Crucial conditions of domestic subcontract in Malaysian construction industry

Abstract

In construction industry, almost every construction project has to deal with construction contract, due to the project complexity and high financial risk. The contracts are developed and published by various associations and professional bodies and are widely used in the construction industry. Contract conditions are intended to specify the duties and rights of the contractual parties and must be properly drafted. Contractual parties under a particular contract must be aware of the details of the contract conditions. In Malaysian construction industry, there are several standard forms of main contracts and nominated subcontracts. However, for domestic subcontract, main contractors prefer to use bespoke contract, which the parties modify the standard contracts by omitting several clauses or adding new clauses; thus, potentially compromise the completeness and accuracy of the contract. Hence, the aim of this study is to examine the crucial conditions in the domestic subcontract commonly approached by main contractor in construction projects. A quantitative research method is adopted and the data have been collected by survey questionnaires. There are a total of 100 valid responses received from the construction industry practitioners in Malaysia. The survey objective is to rank the conditions in domestic subcontract from the most to the less important. As the result, the top 5 of relatively important domestic subcontract conditions, out of 27 conditions, are the terms of payment and final account, extension of time, variation, contractor’s and subcontractor’s obligations, and performance bond. The results of these surveys will enhance the contractual knowledge of main contractor and domestic subcontractor and improve awareness of crucial conditions that are prerequisite for the development of domestic subcontract.