How to Handle a Non-Performing Contractor: Legal Advice from Construction Lawyers in Malaysia

BY MESSRS LUI BHULLAR

How to Handle a Non-Performing Contractor – Legal Steps You Can Take

Delays, defects, or project abandonment by contractors can severely impact your construction timeline, cash flow, and overall project delivery. If you're dealing with a non-performing contractor, knowing your legal rights and the steps you can take is critical to minimizing further losses and ensuring accountability.

In this article, our construction lawyers explain what constitutes non-performance, what legal remedies are available, and how a construction law firm can help you take decisive action.

What is Considered Non-Performance?

A contractor may be deemed non-performing if they:

• Fail to meet agreed construction milestones

• Deliver defective workmanship or use substandard materials

• Delay progress without justification

• Abandon the site altogether

• Breach key terms in the contract

These issues often lead to delay and extension of time disputes in construction, or worse — costly litigation or halted developments.

Step 1: Review the Construction Contract

The first step is always to refer to your contract. A well-drafted agreement should outline:

• The scope of work and timeline

• Liquidated damages for delay

• Termination clauses

• Dispute resolution mechanisms

This is where a construction contract lawyer can assist — by reviewing the agreement and advising you on how to enforce your rights or terminate the contract safely.

Step 2: Issue a Notice to Remedy

Under most construction contracts (e.g., PAM, PWD, CIDB), you must issue a formal notice to the contractor, giving them an opportunity to rectify the breach within a specified period.

If the contractor fails to comply, this could trigger your right to:

• Impose liquidated and ascertained damages (LADs)

• Suspend further payments

• Terminate the contract

Step 3: Engage in Dispute Resolution or Adjudication

If the issue persists, you can escalate the matter through:

1. CIPAA Adjudication

The Construction Industry Payment and Adjudication Act (CIPAA) 2012 allows fast-track adjudication for payment disputes in construction. Whether you are claiming unpaid sums or defending against unsubstantiated charges, a construction claims and adjudication expert can assist you.

2. Arbitration or Court Litigation

In more complex or high-stakes cases, arbitration or litigation may be necessary — especially for defects, negligence, or repudiatory breach.

Engaging a construction dispute lawyer ensures that your interests are professionally represented.

Step 4: Terminate and Engage a Replacement Contractor

If all else fails, and the contract allows for it, you may terminate the contractor and appoint a replacement. However, this must be done carefully:

• Termination must follow the exact process in the contract

• You should quantify the outstanding work and damages

• Evidence should be preserved for future claims

Poorly executed terminations may expose you to counterclaims — so it's advisable to get legal advice for contractors and developers before proceeding.

Step 5: Claim Damages or Recover Losses

Once the project is completed (either by you or a replacement contractor), you may have the right to recover:

• The cost of engaging a new contractor

• Delay-related losses

• Rectification costs for defective work

With the help of a construction law firm, these claims can be filed through adjudication, arbitration, or civil litigation depending on the contract terms and project complexity.

When to Engage a Construction Lawyer

You should speak to a construction lawyer in Malaysia if:

• The contractor has delayed works without proper justification

• There are serious defects in the completed work

• The contractor is demanding extra payment without basis

• You're unsure whether you can terminate the contract safely

• A dispute has escalated into a formal adjudication or lawsuit

Conclusion

Handling a non-performing contractor requires a careful balance of legal strategy, contractual enforcement, and timely action. Delays and defects are serious risks in any construction project — but with the right legal guidance, they can be managed effectively.

Our team of experienced construction lawyers provides tailored legal advice for contractors and developers, including help with construction claims and adjudication, payment disputes, and delay-related issues. If you're facing challenges with a non-performing contractor, contact our construction law firm today for a confidential consultation.

Need Advice on Construction Law in Malaysia?

Speak to a trusted construction dispute lawyer in Malaysia and protect your project from further damage.

📞 Contact Messrs Lui & Bhullar today for a Free consultation.

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