The COVID-19 (Temporary Measures) Act 2020 (“the Act”) was recently passed by the Singapore government with the aim, among other things, of providing relief to parties who may be adversely affected in the conduct of their commercial dealings by the COVID-19 pandemic.
It does this primarily by postponing the legal consequences of a party’s failure to discharge a relevant contractual obligation (e.g. the payment of rent or the booking of venues for events, like weddings, where venue deposits have been paid), where such legal consequences include being sued or having a bond or collateral forfeited.
The parts of the Act that provide such relief have come into operation as of 20 April 2020.
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What does the Act Cover?
The parties who will be covered by this relief are any party who is unable to perform a contractual obligation that is due to be performed on or after 1 February 2020, pursuant to any contract entered into or renewed before 25 March 2020. However, only certain kinds of contracts are covered by the Act.
- Certain kinds of commercial loans to a business (e.g. secured loans financed by a licensed bank/finance company);
- A performance bond granted pursuant to a construction contract or supply contract;
- Hire-purchase agreements and conditional sales agreements for plant, machinery or fixed assets used for manufacturing, production or other business purpose or for a commercial vehicle;
- Events contracts;
- Tourism-related contracts;
- Construction contracts or supply contracts; and
- Commercial leases.
Parties which may be able to make use of the relief under the Act include businesses, such as restaurants, or individuals such as tenants or tour bus drivers who cannot afford to pay their rent due to COVID-19, and risk having their deposits or vehicles forfeited or repossessed, respectively.
How Can One Seek Relief Under the Act?
To claim the benefit of these reliefs, one need only send a notification to the other party or parties to the contract (and one’s guarantor or surety, if any, for whatever obligation from which one is seeking relief) providing any relevant information and explaining why it is not currently possible to discharge the relevant contractual obligation.
The other party or parties, if they think it is unreasonable for you to be completely relieved of your contractual obligations, will be temporarily prevented from commencing legal action against you to compel you to discharge those obligations.
They can, however, refer the matter to an assessor, who will have the power to determine whether your contract falls within the scope of the Act and whether you should therefore be entitled to relief, or whether part or all of any deposit you have paid should be forfeited. Parties cannot be represented by lawyers during this assessment and also cannot appeal the assessor’s decision.
To apply for such an assessment, the other party must pay a fee and serve a copy of the application on all the parties to the contract (and any guarantor or surety).
If a party does not go through this whole process, but instead simply keeps the entire deposit or commences legal action, in breach of the Act, they are guilty of an offence and can be fined up to $1,000 and ordered to return any deposit taken to the other party.
How Long is the Relief Period and What Happens After That?
The relief from one’s obligation to discharge one’s contractual duties lasts for up to 6 months from 20 April 2020, unless this relief period extended.
At the end of the period, all contractual obligations become due and parties can be sued for them again and deposits can be forfeited.
If your business is adversely impacted by COVID-19 and you find yourself unable to meet your contractual obligations, you should consult a lawyer to establish whether your business may fall within the scope of the Act and be entitled to relief.
The lawyer can then advise you on whether and how to serve a notice for relief. If you have notified your counterparty under the Act, and they still take your deposit, you should seek legal advice immediately to receive guidance on referring the case to an assessor to have your deposit refunded to you.
Even if you are the one being served with a notice for relief under the Act by a counterparty to a contract, you should also speak to a lawyer.
A lawyer will be able to determine the likelihood of that notice being invalidated by an assessor and prepare the best possible case for challenging a defective notice or a notice arising out of a contract that should not be covered by the Act.