CIPAA helps alleviate cash flow issues faced by many contractors
01.
Because CIPAA is quick and cost-effective, it helps to alleviate the cashflow issues faced by many contractors who are unpaid. CIPAA also renders all back-to-back payment arrangements to be void, so that the provisions of CIPAA cannot be circumvented.
03.
By resolving construction payment disputes in Malaysia quickly, CIPAA enables contractors and subcontractors to continue work with minimal disruption. This protects project timelines and helps avoid work stoppages that would otherwise occur due to cash flow issues.
02.
Once a decision is made pursuant to CIPAA, that decision is immediately binding. The winning party can enforce the CIPAA decision by applying to register it in the High Court, slowing-down or suspending their works without penalty, or even seek payment from the principal if there is any amount owing (applicable to sub-contractors seeking direct payments from employers).
In addition, non-compliance with a CIPAA decision may lead to enforcement actions such as court execution proceedings, garnishee orders, or winding-up petitions.
04.
CIPAA enforcement introduces legal consequences for non-payment, which deters parties from withholding payment without valid reasons. This encourages quick payment dispute resolution in Malaysia, as well as, fair practices and accountability across the construction industry supply chain.
All in all, CIPAA can be seen as a substantial help for all contractors who have previously faced difficulty in collecting their payments.
FAQs on CIPAA in Malaysia
CIPAA applies to all construction contracts (whether oral or written) relating to construction work carried out wholly or partly in Malaysia.
It can be invoked by:
- Main contractors and subcontractors.
- Construction consultants and quantity surveyors.
- Suppliers of construction materials.
- Specialist service providers in engineering, electrical, or mechanical works.
The Construction Industry Payment and Adjudication Act does not apply to construction contracts entered into before its implementation on April 15, 2014.
CIPAA does not apply to construction contracts entered into by individuals (natural persons) for work on buildings under four storeys that are wholly intended for personal use. For example, a contractor cannot file a CIPAA claim against the owner of a three-storey bungalow built for personal occupation in the event of non-payment.
Further, CIPAA 2012 does not apply to matters involving claims for overpayment claims and loss of profit as these can be pursued in Court or Arbitration.
This ensures that the Act remains focused on resolving payment disputes within the construction supply chain, where delayed payments are most common.
Anyone involved in a construction contract in Malaysia—including contractors, subcontractors, consultants, or suppliers—can initiate a CIPAA claim if they are owed payment under the terms of the contract.
Typically, the entire process takes around 100 working days, from notice of adjudication to final decision. This includes appointment of the adjudicator, exchange of submissions, and issuance of the decision.
CIPAA decisions are binding unless and until they are overturned by arbitration or court. This means payment must be made even while a party pursues further legal action.
The winning party can enforce the decision by registering it with the High Court and initiating execution proceedings such as seizure of assets or garnishee orders.
CIPAA only applies to contracts for construction work carried out in Malaysia, regardless of whether the contractor is foreign or local.