The COVID-19 outbreak has affected a lot of people. Events were cancelled, various works had to be stopped, and many could not proceed with business as usual. As the inability to perform one’s contractual obligations arose from circumstances beyond anybody’s control, Parliament passed the COVID-19 (Temporary Measures) Act (“TMA”) on 7 April 2020 partly to minimise legal liabilities that will be incurred as a result of non-performance.
When will you be entitled to relief?
The relief provided by the TMA is available to you if your business is a party to a scheduled contract, with obligations to be performed on or after 1 February 2020, and you are unable to perform these obligations because of COVID-19. You must also serve a notification for relief on all other parties to the contract and all guarantors for your obligation in the contract before you can claim for relief.
Your company has a scheduled contract if the contract is:
- A contract for the grant of a loan facility by a bank or a finance company, which is secured against any property located in Singapore;
- A construction contract or supply contract, or a performance bond in such contracts;
- A hire-purchase agreement, where the good hired or sold under the agreement is either a plant or machinery to be used for business purposes or a commercial vehicle;
- An event contract;
- A tourism-related contract; or
- A lease or licence of non-residential property
What relief will be provided?
During the prescribed period (the next six months following 8 April 2020, subject to possible extensions), no party will be able to do the following after a notification for relief is issued:
- Commencing or continuing an action in court against your company or your guarantors;
- Commencing or continuing arbitral proceedings;
- Enforcing any judgement or arbitral award;
- Enforcing any security over all immovable property (e.g. land) and movable property used for business purposes (e.g. plants and machinery);
- Applying for insolvency proceedings, including:
- Convening a creditors’ meeting to approve a scheme of arrangement
- Judicial management
- Winding up your company or the company’s guarantors
- Bankruptcy applications against you or your guarantors
- Appointing a receiver or manager over secured property
- Repossessing any property under a hire-purchase agreement
- For leases or licenses or non-residential property:
- Terminating the lease or license over non-payment of rent;
- Exercising any right of re-entry or forfeiture.
These restrictions will be effective until the end of the prescribed period unless you withdraw the notification of relief.
If you have a construction contract or supply contract, you may also apply to the issuer of the performance bond to extend the date of expiry of the performance bond. In addition, the period between the date of performance and the end of the prescribed period will be disregarded when calculating liquidated damages to be paid for any delay in performance.
If you have an event contract or tourism-related contract, any deposit you have paid cannot be forfeited unless an assessor determines that the forfeiture of the deposit is appropriate in the circumstances of your case.
The relief provided by the TMA will not preclude any party from commencing an action pursuant to the Frustrated Contracts Act or a force majeure clause in the contract.
What should you do?
Firstly, if you have a scheduled contract and are unable to perform your contractual obligations because of the COVID-19 outbreak, you should serve a notification for relief on all other parties involved in the contract immediately. You need not be concerned with whether other parties have made demands for performance because this notification will be effective regardless.
If you are unsure with whether your situation entitles you to relief, you may apply to the Registrar to appoint an assessor to determine whether you can claim relief. Your application must be served on all other parties to your contract.
Secondly, if you have a performance bond in relation to a construction or supply contract, apply to the issuer of the bond for an extension of the date of expiry. This application must be done at least seven days before the date of expiry and
Thirdly, if it is now impossible for your contract to be performed, then you may have a frustrated contract. If you have paid money pursuant to the contract, then you may recover the same amount unless the other party has made expense while performing his contractual obligations. Conversely, if you have received money, be prepared to repay that sum to the other party. Alternatively, if there is a force majeure clause providing for remedies when the contract cannot be performed, you may seek to enforce that clause.