Construction Contract in Malaysia | Download Word Template (.doc)

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Ready to use legal template

Drafted by lawyers

Compliant with Malaysian law

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Learn more about Construction Contract in Malaysia

It is preferable to sign a Construction Contract in suitable form to minimize delays in the construction of a house. The construction contract gives you important guarantees. Whether you hire a builder, an architect, a project manager, or have your house built by artisans directly, you must have a particular and detailed building contract. Download our construction contract template available in English at Themis Partner that includes all of the necessary features and terms, as well as the scope of the service. We also remind you that you can build your own home and choose from a variety of contracts. They are more or less distinct depending on the missions assigned to the builder.

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What is a Construction Contract?

A construction contract agreement is a legal document that specifies the scope and parameters of a building project. It is a contract between the construction contractor and the person or company who employs them to conduct the work. The agreement should include multiple sections of clauses that define the project’s scope, terms, and conditions. This template will lay out their regular operating procedures, fees, and other terms.

Each agreement will be slightly different depending on the project, with changes made for scope of work, pricing, and other factors.

What is included in the Construction Contract?

Most contract agreements should have certain parts to safeguard both parties to the arrangement:

➤ Project description: This section describes the project in detail, including the main idea or explanation of the problem being addressed. It could be a list of items or just a paragraph.

➤ Contract price: The sort of contract price that has been awarded, as well as the overall amount of money being contracted, are stated, as are potential contract additions or deductions and how they will be released.

➤ Payment basis: This refers to how much money will be paid to the contractor on a weekly, monthly, or milestone basis. This section should also define how much money should be maintained on each payment application. It will also specify the due date, the penalty for late payments, if interest is charged, and any other payment and invoicing terms.

➤ Construction scope: The scope is a description of all construction operations that will be included in the project that is generally measurable or quantifiable.

➤ Conditions and obligations: The owner's and contractor's responsibilities, including who is accountable for producing paperwork, information, payments, or other deliverables, are written out so that the project can proceed on schedule.

Is a Construction Contract Agreement necessary?

A contract agreement safeguards the interests of both parties participating in building projects. It specifies the scope of your work, the payment terms, and the mechanisms for resolving disagreements.

Without a formal contract, any arguments or miscommunication about the project’s work, timetable, missed or late payments, or other issues could escalate into a big legal struggle. Both the property owner and the contractor may incur costs as a result of this.

A construction contract agreement protects everyone engaged in a construction project’s legal and financial interests. Neither the construction firm owner nor the property owner should agree to begin work without one.

When to use a Construction Contract?

A Construction Contract Agreement should be used if you are on either end of the process of building, renovating, or remodeling a building or structure. Perhaps you’ve finally decided to build your dream house and live happily ever after. Due to excessive contractor delays or unforeseen, expensive expenditures, happily ever after may have to wait.

Perhaps you are a local contractor looking to grow your business and take on larger construction projects. In any instance, develop a formal agreement to serve as the blueprint until construction is completed to smooth out the creases.

What are the different types of Construction Contract?

A construction contract will fall into one of the four types listed below:

1. Fixed price

The costs of the entire project are rolled into a single lump amount or fixed price in this sort of contract. While there may be additional incentives for finishing before the specified completion date, the client is only liable for paying the contract’s predetermined price.

2. Cost-plus

A cost-plus contract compels the client to pay for all project costs, including labor and materials. In addition, the client will be charged an additional cost to cover the contractor’s overhead and profit.

3. Time and materials

A time and materials contract specifies the contractor’s hourly or daily rate. Clients also agree to pay for any additional costs that may arise during the project and are characterized as direct, indirect, markup, or overhead in the contract.

4. Unit pricing

Unit pricing contracts divide the project’s costs into measurable units. This is usually done by the activities or scope of work and the supplies required to execute those jobs.

What are the advantages of building a house in Malaysia?

Here are some advantages to building your own home:

➤ A home design can be tailored to your preferences

➤ You can build a house for as little as RM100 per square foot or as much as RM300 per square foot

➤ Those who intend to expand the size of their home in the future may have to start from scratch. For example, suppose you want to add a fish pond to your property in the future and you already have a budget. You can already assign the land area for the desired fish pond during the early stages of house development

How to get a construction license in Malaysia?

A local or foreign entrepreneur who wishes to start a construction firm in Malaysia must apply for a CIDB license, with the understanding that if he or she does not comply, a punishment will be applied. When applying for a CIDB license in Malaysia, the following areas must be considered: building construction, civil engineering construction, and electrical and mechanical construction.

The CIDB license is valid for one to three years, however the document’s owners can renew the license when it expires. When applying for a construction license, a specified tax will be required based on the grade of CIDB schemes according to the established capacity.

The CIDB in Malaysia must be notified of the construction project’s worth, which cannot exceed RM 500,000,000 for foreign contractors based in the nation. In this case, the charge will be 0.125 percent of the registered construction project, and investors can get more information on this topic from our team of Malaysian company formation specialists.