COVID-19: Temporary Measures & Contractual Obligations in Singapore

Nicholas Narayanan

Nicholas & Tan Partnership LLP

In response to the COVID-19 pandemic, the Singapore government has introduced temporary measures in a bid to ease the pressure on businesses and individuals who are unable to perform their various obligations. This article briefly summarises the legislative intervention for the performance of contracts in Singapore.

Applicable Contracts & Prescribed Period

The COVID-19 (Temporary Measures) Act 2020 (No. 14 of 2020) (the “Act”) offers relief for a prescribed period of 6 months commencing on 20 April 2020, which may subsequently be extended or shortened (“Prescribed Period”).

Amongst other types of relief, the Act applies to targeted categories of contracts, including certain secured loan facilities, construction or supply contracts (including performance bonds granted pursuant to such contracts), certain types of hire purchase or conditional sales agreements, event contracts, tourism-related contracts, and leases/ licences of non-residential immovable property.

A party (“A”) to any of the applicable contracts shall be entitled to seek relief under the Act, where all of the following are satisfied:
• The contract must have been entered into before 25 March 2020;
• The party is unable to perform an obligation under that contract, which is to be performed on or after 1 February 2020;
• Such inability is to a material extent caused by COVID-19; and
• A has served a notification for relief on all other parties to the contract, and on any guarantor/ surety for A’s obligations in the contract.

A party challenging A’s entitlement to temporary relief may apply for an assessor’s determination under the Act. However, in proceedings before an assessor, no party may be represented by an advocate or solicitor, and each party must bear its own costs. There is also no appeal from an assessor’s determination, and any person who fails to comply with an assessor’s determination without reasonable excuse shall face the penal sanction of a fine not exceeding S$1,000.

Prohibited Actions

Where A has served a notification for relief, certain specified actions (“Prohibited Actions”) may not be taken against it by any other party to the same contract, until after the earliest of the following (“Prohibited Period”):
• The expiry of the Prescribed Period;
• Withdrawal by A of the notification for relief; or
• An assessor’s determination under the Act that temporary relief is not available to A.

In addition, limitation periods prescribed by any law or in any contract will be extended by a period equal to the Prohibited Period.

The Prohibited Actions are prescribed by section 5(3) of the Act, and include but are not limited to the following:
• Commencement or continuation of a Court action or arbitral proceedings under Singapore’s Arbitration Act (Cap. 10) (the “Arbitration Act”), against A or A’s guarantor/ surety;
• Enforcement of security over immovable property, or over movable property used for trade, business or profession;
• Application to summon a creditors’ meeting under section 210(1) of Singapore’s Companies Act (Cap. 50), to approve a compromise/ arrangement in relation to A or A’s guarantor/ surety;
• Application for judicial management, winding up or bankruptcy of A or A’s guarantor/ surety;
• Appointment of a receiver or manager over any property/ undertaking of A or A’s guarantor/ surety;
• Execution or distress against any property of A or A’s guarantor/ surety (except with the Court’s leave);
• Repossession of goods under agreements for chattels leasing or hire-purchase, which are used for trade, business or profession;
• Termination of a lease or licence of immovable property for non-payment of rent or other moneys;
• Exercise of a right of re-entry/ forfeiture under a lease or licence of immovable property; and
• Enforcement against A or A’s guarantor/ surety of a Court judgment, arbitral award made in proceedings under the Arbitration Act, or a construction adjudication determination under Singapore’s Building and Construction Industry Security of Payment Act (Cap. 30B).

Where Court proceedings or arbitral proceedings under the Arbitration Act are pending at the time A serves a notification for relief, such proceedings will be stayed once a copy of the notification for relief is lodged with the Court/ arbitral tribunal, until the expiry of the Prohibited Period.

However, the Act clarifies that actions pursuant to Singapore’s Frustrated Contracts Act (Cap. 115) or a force majeure clause shall remain unaffected.

Additional Relief: Construction, Supply, Event & Tourism-related Contracts

The Act also provides for additional relief in relation to construction/ supply contracts, and event/ tourism-related contracts, including:
• Extension of the term of a performance bond, and restrictions on the ability to make a call on a performance bond, which is given pursuant to a construction/ supply contract;
• Disregarding of the Prescribed Period in ascertaining the liquidated (or other) damages payable under a construction or supply contract; and
• Deposits paid under event or tourism-related contracts may not be forfeited (and/or must be restored), once a notification for relief has been served.

Penal Sanctions

Where certain actions are taken in breach of the provisions pertaining to relief in contract under the Act, such actions may be rendered void or invalid (as the case may be). Persons in contravention of certain specified sub-sections of the Act will also face the penal sanction of a fine not exceeding S$1,000.

XLNC ARCHIVE | 05 May 2020


Interested in becoming a member of XLNC?

If you are a professional services firm with an international client base and are regarded as one of the leading industry practices in your country, working to the highest standards and providing excellent client service, you meet the basic requirements for XLNC membership.

Become a member