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Construction Payment Agreement

Construction Payment Agreement Template for Malaysia

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Construction Payment Agreement

"I need a Construction Payment Agreement for a high-rise residential project in Kuala Lumpur, with monthly progress payments and a 5% retention sum, to be used between our company as the main contractor and three subcontractors starting March 2025."

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Document background
The Construction Payment Agreement is essential for managing payment obligations in Malaysian construction projects. It should be used whenever parties need to establish clear payment terms and procedures in construction contracts, particularly where the Construction Industry Payment and Adjudication Act 2012 (CIPAA) applies. The agreement addresses common payment issues in the construction industry, including progress payments, payment claims, certification procedures, and dispute resolution mechanisms. It is particularly relevant for projects involving main contractors, subcontractors, and developers, providing security and clarity in payment obligations. The document ensures compliance with Malaysian construction law while protecting the interests of all parties involved in the payment chain.
Suggested Sections

1. Parties: Identification of the contracting parties including full legal names, registration numbers, and addresses

2. Background: Context of the agreement, reference to main construction contract, and purpose of this payment agreement

3. Definitions: Definitions of key terms used throughout the agreement, including payment-related terminology

4. Payment Terms: Core payment obligations, amounts, and payment schedule

5. Payment Procedures: Detailed procedures for submitting and processing payment claims, including required documentation

6. Progress Payment Provisions: Terms governing progress payments, including calculation methods and certification requirements

7. Payment Timeframes: Specific timeframes for payment processing, aligned with CIPAA 2012 requirements

8. Default and Consequences: Consequences of payment default and available remedies

9. Dispute Resolution: Procedures for resolving payment disputes, including adjudication under CIPAA

10. General Provisions: Standard contractual provisions including notices, amendments, and governing law

Optional Sections

1. Security of Payment: Include when payment security mechanisms like bank guarantees or performance bonds are required

2. Set-off Rights: Include when parties want to explicitly address rights to set off payments against other obligations

3. Retention Money: Include when retention money is part of the payment structure

4. Early Payment Provisions: Include when there are incentives or discounts for early payment

5. Multiple Currency Provisions: Include when payments may be made in different currencies

6. Back-to-Back Payment Provisions: Include in situations involving main contractors and subcontractors

Suggested Schedules

1. Schedule 1 - Payment Schedule: Detailed breakdown of payment amounts, milestones, and due dates

2. Schedule 2 - Payment Claim Forms: Standard forms for submitting payment claims and supporting documents

3. Schedule 3 - Payment Response Forms: Standard forms for responding to payment claims

4. Schedule 4 - Project Details: Details of the construction project related to the payment agreement

5. Schedule 5 - Bank Account Details: Banking information for making payments

6. Appendix A - Main Contract Extract: Relevant payment-related extracts from the main construction contract

7. Appendix B - Performance Security Forms: Forms of any required payment security documents

Authors

Alex Denne

Head of Growth (Open Source Law) @ Genie AI | 3 x UCL-Certified in Contract Law & Drafting | 4+ Years Managing 1M+ Legal Documents | Serial Founder & Legal AI Author

Linkedin in social icon imageX social icon image
alex.den.21@genieai.co
Relevant Industries

Construction

Real Estate Development

Infrastructure

Commercial Property

Residential Development

Industrial Construction

Civil Engineering

Building and Construction Materials

Engineering Services

Project Management

Relevant Teams

Legal

Finance

Construction

Commercial

Procurement

Project Management

Contract Administration

Risk Management

Operations

Relevant Roles

Project Manager

Construction Manager

Contract Administrator

Quantity Surveyor

Finance Director

Commercial Manager

Legal Counsel

Project Director

Construction Director

Chief Financial Officer

Procurement Manager

Site Manager

Claims Manager

Industries
Construction Industry Payment and Adjudication Act 2012 (CIPAA): The primary legislation governing payment mechanisms in construction contracts, including payment terms, payment disputes, and adjudication procedures
Contracts Act 1950: Fundamental legislation governing contract formation, validity, and enforcement in Malaysia, including essential elements of a valid contract
Construction Industry Development Board Act 1994: Regulates the construction industry and sets standards for construction activities, including registration requirements for contractors
Limitation Act 1953: Sets time limits for bringing legal actions relating to contractual disputes and payment claims
Arbitration Act 2005: Governs arbitration proceedings in Malaysia, which is a common dispute resolution mechanism in construction contracts
Stamp Act 1949: Requires proper stamping of agreements to ensure their admissibility as evidence in court proceedings
Teams

Employer, Employee, Start Date, Job Title, Department, Location, Probationary Period, Notice Period, Salary, Overtime, Vacation Pay, Statutory Holidays, Benefits, Bonus, Expenses, Working Hours, Rest Breaks,  Leaves of Absence, Confidentiality, Intellectual Property, Non-Solicitation, Non-Competition, Code of Conduct, Termination,  Severance Pay, Governing Law, Entire Agreemen

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