SINGAPORE LEADS THE CHARGE IN LEGISLATING RELIEF FROM CONTRACTUAL NON-PERFORMANCE DUE TO COVID-19 – WHO WILL FOLLOW?
The COVID-19 pandemic has brought unprecedented and unforeseen socioeconomic challenges. Huge numbers of businesses and individuals now face the risk of being unable to fulfil contractual obligations due to disruptions associated with the pandemic. In many jurisdictions there have been calls for governmental action to address the legal consequences of this disruption. In one of the boldest moves yet, the Singapore government, on 7 April 2020, passed the COVID-19 (Temporary Measures) Act 2020 to provide temporary relief to certain businesses and individuals who are unable to fulfil their contractual obligations due to COVID-19.
In this article we summarise the provisions of this unprecedented piece of legislation, focusing particularly on those measures directed at construction and supply contracts, and discuss whether the Singapore government’s approach could be a model for other countries around the world.
Key provisions of the Act
At the heart of the Act is Section 5, which imposes a temporary moratorium on legal actions relating to a party’s inability to perform obligations under certain scheduled contracts where such inability is, to a material extent, caused by COVID-19.
Scheduled contracts include construction contracts and supply contracts for construction works, performance bonds granted pursuant to a construction or supply contract, certain loan facility contracts secured against commercial or industrial immovable property or plant and machinery located in Singapore, certain hire purchase agreements, event contracts, tourism-related contracts, and leases or licences of non-residential immovable property. The scope of the Act has remained under review and, on 13 May 2020, the Singapore Ministry of Law announced that the Act will be extended to two new types of contracts: (i) options to purchase; and (ii) sale and purchase agreements or agreements for lease for residential property.
Importantly, the moratorium applies: (i) only to scheduled contracts entered into before 25 March 2020; (ii) to a ‘subject inability’, being an inability to perform an obligation due for performance on or after 1 February 2020 where the inability is to a material extent caused by a COVID-19 event, as defined in the Act; and (iii) only if the affected party has served a notification for relief to its counterparty, any guarantor or surety, or other persons as prescribed.
Jul-Sep 2020 issue
Ashurst ADTLaw