This document discusses contractors' obligations to remedy defects during the defects liability period in Malaysian construction contracts. It provides details on three key aspects: 1. Contractors are obligated under Clause 15.3 of PAM 2006 to remedy any defects at their own expense during the defects liability period. 2. The defects liability period typically lasts 12-18 months after the issuance of the certificate of practical completion, during which time contractors are liable for remedying defects. 3. For the contractor to receive the second half of the retention money, a certificate of making good of defects must be issued upon the contractor remedying all defects listed in the schedule of defects.

1. Defects Liability
Lecture Week 5

2. Contractor’s Obligation
CL 15.3 of PAM 2006
- states the obligation of contractors to remedy
defects
- States the rights of employers in circumstances
where contractors failed to remedy the defects.

3. Defects Liability
P&M Kaye Ltd v Hosier & Dickinson Ltd
Per Lord Diplock:
“ Condition 15 imposes upon the contractor a liability to
mitigate the damage caused by his breach by making good
defects of construction at his own expense. It confers upon
him the corresponding right to do so. It is a necessary
implication from this that the employer cannot as he
otherwise could, recover as damages from the contractor
the difference between the value of works if they had been
constructed in conformity with the contract and their value in
their defective condition, without first giving to the contractor
the opportunity of making good of the defects”.

4. Practical completion(PC)
Clause 15.1
What is practical completion
(compare with cl 15.1 of PAM 98)

5. 1st approach
P& M Kaye Ltd v Hosier & Dickinson Ltd
Held: Practical completion means
completion except for trifling defects. As
long as the work is ready for use or
occupation, the works are practically
complete.

6. 2nd approach
Westminster City Council v Jarvis & Sons
Ltd.
Held: Practical completion means
completion for all practical purposes
except for very minor de minimus work
and there are no patent defects in the
works.

7. Per Viscount Dilhorne:
“ …defects liability period is provided in
order to enable defects not apparent at
the date of practical completion to be
remedied. If they had been apparent, no
such certificate would have been
issued.”

8. 3rd approach
Morgan v S & S Construction Ltd
Held: There is no completion until work
to be done by the contractor has been
carried out in accordance with the
contract, except for departures from it
which are either latent or undiscovered
or merely trivial.

9. Practical Completion
v
Substantial Performance
SP-Building Law Reports:
‘…the doctrine of substantial performance…
tempers the circumstances in which payment
of the amount due under an entire contract …;
if achieved , then payment is to be made but
with a deduction for completion of defective
works.’
Practical Completion:
balance of the contract sum minus the retention
fund

10. The effect of PC
1. The date stated in CPC marks the end
of contractor’s liabilities of his
contractual obligation except for the
obligation to remedy defects which
occur within the DLP.
2. One moiety (a certain portion ) of the
retention fund has to be released to the
contractor-cl 30.6 (c)

11. 3. The date of CPC marks the starting date
of DLP.-cl 15.2(b)(i)
4. The period of final measurement and
valuation starts- cl 30.10
5. Contractor’s liability to insure ends.- cl
20A, B and C
6. The contractor license to occupy site
ends-cl 15.2

12. 7. Liability of contractor's to liquidated
damages ends.
8. Starts to right to arbitration (end of
restrictions) – cl. 34.1
9. Contractors need to submit all
necessary documents to the architect for
adjustment of the contract sum- cl.30.10

13. Defect Liability Period (DLP)
Generally, it refers to a period stated in
the certificate of practical completion-cl15.3;
unless some other period -
specified in the Appendix. (The common
practice is 12 – 18 months.)

14. Types of defects
 Clause 15.2 PAM 1998- Defects:
- including shrinkages or other faults which
appeared during DLP.
-must be due to materials or workmanship not
in accordance with the contract
Note: PAM 2006 does not have provision on
type of defects- just mention about defects as
mentioned in the schedule of defects-cl15.4

15. Schedule of defects
Refer to cl.15.4 PAM 2006

16. Certificate of Making good of
defects
Cl.15.6 (Refer to PAM 2006)
• A procedure which is required for the second half
of the retention money to be payable to contractor.
• A process which must be finalized before the
period to issue Final Completion Certificate begins.