Procedure and Effects of Delayed Possession of Site under PAM 2006

Procedure and Effects of Delayed Possession of Site under PAM 2006 

Where the Employer fails to give possession of the site to the Contractor on or before the date stated within the Contract, it is a breach of contract and, if the failure to give possession continues for any significant time, it will be a material of the contract. This is because without possession of the site the contractor cannot execute the Works under the contract. All standard forms of contract used in Malaysia including PAM 2006, provide for a specific date for possession of the site. Failure to give possession of the site is a breach not only of the express terms of a contract but also a breach of a term that would be implied at common law in the absence of such an express term.

As a result of the Employers default in giving possession of site being a material breach of the contract, a protracted failure by the Employer to give possession of site, and any subsequent acceptance by the Contractor of the Employer’s breach, may entitle the Contractor to accept the repudiation and to commence an action for damages, which could include the loss of the profit that it would otherwise have earned. (See Wraight Ltd v PH&T Holdings Ltd [1968]). In Malaysia most Contractors would balk at taking such drastic action, but they may claim damages at common law for any loss actually incurred.

Architects may wish to try to overcome a failure on the part of the Employer to give possession of site by issuing a postponement or similar instruction under the Contract. For example, PAM 2006 Sub-Clause 21.4 allows the Architect to issue instructions in regard to the postponement of any work which is to be executed under the contract. However, the power to postpone is not the same as power to defer possession of the site. Although the Architect may issue an instruction to postpone all the work on site until further notice, the Contractor is still entitled to be in possession of the site from the date of possession stated in the Contract.

Postponement is when the Contractor is on the site and in control of it, but doing no contract work while in control. The correct procedure, in the event that the Employer cannot give possession, is for the Employer to formally notify the Contractor and Architect of the deferred possession and for the Architect to grant an extension to the time for completion equal to such delays in accordance with Sub-Clause 21.1. The Contractor and Architect will similarly follow the contract in respect of loss and expense which result.

In practice, where an Architect attempts to defer possession by issuing a postponement or similar instruction, the Contractor will often accept the instruction as deferring possession, because the contract (Sub-Clause 21.1) makes provision for an extension of time and loss and/or expense following postponement such postponement. Moreover, if the suspension of work lasts longer than the period specified in the Appendix to Contract the Contractor is entitled to take steps to terminate his employment under the contract and recover his loss and expense accordingly.

MALCONLAW 2012

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