale made and any reasonable administrative
charges.
• Liquidated Damages (if any) which continue to be deductible at
time of Contract termination will immediately stops being
payable.

After the termination of the Contract, the Employer may complete

remaining Works himself or employ other contractors to complete
the Works.

CLAUSE 61: Termination By The Employer Synergy Building Solutions Sdn Bhd
Effects of the Termination (Cont'd)
The Employer or his chosen contractors may use the
Constructional Plant and Equipment and unfixed materials but their
use must be properly accounted to the Contractor.

CLAUSE 61: Termination By The Employer Synergy Building Solutions Sdn Bhd
Payment After Termination
The Engineer must issue certificate on the financial position of the
Contract after its termination known as the Certificate of
Termination Cost.

The Engineer must certify the values of the following items in the
Certificate of Termination Cost:
• certified sum of all Works completed by Contractor up to
termination date of the Contract based on joint survey
conducted [Clause 61.3(1)(d)];
• certified value of all Variations completed by Contractor
including Variations which are to be valued by Dayworks;
• costs of which Engineer considers the Contractor is entitled to;
• cumulative amounts due to all NSCs together with any profit
and attendance charges which the Contractor is entitled;

CLAUSE 61: Termination By The Employer Synergy Building Solutions Sdn Bhd
Payment After Termination (Cont'd)
• value of Performance Security that the Employer has made
demand and been paid;
• amounts due to the Contractor for use of Constructional Plant
and Equipment and unfixed materials [Clause 61.3(3)];
• sale proceeds (if any) from Constructional Plant and Equipment
and unfixed materials [Clause 61.3(1)g];
• the costs of Employer completing remaining Works;
• the costs of making good defects in Works;
• administrative charges reasonably imposed by the Employer in
selling Constructional Plant and Equipment and unfixed
materials [Clause 61.3(1)g];
• any other costs which Employer is entitled to claim from the
Contractor under the express terms of contract.

CLAUSE 61: Termination By The Employer Synergy Building Solutions Sdn Bhd
Payment After Termination (Cont'd)
Certificate of Termination Cost must state difference in total value
certified due to the Contractor (in RED) less total value certified
payable to the Employer (in BLUE). The balance will be value
certified payable by the Contractor to the Employer or vice versa.

The payment due on Certificate of Termination Cost must be paid

within 30 days of issuance.

The Engineer must issue Certificate of Termination Cost as soon as

he can ascertain and certify all applicable values or within 6
months after Contract termination, whichever is later.

The Contractor will not be entitled to any payment (if any) after
Contract termination until Engineer issues Certificate of Termination
Cost. [Note : Not tested at Court against Section 35 of CIPAA]

CLAUSE 61: Termination By The Employer Synergy Building Solutions Sdn Bhd
Clause 62:
Termination By The Contractor

Synergy Building Solutions Sdn Bhd

 Termination Due to Breaches of the
Employer
The Contractor may issue to the Employer notice specifying
Employer’s breach/breaches of the Contract such as:
• the Employer fails to pay Contractor wholly/partially the amounts
certified in IPC;
• the Employer interfered/influenced/obstructed the Engineer’s
certification process;
• the Employer does not have replacement Engineer within 30
days of Engineer’s stoppage being the Engineer under the
Contract.

The Notice to be given by Contractor to the Employer is known as

Notice of Default and must state the breach/breaches of the Contract
used to invoke Contract termination. The Contractor must not issue
Notice of Default unreasonably/vexatiously.

CLAUSE 62: Termination By The Contractor Synergy Building Solutions Sdn Bhd
 Termination Due to Breaches of the
Employer
The Notice of Default must require the Employer to make good
specified breaches within 14 days of its receipt.

If the Employer continues with the specified breaches or does not

take steps to remedy the breaches, the Contractor may serve notice
(Contractor’s Termination Notice) to the Employer 7 days after the
14-day period above.

Contractor’s Termination Notice is effective immediately with

termination of Contract upon the Employer’s receipt.

The Contractor must not issue Contractor’s Termination Notice

unreasonably / vexatiously.

CLAUSE 62: Termination By The Contractor Synergy Building Solutions Sdn Bhd
 Termination Due to Breaches of the
Employer
Notice of Default and Contractor’s Termination Notice may be served
to the Employer either by:
• AR Registered Post; or
• delivering a copy to the Employer’s notified address/registered
office/site office with the Employer/his agent acknowledging and
confirming receipt.

The effect of Notice of Default is temporarily suspended if Employer

remedies the breaches within the 14-day period.

If Employer repeats the same breaches for which Notice of Default

was issued earlier, the Contractor may serve to the Employer the
Contractor’s Termination Notice which is effective immediately upon
the Employer’s receipt and the Contract is terminated.

CLAUSE 62: Termination By The Contractor Synergy Building Solutions Sdn Bhd
 Termination Due to Bankruptcy or
Insolvency of the Employer
If the Employer
• (being an individual) goes bankrupt;
• (being a company) applies to High Court section 176 of
Companies Act 1965 for a scheme of arrangement with his
creditors except if the application relates to a scheme for the
reconstruction or amalgamation of the Employer and other
companies [need to be updated to Company Act 2016];
• (being a company) has a winding up order issued against him by
court of competent jurisdictions;

The Contractor may then, by the Contractor’s Termination Notice to

Employer, terminate the Contract without Notice of Default.

CLAUSE 62: Termination By The Contractor Synergy Building Solutions Sdn Bhd
 Termination Due to Breaches of the
Employer (Cont'd)
Termination of Contract is effective immediately as soon as the
Contractor’s Termination Notice is served and received by the
Employer.

Contractor’s Termination Notice must state the grounds listed in

Clause 62.2(1) to invoke the Contract termination.

Contractor’s Termination Notice may be served to the Employer

either by:
• AR Registered Post; or
• delivering a copy to the Employer’s notified address/registered
office/site office with the Employer/his agent acknowledging and
confirming receipt.

CLAUSE 62: Termination By The Contractor Synergy Building Solutions Sdn Bhd
 Effects of Termination of the Contract
by the Contractor
Upon the termination of Contract, irrespective of validity of
termination and irrespective if the Employer intends to dispute its
validity, the following rules apply:
• the Employer is entitled to enter Site and the Contractor no longer
has possession of Site.
• the Contractor must move out of Site together with his personnel
and labour and all Constructional Plant and Equipment and
unfixed materials.
• The Engineer must write to the Contractor to attend joint survey
of Works completed, Constructional Plant and Equipment and
unfixed materials remaining on Site within 7 days after
termination of Contract.

After termination of Contract, the Employer may complete remaining

Works himself or employ other contractors to complete Works.

CLAUSE 62: Termination By The Contractor Synergy Building Solutions Sdn Bhd
 Payment After Termination
The Engineer must issue certificate on the financial position of the
Contract after its termination known as the Certificate of Termination
Cost.

The Engineer must certify the following values in Certificate of

Termination Cost:
• certified sum of all Works completed by Contractor up to
termination date based on joint survey conducted [Clause
62.3(1)(c)];
• certified value of all Variations completed by Contractor including
Variations valued by Dayworks;
• costs which Engineer considers the Contractor is entitled to;
• cumulative amounts due to all NSCs together with any profit and
attendance charges which the Contractor is entitled;
• value of Performance Security that Employer has made a call
according to Call on Performance Security [Clause 10.4];

CLAUSE 62: Termination By The Contractor Synergy Building Solutions Sdn Bhd
 Payment After Termination (Cont'd)
• costs of making good defects in Works;
• any other costs which Employer is entitled to claim from
Contractor.

Certificate of Termination Cost must state difference in total value

certified due to the Contractor (in RED) less total value certified
payable to the Employer (in BLUE). The balance will be value
certified payable by the Contractor to the Employer or vice versa.

The Engineer must issue the Certificate of Termination Cost as soon

as he can ascertain and certify all applicable values or within 6
months after Contract termination, whichever is later.

CLAUSE 62: Termination By The Contractor Synergy Building Solutions Sdn Bhd
 Payment After Termination (Cont'd)
The Contractor will not be entitled to any payment after Contract
termination until Engineer issues Certificate of Termination Cost.
[Note : Not tested at Court against Section 35 of CIPAA]

The payment due on Certificate of Termination Cost must be paid

within 30 days of its issuance.

CLAUSE 62: Termination By The Contractor Synergy Building Solutions Sdn Bhd
QUESTIONS & ANSWERS
THANK YOU

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EMAIL ADDRESS
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PHONE NUMBER
+603 - 5131 9823

Synergy Building Solutions Sdn Bhd