Increased measures to preempt the spread of coronavirus (COVID-19) in Singapore may cause disruption to commercial contracts, as parties unable to perform their obligations could invoke force majeure.
The Singapore prime minister announced on 3 April the implementation of an elevated set of measures to significantly reduce movements and interactions in public and private places, and to put in place a “circuit breaker” to preempt the trend of increasing local transmission of COVID-19. These heightened measures are likely to cause further disruption to commercial contracts, and parties who are unable to perform their contractual obligations as a result of these measures may potentially invoke force majeure.
To preempt escalating COVID-19 infections, the Singapore government is implementing heightened measures requiring Singapore residents to minimize movements and interactions in public and private places, and to stay home unless necessary for essential purposes. The enhanced measures will be in place for four weeks, from 7 April 2020 until 4 May 2020.
Closure of Workplaces
Home-Based Learning for Schools
Closure of Recreation Venues, Attractions, and Places of Worship
Force majeure provisions are generally included in contracts to cover extraordinary events such as the outbreak of war and natural disasters. Typically, a force majeure clause allows for the contract to be terminated or for a party to avoid liability for nonperformance upon the occurrence of certain specified events or unforeseen events beyond the reasonable control of either party, which render the performance of the contractual obligations impossible or radically different from what was contemplated by the parties.
Under the expanded set of measures being implemented in Singapore, only essential services are permitted to operate. Businesses that are not considered essential services are not permitted to operate, unless they can operate remotely.
Businesses performing “essential services” may find it challenging to rely on force majeure provisions as they are permitted, even under the “circuit breaker” measures, to continue operations. Depending on the specific wording of the force majeure clause, a party to an essential services contract may still be able to invoke the force majeure provision if it is unable to perform its obligations as a result of COVID-19, or if the enhanced government measures to curb the spread of COVID-19 have resulted in the disruption of certain nonessential services (e.g., IT providers) on which the party relies to perform its obligations.
Additionally, businesses should also bear in mind that the new COVID-19 (Temporary Measures) Bill, which was announced on 1 April 2020, prohibits a contracting party from taking certain legal actions against a nonperforming party (e.g., court and insolvency proceedings, enforcement of security, and termination of leases of nonresidential property) in respect of certain categories of contracts (e.g., leases for nonresidential property, construction contracts, supply contracts, and goods and services contracts for events) for six months from the commencement of the act. These measures provide contractual parties with temporary relief from certain legal actions, and may potentially prevent a force majeure clause from being invoked.
For our clients, we have formed a multidisciplinary Coronavirus COVID-19 Task Force to help guide you through the broad scope of legal issues brought on by this public health challenge. We also have launched a resource page to help keep you on top of developments as they unfold. If you would like to receive a daily digest of all new updates to the page, please subscribe now to receive our COVID-19 alerts.
If you have any questions or would like more information on the issues discussed in this LawFlash, please contact any of the following Morgan Lewis lawyers, who are directors of Morgan Lewis Stamford LLC, a Singapore law corporation affiliated with Morgan, Lewis & Bockius LLP: