Page 54 - Interactive report Ar Site Practice

THE MAIN BENEFITS OF LADS ARE THAT:

They become payable upon the occurrence of the specified breach and the employer is
not required to prove that it has suffered any loss;

They provide commercial certainty for both parties and they effectively act as a cap on
the contractor's liability for the specified breach;

They reduce the need for costly and time-consuming court proceedings (or other dispute
resolution mechanisms) to ascertain whether general damages are payable and the level
of such damages; and

They act as an incentive for the contractor to desist from committing the specified
breach.

LAD is an important part of construction law in Malaysia, as it helps to avoid unnecessary
disputes around project overruns.

By agreeing in advance what that cost might be, it provides clarity to both employers and
contractors on the financial cost of a project overrun.

On the side of the employer, it means they’re confident that they won’t lose out
financially if the project does go beyond its agreed completion date.

The agreed contract means that at the point where this claim crystalizes, it is already
contractually agreed by both parties.

From a contractor's point of view, they understand in advance what the costs to their
own business will be if they fail to deliver on time. That provides a clear financial
calculation as to the potential cost of overruns.