PARTIAL POSSESSION BY EMPLOYER

WONG GENG SEN 0321690

JOANNE TEE SIN YI 0315689

THUN SHAO XUN 0315919

WHAT IS PARTIAL POSSESSION?

• Used part of the building before practical completion

• Clause 16.0: Employer wishes to take possession of certain sections of the works

before the whole Works is completed.

WHY PARTIAL POSSESSION?

• Business Pressure- Current demand and price is good so they

need to start business or production

• Commercial reasons- Works has been delayed so the need to

complete early, thus partial possession for some sections.

HOW TO TAKE PARTIAL POSSESSION?

• Under clause 16.0 employer must give a written notice of intention to

take partial possession to contractor, so that contractor can prepare

himself and focus the part of employer want to occupy.

1: Partial possession occur before practical completion.

2: The employer to identify part to be taken over.

3: The contractor have given his consent

• Contractor cannot unreasonably delay or withhold such consent

CONTRACTOR CONSENT FOR PARTIAL POSSESSION

• Clause 16.1 prohibits the Contractor from unreasonably

withholding or delaying consent. However, the Contractor is not

bound to give consent for partial possession.

• Reasons: Health and Safety Issue

Disturb the progress of work

Non-payment issue for work done

CERTIFICATE OF PARTIAL COMPLETION

• Clause 16.1(a): Architect must issue Certificate of Partial

Completion within 14 days of taking partial possession of the

Occupied Parts.

• Certificate of Partial Completion must include date of partial

possession. Layout plan is a must to identify or demarcate the

occupied part and estimated value of the occupied part

CONTRACTUAL EFFECTS OF PARTIAL POSSESSION

• Practical Completion: Practical completion of the Occupied Part

shall be deemed to have occurred on the date of taking over the

Occupied Part.

• Defects Liability Period (DLP): Commenced on the date of

practical completion of the Occupied Part by the Employer.

• Liquidated Damages (clause 16.1©): Liquidated damages shall

be reduced by the ratio of the estimated value of occupied part to

the contract sum.

EXAMPLE OF CALCULATION

• If Occupy part is RM2 Mil. Contract sum RM10 Mil. Liquidated

Damages RM1000/day

• New liquidated damage = 1000-(2/10x1000)

= 1000-200

= RM800 per day

• Liquidated damages of RM800 per day shall apply to the

remaining works

RETENTION SUM

• Clause 16.1 (d): Architect must issue a payment certificate to release the first moiety of the

retention fund in the ratio of the estimated value of the occupied part and must issue payment

certificate within 14 days after the issuance of the certificate of partial completion.

• Formula for retention sum: RP = VOP x R

CS

RP= the amount of retention to be released

VOP= estimated value of Occupied Part

CS= Contract Sum

R= Maximum Retention

EXAMPLE

• Retention sum (max) is RM500,000. Value of Occupied Part is

RM2,000,000. Contract Sum is RM10,000,000.

• Value of retention sum for Occupied Part is

2/10 x 500,000= 100,000/2 = RM50,000

• 1st moiety to be released = 100,000/2 = RM50,000

CERTIFICATE OF MAKING GOOD DEFECTS (CMGD)

• Clause 16.1(e): All defects in the Occupied Parts have been made

good, the Architect shall issue a CMGD

RELEASE OF SECOND MOIETY OF RETENTION

• 16.1 (f), the Architect shall issue a certificate for the release of

the remaining retention fund (second moiety) for the Occupied

Part within 14 days after the issue of CMGD of the same

Occupied Part.

ITEM NOT AFFECTED BY PARTIAL POSSESSION

• Work Insurance

• - Clause 20.A.1: Contractor shall keep such works so insured

notwithstanding any arrangement for partial possession.

• - Total sum insured of the above provision is that the parties

insurance obligations remain unaffected.

• - Respective parties remain obliged to insure and keep the

works insured to the full value , there being no reduction for

the value of the Occupied Part.

ITEM NOT AFFECTED BY PARTIAL POSSESSION

Performance Bond and Final Certificate.

• Clause 30.6 for Performance Bond does not indicate any deduction

or reduction of the bond value after partial possession.

• Clause 30.0 for Final Certificate are not affected by the partial

possession since there is only one Final Certificate issued.

• Hence, it can be inferred that both the Performance Bond and the

Final Certificate are to remain unaffected by the issuance of

Certificate of Partial Completion.

PARTIAL POSSESSION BY EMPLOYER (WITHOUT CONSENT)

• The employer may trigger breach of contract

• Restrictions on employer right to take possession without consent

• Clause 16.2: A provision which caters for the common practice where

the Employer does, or is forced to take over parts of the works before

practical completion without the Contractor’s consent.

RESTRICTIONS ON EMPLOYER’S RIGHTS TO TAKE PARTIAL POSSESSION WITHOUT

CONSENT• Employer has no absolute rights.

• Clause 16.2(a) may take partial possession provided three pre-

conditions are met:

i) The completion of Works have been delayed

ii) A Certificate of Non-Completion has been issued by

Architect under clause 22.1

iii) Partial possession do not unreasonably disturb the

regular and remaining work

EMPLOYER’S RIGHTS LIMITED BY THE CONTRACT

• Clause 16.2 “without prejudice to any other rights and remedies which

he may possess under the contract”

• Limit employer right to those under contract only

PROCEDURES FOLLOWING PARTIAL POSSESSION (WITH OR WITHOUT CONSENT)

• Clause 16.3: Govern the Contractor’s duties following partial possession by the

Employer, whether with or without contractor’s consent.

i) Contractor shall remove all facilities and equipment's from the occupied part

upon the receipt of AI

ii) Architect shall prescribe the time for removal from occupied part

iii) However contract silence on consequences of non compliance by contractor

and remedies of employer

iv) It is also silent on remedies available to employer for such non-compliance by

the Contractor.

QUESTION

QUESTION 1

• Explain the differences between Sectional Completion and Partial Possession in

PAM 2006.

ANSWER

SECTIONAL COMPLETION PARTIAL COMPLETION

Clause 21.3 Clause 16.1

Stated in contract documents (different sectional commencement date and different sectional completion date)

Not stated in contract documents

Architect to issue the Certificate of Partial Completion within 14 days of taking partial possession of the Occupied Parts

Architect to issue the Certificate of Sectional Completion when the sections of Works are Practically Completed.

happened before Signage of Contract

happened after Signage of Contract

ANSWER

ADDITIONAL QUESTIONS

• Architect shall issue the Certificate of Partial Completion within how

many days and under which clause?

ANS: Within 14 days of taking partial possession of the Occupied Parts.

Clause 16.1(a).

QUESTION 2

• Under What circumstance can the employer take partial possession of the site?

Please explain both partial possession with and without consent from the contractor

Employer can access partial possession when:

Business pressure – Demand and price is good, required to start work

Commercial reasons – Commencement date of works delayed.

Partial possession by employer with consent

To take partial possession:

- Before practical completion

- Give written notice

- Identify the part to be taken over

- Contractor given his consent

Contractor could not delay or withhold such consent

However, according to clause 16.1 the contractor may withhold consent when:

-Partial possession may give safety and health issues

-Material disrupt the regular work progress

-Non-payment issue for work done

ANSWER

Partial possession by employer without consent

The employer may trigger breach of contract

Restrictions on employer right to take possession without consent

Employer has no absolute right to take possession, unless it met three condition:

- Completion work has been delay

- Certificate of non-completion ahs been issue

- Partial possession do not unreasonably disturb the regular and remaining work

Employer right are limited by the contract

Clause 16.2 “without prejudice to any other rights and remedies which he may possess

under the contract”

Limit employer right to those under contract only

ANSWER

Procedure following partial possession (with or without consent)

Clause 16.3 govern the contractor duties following the procedures

- Contractor shall remove all facilities and equipment's from the

occupied part upon the receipt of AI

- Architect shall prescribe the time for removal from occupied part

- However contract silence on consequences of non compliance by

contractor and remedies of employer

ANSWER

ADDITIONAL QUESTIONS

What are the remedies if contractor does not give partial possession to

the employer?

ANS: - Determine the reason

- Claim for lose and expenses

QUESTION 3

• Explain the contractual implications of partial possession and the items not affected

by it.

ANSWER

Contractual effects of partial possession

a) Practical completion - Clause 16.1(b)

b) Defects liability period (DLP)- The DLP is deemed to have commenced on the date of practical

completion of the Occupied Part by the Employer

c) Liquidated Damages (LD) - Clause 16.1(c)

ANSWER

Items Not Affected by Partial Possession

a)Work Insurance

- Under Clause 20.A.1, 20.B.1 and 20.C.1

- The total sum insured of the above provisions is that the parties

insurance obligations remain unaffected

b) Performance Bond and Final Certificate

- Clause 30.6 for Performance Bond does not indicate any

deduction or reduction of the bond value after partial

possession

-Clause 30.0 for the Final Certificate are not affected by the partial possession

since there is only one Final Certificate issue

ADDITIONAL QUESTION

• Let’s say employer take possession on building A. 3 days later defects

appear on the building A ground floor. Does contractor have to liable

in this situation?

ANS: Contractor have to liable in this situation because once the

employer take the possession of the occupy building Defects Liability

Period Start.