DAMAGES FOR NON

COMPLETION
Professional Practice II
QSD389
INTRODUCTION

• The obligation of contractor is to complete the

works within a stipulated time or within extended
time granted.
• Otherwise he will be issued with Certificate of
Non-Completion
• Contractor has to compensate the employer for
the loss incurred due to the delay in completion.
NON-COMPLETION

• Definition – the situation where the works do not reach practical

completion within the contractual completion date.

 CCMGD
 Works completed
Site possession  Final Payment &
 CPC
Final Account

Contract period DLP

• The work are not completed by the completion date – it is called

non-completion and this leads to the delay in completion of the
work.
NON-COMPLETION

Works not completed on

Site possession Works completed  CCMGD
completion date
 C.P.C.  Final Payment &
 C.N.C.
Final Account
L.A.D

Contract period Delay DLP

CONSEQUENCES OF DELAY

Extension of time – if the delay is

not due to the contractors faults

DELAY
Determination – if Liquidated and ascertained
delay is serious and damages – if delay is caused
caused by contractor by contractor
CERTIFICATE OF NON-COMPLETION

• The S.O. is to issue a Certificate of Non-Completion to certify

that the contractor has failed to complete the job on time.
• No exact date of issuance - normally issued on the
completion date
• The Certificate of Non-Completion is a condition precedent
to deduction for L.A.D.
PROCEDURE OF ISSUING CERTIFICATE OF
NON-COMPLETION

Completion Date

Contractor can contest S.O.’s

decision through Arbitration Joint inspection of works by
employer, S.O and contractor

NO
Issuing of Certificate of Non- Practical
Completion Completion

1. Contractor to proceed with
the work until completion
2. Contractor will be imposed
with L.A.D during delay
YES
Issuing of Certificate of
Practical Completion
EFFECT OF THE ISSUANCE OF CERTIFICATE OF
NON-COMPLETION

• The employer is entitled to be compensate for all losses

suffered by him for the delay beyond the contractual
completion date.
• The amount of L.A.D. to be paid to the employer is
calculated based on the rate stated in the Appendix.
• Damages cover any period between the completion date
and the date of C.P.C.
 DAMAGES FOR NON-COMPLETION
Liquidated and Ascertained Damages (LAD)
• The contractor is liable in damages (LAD) in the event of late
completion.

A pre
determined
amount

Liquidated
and
Ascertained
An
A fixed Damages
agreed
amount amount
 DAMAGES FOR NON-COMPLETION
Computation of LAD
a) Based on the loss of income by the employer
• This method is normally applicable to small projects that provide revenue to
the employer.
• The damages may be taken as equal to the estimate amount of rental of the
building
• Example:
Assumption: Rental rate = RM20,000/month
Period of delay = 20 days
Rate of LAD = RM20,000.00 = RM666.67 / Day
30 days
Amount of Liquidated Damages = RM666.67 x 20 days
= RM13,333.40
DAMAGES FOR NON-COMPLETION
Computation of LAD (Cont’d)
b) Based on all factors that contribute to the total loss incurred by the
employer
• This is normally applicable to bigger projects that provide revenue to the
employer.
• This method is more comprehensive and include such factors as Financing
charges, Loss of income and Prolongation Cost.
 DAMAGES FOR NON-COMPLETION
Computation of LAD (Cont’d)
c) Based on the cost of providing finance for the contract works.
• i.e., the interest on the loan to be paid by the employer
• This method is normally applicable to non-making profit concern. i.e. for
projects that do not provide revenue to the employer such as schools,
mosques, clinics, etc.
• It is difficult to determine what real damage is – that’s good reason for
liquidating the damages.
• Percentage of L.A.D. = Prime Rate/365 days
• This prime rate may be obtained form any commercial bank in the area
where the project is situated.