Relief coming for parties in contracts hit by virus

No atrium sales or events were seen at Vivocity on March 28, 2020.
No atrium sales or events were seen at Vivocity on March 28, 2020.ST PHOTO: JASON QUAH

Proposed law will protect individuals, firms unable to fulfil obligations due to pandemic

Individuals and companies that find themselves unable to fulfil their contractual obligations on account of the coronavirus pandemic will be protected by an upcoming law.

For instance, if they have to postpone a wedding or business event, they will not have to forfeit their deposit to a hotel or catering firm.

The Covid-19 (Temporary Measures) Bill will be introduced in Parliament next week. The Ministry of Law (MinLaw) said yesterday it intends to expedite the passage of the new law through a certificate of urgency signed by the President, which would allow all three readings to be taken in one sitting.

Law and Home Affairs Minister K. Shanmugam said the Bill was a whole-of-government effort involving agencies such as the Finance and Trade and Industry ministries, and committee members from the private sector, such as law practice Rajah & Tann, DBS and CapitaLand. He said: "The Bill was put together very quickly, in a matter of days, as we saw the situation deteriorating."

When passed, the new law will also prevent landlords from terminating commercial leases due to non-payment of rent if this is due to the virus, such as for a restaurant whose footfall has fallen.

Although rent will continue to accumulate and be payable, it will be due only six months later. In this way, the law will provide temporary cash-flow relief for both businesses and individuals who may otherwise have to pay damages or risk having their deposits or assets forfeited from failing to meet contractual obligations, said MinLaw.

MinLaw said the pandemic and resulting public health measures imposed by governments around the world have caused "unprecedented and unforeseeable social and economic impact and led to supply chain disruptions and manpower shortages". "In many cases, this has undermined the ability of individuals and businesses to fulfil contractual obligations," the ministry said. "It would be unfair to hold them strictly liable for their failure to do so."

The proposed law will apply retroactively, and cover contractual obligations performed on or after Feb 1 this year, the approximate date when the coronavirus outbreak started to significantly impact Singapore. It will cover contracts entered into or renewed on or before March 24, the day the multi-ministry task force set up to deal with the outbreak announced stricter measures to minimise the virus' spread, such as the closure of entertainment venues, and deferment or cancellation of all events and mass gatherings.

MinLaw said the proposed law will not absolve or remove parties' contractual obligations, but suspend them for a prescribed period, which is six months from when it becomes law. For instance, it provides that a hotel cannot forfeit a deposit for a wedding dinner if it is postponed to a later date, and must restore the deposit if it was forfeited earlier. But this does not apply if the wedding couple cancels the event or switches hotels.

 
 
 

To guard against unfair outcomes, the ministry will employ about 100 assessors to resolve disputes arising from the application of measures under this law. The assessor will decide if the contractual obligation was untenable on account of Covid-19 and has the power to grant relief. Parties will not be allowed to engage lawyers, there will be no cost orders and the assessor's decision will be final.

This provision encourages parties to "work things out sensibly" rather than to immediately opt to go to an assessor, whose decision might advantage one side more than the other, said Rajah & Tann managing partner Patrick Ang, who was consulted on the Bill.

MinLaw may extend the relief period for up to six more months, but the law will cease to have effect after one year.

 
A version of this article appeared in the print edition of The Straits Times on April 02, 2020, with the headline 'Relief coming for parties in contracts hit by virus'. Print Edition | Subscribe