Liquidated and ascertained damages (LAD) refer to a pre-arranged sum of money that the contractor of a construction project is required to pay the employer if they fail to complete the project within the agreed-upon timeline. It is a common clause in construction contracts in Malaysia and is intended to protect the employer against any delays caused by the contractor.
The LAD clause is typically included in the contract to provide the parties involved with a clear and agreed-upon amount of compensation in case of delays. This helps to avoid any disputes that may arise between the contractor and owner. It is important to note that LAD is not a penalty, but rather an estimate of the damages that the employer is likely to suffer as a result of the delay.
In Malaysia, the LAD clause is governed by the Construction Industry Payment and Adjudication Act 2012 (CIPAA). According to the act, the employer may claim LAD from the contractor in the event of a delay in the completion of the project. It is crucial to note that the LAD amount must be reasonable and proportionate to the estimated losses incurred by the employer as a result of the delay.
The LAD clause must be clearly defined in the contract, including the LAD rate, the period of delay, and the maximum amount of LAD that can be claimed. The period of delay is typically calculated from the date of completion specified in the contract to the actual completion date. The LAD rate is usually expressed as a percentage of the contract value and ranges from 0.1% to 1% per week of delay. The maximum amount of LAD that can be claimed is typically set at a cap of 10% of the contracted sum.
It is essential for the contractor to adhere to the agreed-upon timeline to avoid any LAD claims. However, in the event of delays caused by events beyond their control, such as adverse weather or unforeseen circumstances, the contractor may be entitled to an extension of time. This must be agreed-upon by both parties, and the LAD clause adjusted accordingly.
In conclusion, the LAD clause is a crucial aspect of construction contracts in Malaysia. It provides the parties involved with a clear understanding of the consequences of any delays and helps to avoid any disputes that may arise. As a professional, it is important to ensure that articles on this topic are well-researched and informative, providing readers with a comprehensive understanding of the LAD clause and its implications.