MUTUAL TERMINATION OF CONTRACT INCONSTRUCTION PROJECTS - Master of Science(Construction Contract Management) Thesis

Sep 16, 2026

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In a construction market facing sharp increases in material costs, termination becomes a key concern for contracting parties, especially contractors who underestimated costs during a project lifecycle. The study explains how a mutual termination clause allows parties to end an existing contract and mutually release one another, including pending claims. Under the Contract Act 1950, discharge can occur by mutual consent under clauses 63 and 64, rescinding the principal contract. The agreement may still lead to disputes that require court adjudication.

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MUTUAL TERMINATION OF CONTRACT INCONSTRUCTION PROJECTS

ACKNOWLEDGMENTS

ABSTRACT

ABSTRAK

# MUTUAL TERMINATION OF CONTRACT INCONSTRUCTION PROJECTS AWANG MUHAMAD BIN HJ.JAMBOL A project report submitted in partial fulfillment of therequirement for the award of the degree ofMaster of Science(Construction Contract Management) Faculty of Built EnvironmentUniversiti Teknologi Malaysia AUGUST 2011 ## ACKNOWLEDGMENTS This master project can be completed successfully due to the contribution of manypeople.First of all,I would like to express my highest gratitude to my supervisor,Dr.Nur Emma Mustaffa for her encouragement,patience,guidance,advice,critics,support and friendship in order to complete this master project. Next,I would like to thank all the lecturers for the course of Master of Science(Construction Contract Management),for their patience and kind advice during theprocess of completing the master project. Besides that,I am deeply grateful to my family for their unconditional love and carethroughout the years.Unforgettable,I would like to thank to my beloved wifeShahiza binti Musa and my sons Muhammad Haziq Nifail and Muhammad HaziqDarwish who has given me full support during this study. I am also indebted to Jabatan Perkhidmatan Awam(JPA)Malaysia for funding myMaster study.Jabatan Kerja Raya(JKR)Malaysia and Pasukan Projek LebuhrayaPantai Timur Fasa 2 (LPT2)also deserve special thanks for their corporation andassistance in supplying the relevant literatures.My fellow postgraduate studentsshould also be recognised for their support.My sincere appreciation also extends toall my colleagues and others who have provided assistance at various occasions.Their views and tips are useful indeed.Unfortunately,it is not possible to list all ofthem in this limited space. Awang Muhamad bin Hj.Jambol August,2011 ## ABSTRACT In the present climate where the construction industry is facing an unprecedented risein the cost of construction materials,the issue of termination is sometimes foremoston the minds of the contracting parties,especially contractors who have not properlyestimated the costs during a project lifecycle.Introduction of the mutual terminationclause is intended for use by the parties to an existing contract who may wish totenminate the contract and release each other from the contract.Under this form,theoriginal contract is terminated and the parties enter into a mutual release of thecontract as well as of any claims that may be pending by one party against the other.Under the Contract Act 1950,the contract may be discharged by mutual consent ofcontracting parties according to clause 63 and 64 of the Act.A contract may bedischarged by an agreement that it shall no longer bind either party.As it is theiragreement which binds the parties,so by their agreement they may be loosed fromthe contractual tie.Mutual termination agreement unequivocally stated that theparties agreed to a mutual termination subject to the terms and conditions set outtherein.The effect of this is that the principle contract is thereby rescinded and theparties thereon are bound by the terms and conditions of the mutual terminationagreement.Henceforth,if any claim should arise between the parties it is governedby the mutual termination agreement and not by the principle contract which hadexpressly been rescinded by mutual consent.A termination by mutual consent is anagreement between employer and the contractor to cease work under the contract.Even though in the mutual termination agreement it is clearly stated that thecontractor is not entitled or shall not make any claim or demand for any payment,loss,damages,compensation or whatsoever against the client,however in certaincircumstances,the disputes still arise and need to be brought to the court for finaljudgement. ## ABSTRAK Dalam situasi masa kini,dimana industri pembinaan mengalami kenaikan terhadapharga bahan binaan utama,isu penamatan menjadi keutamaan di dalam pemikiranpihak-pihak yang berkontrak terutamanya kepada kontraktor yang telah tidakmembuat anggaran kos y

FAQs

What is the purpose of a mutual termination clause in construction contracts?

It allows the parties to an existing contract to terminate the contract by mutual consent and release each other from contractual obligations and any pending claims.

How can a contract be discharged under the Contract Act 1950?

A contract may be discharged by mutual consent of contracting parties according to clauses 63 and 64, or by an agreement that it will no longer bind either party.

If a mutual termination agreement states no payment claims, why can disputes still occur?

Even though the agreement may exclude claims for payments, losses, damages, or compensation, disputes can still arise in certain circumstances and may need to be taken to court for final judgment.

Sep 16, 2026

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