(1) Performance bonds in construction-related contracts
If you are a party to a construction or supply contract entered into before 25 March 2020, you may have been required to procure a performance bond issued by a financial institution or an insurance company. As a result of COVID-19 and the resulting Circuit Breaker measures, you may have been unable to carry out construction works or supply goods and/or services on or after 1 February 2020. You may thus be concerned with the prospects of the other party calling on the performance bond over your failure/inability to perform your contractual obligations.
To avoid such a situation, you may apply to the issuer of the performance bond (ie. the financial institution /insurance company) to extend the date of expiry of the performance bond.
To apply for such an extension, you must first make sure that you have duly served your Notification for Relief (‘NoR’) on the issuer of the performance bond and any other party/parties to your contract. If applicable, you must also serve the NoR on any of your guarantor or surety. After that, you should check with the issuer of the performance bond whether any further steps need to be taken to apply for an extension. You must also serve a notice of the application for extension to the other party/parties at the same time. Do note that you must complete all the required steps in applying for an extension at least 7 days before the date of expiry of the performance bond.
Once all these steps have been complied with, the term of the performance bond would be extended to a date that is mutually agreed by all parties to the contract and the issuer of the performance bond. If no such agreement is reached, the default date of expiry of the performance bond would be 7 days after the end of the prescribed period (ie. 26 October 2020.)
In addition, once the NoR has been served, the period between the due date of performance and the end of the prescribed period (19 October 2020) would be disregarded when calculating liquidated damages to be paid for any delay in performance. It is thus
imperative to serve the NoR early.
Evidence that an inability to perform a contract between 1 February 2020 and 19 October 2020 is to a material extent caused by a COVID-19 event operates as as a defence to claims for breach of contract during the aforementioned period.
(2) Tourism-related contracts and event contracts
If you have entered into an event contract (eg. for hosting your wedding) or tourism-related contract, you may have paid a deposit to secure a venue and timeslot. However, the event for which you booked the venues may have to been cancelled/postponed due to the halt in tourist arrivals and/or the Circuit Breaker measures in place, and you are thus unable to
perform your remaining obligations. In such an event, any deposit that you have paid cannot be forfeited by the other party (usually hotels/restaurant upon you duly serving the Notification of Relief (NOR) on them, unless the NOR is subsequently withdrawn or an assessor determines that the forfeiture of the deposit is appropriate in the circumstances of your case. If the deposit has already been forfeited prior to the service of the NOR, the other party would be required to restore the deposit as soon as practicable.
You would also not be required to pay any cancellation fee if you are able to show that the inability to continue performance of your obligations under the event contract/tourism- related contract between 1 February 2020 and 19 October 2020 was materially caused by a Covid-19 event.