Addressing Debtor Excuses: Handling 'I Haven't Been Paid' Claims in Malaysia

In the world of debt recovery, one common excuse offered by debtors is, "I haven't received payment from my own customer, so I can't pay you yet." This excuse, while frequent, lacks legal standing in most contexts.

In the context of Construction debts; under the Construction Industry Payment and Adjudication Act 2012 (CIPAA) in Malaysia, such excuses are explicitly prohibited. 🚧 CIPAA aims to facilitate regular and timely payment in the construction industry and provides that “pay when paid” clauses are void. This means that a contractor cannot delay payment to their subcontractor simply because they have not been paid by their own client.

As per Section 35 of CIPAA:

"Any conditional payment provision in a construction contract in relation to payment under the construction contract shall be void." 🚫

This provision ensures that all parties in the construction chain receive timely payment, maintaining cash flow and preventing cascading payment delays. The courts have upheld this principle, emphasizing that each party's payment obligation is independent of the other's payment receipt.

In other sectors, while similar statutory protections may not exist, the general principle remains that a debtor’s obligation to pay is not contingent on their own receipt of payment from another party. Contractual obligations are typically binding and enforceable regardless of external payment issues.

This excuse, therefore, is not legally valid and should not be accepted as a reason for delayed payment.

AUTHOR PROFILE

Rudi Cheu is the principal of Rule & Co. Advocates & Solicitors; a Malaysian law firm focusing on practical and cost-effective solutions for debt recovery and commercial disputes. With nearly a decade of debt recovery experience under his belt; Rudi is passionate about helping businesses navigate debt recovery challenges and shares insights at www.rulecolaw.com/blog and recoverdebt.my

He can be reached via Whatsapp: +60102028095 or via email: rudi@rulecolaw.com