This document discusses the rights of setting-off by an employer under a construction contract. It outlines that a contractor has 28 days to accept or 21 days to dispute a set-off amount provided by a quantity surveyor. If disputed, the employer has 21 days to accept the contractor's disagreement or the dispute can be referred to adjudication. Adjudication aims to enable works to continue while temporarily resolving disputes. Liquidated damages are exempt from set-off procedures and must be resolved separately.

1. Lecture P4
Rights of Setting-Off by Employer
(8-12,Q3)

2. Rights of contractor
When contractor received the
set-off calculation from the QS
To accept the amount within 28 days
of notices of setting off
To dispute the amount within 21 days
of receipt of written notice of set-off
+ state reasons from disagreement
+ own evaluation with supporting
documents and calculation

3. Rights of employer
When employer received the
contractor’s written notice of dispute
To accept the contractor’s disagreement &
agree on the disputed amount within 21 days
after receipt of contractor’s response
Employer and contractor mutually come to
an agreement on the amount as set-off
Eg: Both parties pay half / Give discount
Employer and contractor unable to agree, either
party may refer the dispute to adjudication

4. Adjudication (Clause 34.1)
Employer can only set-off the amount
decided by the adjudicator.
If any parties disputes with the decision by
the adjudicator, he must still comply and be
bound by the decision until CPC.
“Pay Now Argues Later” (Rough Justice) =
enables the works on site to proceed with a
temporary decision on the dispute.
APPEAL
Procedure to refer the disputed decision to
an Arbitration :
Give written notice within 6 weeks from
the date of adjudicator’s decision.
After 6 weeks, the adjudicator’s decision is
final.

5. Restriction on Employer’s rights to set off
• Limitation on the employer’s rights to set-off:
1. The dispute arises before CPC
2. The dispute must within Clause 30.4
• Employer can only set-off when:
1. The contractor has expressly agreed to the amount
2. The disputes has gone to adjudication & the adjudicator has issued decision

6. Liquidated Damages (LD)
• LD are not stated in Clause 30.4 and 22.1
o Clause 30.4 – Matters subjects to an appropriate set-off
o Clause 22.1 – The imposition of LD by the Employer shall not be taken into account by the
Architect in the issuance of payment certificates and Final certificates, and is not subject to
the set-off procedures under Clause 30.4 and adjudication.
• LD is the only item that are not subject to set-off procedure and it
has to be resolved separately between employer and contractor.
• The reasons for this exemption from set-off:
o LD are often subject to disputes
o Up to the Employer’s discretion to deduct the LD from any money due to the contractor

7. Questions

8. Q3.
3a. Why are set-off and Liquidated Damages taken
up by the Employer separately and is not stated in
Interim Certificate?
3b. Can the Employer refer a set-off dispute to
arbitration during the construction period?

9. • Set-off and Liquidated Damages are taken up by the Employer
separately and are not stated in Interim Certificate.
• This is because Interim Certificate is to certify the works that have
been properly carried out but Set-off and Liquidated Damages are
not work done.
• They are matters between the employer and the contractor. They
are up to the employer whether to deduct or not. However, as a
professional QS, we have to highlight the rights to the employer.
Answer for 3a:

10. • Clause 34.1 states that any dispute under Clause 30.4 after the date of
Practical Completion shall be referred to arbitration under Clause 34.5.
• However, employer can refer a set-off dispute to arbitration during the
construction period.
• Clause 34.10 states that unless with the written agreement of the
Employer and Contractor, such arbitration proceedings shall not
commence until after Practical Completion or alleged Practical
Completion of the Works or determination or alleged determination of
the Contractor’s employment under the Contract or abandonment of
the Works except on Clause 34.10 (a)-(d).
Answer for 3b:

11. Q6.
What are the main differences between
Adjudication and Arbitration?

12. Adjudication Arbitration
Faster process  Cheaper
• Adjudicator can straight away make decision by
documents (Quick Decision)
Longer process  More expensive
• Arbitration is like court case and have more
procedures
• Eg : need witness to prove/ need to check the
documents correct or not
Dispute after CPC not going to Adjudication anymore. Dispute after CPC need to go to Arbitration.
(Clause 34.1)
After the adjudicator make decision, we must still
comply and be bound by the decision until CPC.
However, we can still appeal the decision to
Arbitration upon CPC.
Once Arbitrator make decision, we cannot challenge
or appeal.
Mainly for set-off dispute. For other dispute.