Loss and Expense Claims in a Construction Contract Malaysia

Construction projects are often complex and involve multiple parties and a variety of risks. Despite careful planning and execution, unexpected circumstances can lead to additional costs and delays. In such situations, loss and expense claims can be made under the terms of the construction contract. In this article, we will discuss the key aspects of loss and expense claims in a construction contract in Malaysia.

What are Loss and Expense Claims?

A loss and expense claim is a request made by a contractor to the employer for additional payment to compensate for losses and expenses incurred as a result of circumstances beyond the contractor`s control. These may include variations to the scope of work, delays, disruptions, or unforeseen events such as adverse weather conditions or changes in regulatory requirements.

Under the Malaysian construction contract, loss and expense claims are usually made through the contractual mechanisms of the contract, including the variations clause and the relevant provisions for extensions of time. It is important to note that while a contractor is entitled to claim for additional payment, they must provide sufficient evidence to demonstrate that the losses and expenses were caused by circumstances out of their control.

How are Loss and Expense Claims Calculated?

To determine the value of a loss and expense claim, the contractor must provide a detailed breakdown of the additional costs incurred, including direct costs such as labor, materials, and equipment, and indirect costs such as overheads and lost productivity. This should be supported by records and evidence tracing the additional expenses, such as receipts, invoices, and time sheets.

The contractor should also provide a detailed analysis of the impact of the event causing the loss and expense, including the duration of the delay, disruption, or variation, and the effect on the overall project program. This information is used to calculate the value of the claim, which is subject to negotiation with the employer or their representatives.

Dispute Resolution Mechanisms

In the event of a dispute over a loss and expense claim, the contract usually provides a mechanism for resolving the matter, such as arbitration or mediation. The parties are encouraged to engage in good faith negotiations to resolve the dispute amicably before resorting to these mechanisms.

It is important for contractors to understand the dispute resolution mechanisms contained within their construction contract and to ensure that they comply with any relevant procedures and timeframes to avoid prejudice to their rights.

Conclusion

Loss and expense claims are an essential part of any construction contract in Malaysia. Contractors must understand the contractual mechanisms for making such claims, including the requirements for evidence and how claims are calculated. They must also be aware of the dispute resolution mechanisms contained within their contract to ensure that their rights are protected. By doing so, contractors can minimize their risks and maximize their entitlements to additional payment in circumstances beyond their control.