Movement Control Order  (MCO)

 

FAQs

for contractors

We have prepared some MCO Frequently Asked Questions (FAQs) for you, our esteemed clients. We hope that these information will be helpful during this extraordinary time. 

1. The information in this page shall not be constituted as legal advice. Every contract and project turn on their own distinct facts and circumstances. Please contact us (see bottom of page) if you require specific legal advice. 

2.. This FAQs seek to provide general answers to some of the questions that you may have. For answers specific to your contract/project/works, please contact us through e-mail.

3. We will update this page as we gather more information. 

Is the contractor automatically granted Extension of Time (EOT) for the period of the CMO?

 

The short answer is 'no.' Be pro-active and write in to apply for EOT immediately in accordance with the contract. DO NOT wait. Most construction contracts requires you to apply for an EOT within a certain period of time from the occurrence of a "relevant event". In this case, the announcement and implementation of the CMO on 16.3.2020 would be the occurrence of a "relevant event".  The failure to apply for EOT within the period stipulated in the contract may disentitle you to EOT. 

 

Can the SO or employer order the works of a contractor to be suspended? If so, what are the consequences? 

Yes. This is usually expressly provided in the Contract. The SO or employer may give an instruction for works to be suspended for a certain period. Standard forms of contract such as the Pertubuhan Arkitek Malaysia (PAM) Standard Form of Contract 2006 also provides for a maximum period of suspension (3 months). 

 

If suspension is instructed, this means that works are to be suspended, and the contractor is entitled for EOT (an application is required to be made, for example, under clause 23.8(w) of the PAM 2006 Contract). The contractor cannot terminate the Contract or insist on payment for works done during the period of suspension. During the period of suspension, the insurance policy taken out for the works is to be maintained. 

Depending on the contract, the contractor may be allowed to claim for loss and expense. 

 

Can the employer / main contractor instruct contractors to continue with works during the CMO? 

No. The Government policies and laws will prevail over any directions to proceed with works (whether contractual or otherwise) from the employer or superintending officer (SO). 

 

Furthermore, a clause requiring the contractor to abide by the laws, rules and regulations is usually already provided in the Contract. 

 

If the suspension of works is not instructed, what would be the ground/event to justify an EOT application?

 

You may rely on the "force majeure" clause, if such a clause is stipulated in the contract. A force majeure is an exceptional event or circumstance that happens beyond the control and expectation of the parties, preventing one of more parties to the contract from performing their contractual obligations. Sometimes, it is just referred to as an "act of God". Examples of  force majuere are wars, natural disasters such as earthquakes and tsunamis, and in our case, the MCO due to the outbreak of Covid-19. In some contracts such as the PAM Standard Form of Contract, force majeure is specifically provided for as a relevant event to which EOT may be applied for. It should be noted that whether the MCO is a force majeure event as provided for in a contract would depend on how the clause and contract is drafted. Furthermore, if the contract entered is for works related to "essential services", the parties cannot rely on a force majeure clause because parties are not prevented from performing the contract during MCO.

 

Where there is no force majeure clause in a contract, parties may rely on section 57 of the Contracts Act 1950. Section 57 provides that 'A contract to do an act which, after the contract is made, becomes impossible, or by reason of some event which the promisor could not prevent, unlawful, becomes void when the act becomes impossible or unlawful.' In the case of MCO, we may argue that the enforcement of the MCO had made undertaking works during the operation of MCO to be unlawful, and hence the part of the contract requiring parties to do so during the period of MCO is void. 

 

Having said all of the above, whether the contractor may rely on one or another event to justify an application for EOT large depends on what is written in the contract. We at Siong & Rita are happy to review your contract and advise you on how to draft an application for EOT. Just e-mail us your queries or legal needs. 

Can I continue with my works on the basis that my works are "essential services"? 

Under the Prevention and Control of Infectious Diseases (Measures within the infected local areas) (No.2) Regulations 2020, if your works are a type of service which fall under the category of "essential services", you may continue with the works provided that the personnel within the site is kept to the minimum. However, if your works is construction in nature, your works are NOT "essential services".  

Under the Schedule to the Regulations, "essential services" include electricity and energy, production, refining, storage, supply and distribution of fuel and lubricants, sewerage, radio communication, transport, defence and security, and hotels and accommodation. 

Are there any type of construction work that is allowed to carry on? 

Construction works classified as "critical works" may carry on. Critical works are works that, if not carried on, may pose danger to workers, public and the environment. One example would be repairing a bridge or traffic management control. 

 

However, an application must be made to the Department of Occupational Safety and Health (DOSH). The application procedure may be found here

  

Do I need to pay my employees during the MCO?

The Malaysian Bar has prepared a circular to answer FAQs relating to employment during MCO. Please download a copy of the circular here.

 

Do you have other legal questions on the MCO?

Do contact us and we will be happy to answer all your queries. 

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