The Ministry of Law of Singapore announced the introduction of a new bill on 1 April aimed at protecting individuals and businesses that are unable to fulfil their contractual obligations because of the coronavirus (COVID-19) pandemic.
The public health measures imposed by governments around the world in response to the pandemic, including travel bans and restrictions, city lockdowns, and the quarantine of individuals, have resulted in business and supply chain disruptions and manpower shortages – undermining the ability of individuals and businesses to fulfil their contractual obligations.
The COVID-19 pandemic has resulted in individuals and businesses defaulting on their contractual obligations. Contracts relating to commercial undertakings, such as construction projects and commercial and industrial tenancies, as well as contracts for individual consumer transactions, such as event and travel-related bookings, have been severely impacted. Parties who are in default of their obligations under their contracts may be liable for damages or forfeiture of deposits and assets, and may also face potential litigation or insolvency.
The new COVID-19 (Temporary Measures) Bill is aimed at providing temporary and targeted protection for individuals and businesses who are unable to fulfil certain contractual obligations due to the COVID-19 pandemic.
The new legislation will have retroactive application and will cover relevant contractual obligations that are to be performed on or after 1 February 2020, for contracts that were entered into or renewed before 25 March 2020. It will be in place for six months from the commencement of the Act and may subsequently be extended for another six months thereafter.
Temporary Relief from Legal Action
The new bill will prohibit a contracting party from taking the following legal actions against a nonperforming party:
The temporary relief measures will apply to the following contracts:
There will also be additional relief in respect of the forfeiture of deposits for events and tourism-related contracts. For example, a provider cannot forfeit the deposit for an event or tourism-related contract if there is a postponement of such event or contract which occurs as a result of COVID-19 restrictions, unless it obtains a determination from an assessor that it would be just and equitable to forfeit either the whole deposit or a part of it.
In the case of construction and supply contracts, a contractor will be relieved from liability for nonperformance if this was caused, to a material extent, by COVID-19.
The bill will also introduce temporary relief for individuals and businesses in financial distress.
The new bill provides breathing space for individuals and businesses who are unable to fulfil their contractual obligations as a result of the ongoing COVID-19 pandemic. The measures under the new bill provide temporary relief for individuals and businesses who may otherwise suffer monetary losses or damages or face potential litigation or insolvency. Individuals and businesses should however be mindful that their contractual obligations are only suspended and not waived. Their contractual obligations will continue to accrue and will need to be satisfied after the temporary relief period ends.
The process of passing the new legislation will be expedited through a Certificate of Urgency signed by the president, which will allow all three readings of the bill to be taken in one Parliament sitting, and is expected to be passed in Parliament next week. The Ministry of Law of Singapore has stated that further details will be released in due course.
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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: