This document discusses determination of a contractor's employment by the employer. It provides details on: - The definition and meaning of determining a contractor's employment - Rights and duties of employers and contractors regarding determination - Procedures that must be followed for valid determination, including giving proper notice - Remedies available to contractors if determination is found to be invalid - Rights and remedies of employers that are not prejudiced by determination - Responsibilities of both parties regarding completing remaining works after determination

1. PP2 Coursework 1
P10 Determination of Contractor’s Employment by Employer
Group Members:
Calvin Wong Ping Ket (0322481)
Farah Aida Binti Shahar Sham (0322962)
Tio Chong Zhi (0328134)

2. Summary of the Topic

3. Determination of Contractor’s employment by
Employer
- Determination of the contractor’s employment means the termination of
the contractor’s employment by the employer under the contract as a
result of the contractor’s default.
- The determination keeps some of the clause in the contract alive, to bring
the contract to a closure.
- The court will tend to lean towards the employer if the contractor does
not properly and strictly follow the contract provision.

4. Rights and Duties of Employer and Contractor for Determination of Contractor’s Employment
by Employer

5. Strict Compliance with Procedure for
Determination
Clause 25.2
- Comply meticulously with the time table stated in contract.
- Notice must state the contractor’s default and applicable clause of the Contract.
- Writing and delivered by hand or registered post
- Notice must not be given unreasonably or vexatiously

6. Contractor’s remedies after determination
Clause 25.7
- Allow contractor to claim for compensation for damages only if the
determination is found invalid.
- Subjected to contractor’s ability to prove his entitlement and quantum he
deserves.

7. Employer’s rights and remedies not prejudices
Clause 25.8
- Employer must exercise his rights to determination either;
- Under the clause 25.2 of the contract for performance default; or
- Under common law
- If the Employer chooses to determine the contract, he will not be able to
resort to the common law rights of determination.

8. Completion of the remaining works
- Employer must take immediate action for arrangement for the
completion of the remaining works:
1. Instruct Contractor to;
a. Cease all operation on site
b. Demobilize and remove his workers and staff
c. Leave all temporary building
2. Make claim against the bank e.g. Performance Bond
3. Arrange new tender document.
4. Employ a replacement contractor
5. Employer take up insurance coverage under fire and Third Party policy for
the completed works.

9. Completion of the remaining NSC’s works
- Architect can nominate the same NSCs to the replaced contractor, if they
agree to proceed with the same subcontract sum.
- The new subcontract sum shall be the original subcontract sum less the
amount previously paid to the NSC.
- If the NSC demands for an increase of the subcontract sum, fresh
tenderers shall be invited to completed the works.

10. Determination of NSC’s Employment
Clause 27.8
- Contractor can determine the NSC’s employment with the Architect’s
written consent.
- To avoid wrongful determination of the NSC.

11. Procedure for the determination of the NSC’s
employment
- Contractor shall give a written report stating the NSC’s default to the
Architect, with a copy for the NSC.
- Architect may request the NSC to give an explanation based on the
Contractor’s allegation of default.

12. How to complete remaining works ‘abandoned’ by
NSC
- Contractor shall determine the NSC’s employment with the Architect’s
written consent.
- Architect shall re-nominate a replacement NSC to complete the works.
- Employers pay additional cost to the Contractor if the replacement NSC
charge higher than the previous NSC.
- Additional expenses recovered by the Contractor from the previous NSC,
will be used to complete the remaining works.
- The recoverable cost cannot be charged back to the Employer.

13. QUESTION 1 :
Discuss the situations where Employer can
determine the Contractor’s Employment
provided for in PAM 2006

14. Default by Contractor
Clause 25 deals with the employer’s right to ‘determine the employment of the contractor’
- Clause 25.1(a) if without reasonable cause, the contractor fails to commence the works in
accordance with the contract.
- Clause 25.1(b) if without reasonable cause, Contractor wholly or substantially suspends the
carrying out of the works before completion
- Clause 25.1(c) Contractor fails to proceed regularly and/or diligently with the works
- Clause 25.1(d) Contractor persistently refuses or neglects to comply with an AI
- Clause 25.1(e) Contractor fails to comply with provisions in Clause 17.0 (regarding matters on
Assignment and Sub-Contracting) or
- Clause 25.1(f) Contractor has abandoned the works.

15. Automatic Determination
Clause 25.3
When the contractor:
● becomes insolvent
● Making a composition or arrangement with his creditors
● Have a winding up order made
● The company may be taken over by holders of debentures
The contractor shall be automatically determined. No notice is required but it
advised to notify them in writing.

17. QUESTION 2 :
What must the Employer check before
determining the Contractor’s Employment?
What can happen if the Employer had failed
to pay the sum due on Interim Certificate
at the time of determination?

18. QUESTION 2 :
The employer must make sure that the contractor has defaulted under any 6
of the defaults listed under clause 25.1.
If the employer had failed to pay the sum due on Interim Certificate at the
time of determination, the employer will not be able to make further payment
to the contractor until after the completion of the works. The contractor
would only be able to get paid the sum due on the Interim Certificate after the
completion of the works.

19. QUESTION 3:
Discuss the essential contents required in the Notice of Default and Notice of
Determination.
● Reason for determination (Facts of default, Not opinion)
● The clause allows employer to determine contractor (25.1)
● Must be in writing, delivered by hand/registered post by the Employer or
the Architect

20. Questions

21. Question 1:
Why must QS submit the final account to
employer/contractor within 6 months from completion of
remaining works?

22. Question 2:
Is it possible for the Employer to determine the
Contractor’s employment, if the Employer fails to pay the
Contractor within the Period of Honouring Certificate?

23. Question 3:
What if the Nominated Sub-Contractor has determines his
own employment due to the breach of the Contractor?

24. Answer to Question 1
It takes within 6 months because it takes time to calculate damages for any
defective works, and the final account must be prepared after the remaining
works have been completed because the new replaced main contractor will
cost more to complete the remaining works. In this case, the additional
expense that the employer has to bear will be deducted from the final
account. Contractor to finalize the account with the subcontractors and
suppliers.

25. Answer for Question 2:
No. Under Clause 26.1 (a) states if the employer fails to pay the contractor
within the Period of Honouring Certificate, the contractor will be able to
determine his own employment and the Employer will loses his rights to
determine the contractor’s employment under the ‘prevention principles’.

26. Answer for Question 3:
According to Clause 27.12, in this event, the Architect shall re-nominate
another NSC and the Contractor shall be paid the same sum as would have
been payable to the previous NSC.
Other than that, the Contractor is liable to pay all extra costs to new NSC to
complete the Works and also to pay Employer the extra cost for re-
nomination & loss and/or expenses suffered by the Employer.
The Contractor is not entitled to any EOT unless and until he has established
the determination by the NSC of his employment is invalid.