COVID-19 (Temporary Measures) Act 2020 – Temporary Relief Measures for Certain Contractual Obligations

22
April
2020

The COVID-19 (Temporary Measures) Act 2020 (the “Act”) forms the backbone of several temporary relief measures put in place by the Singapore government to support businesses during the COVID-19 pandemic. Most notably, the Act allows temporary relief from legal actions arising from the inability to perform obligations in specified contracts. The provisions under the Act relating to the temporary relief measures for contractual obligations came into force on 20 April 2020.

Temporary Relief

Generally, the temporary relief is for a period of six months commencing on 20 April 2020, unless the party requesting for relief (“Relief Party”) withdraws the notification of relief (“Relief Notification”) or the assessor (“Assessor”) determines that the temporary relief measures do not apply. If the temporary relief measures are applicable, the counterparty (“Counterparty”) shall not, amongst other actions:

  • commence or continue an action in a court (including arbitral proceedings) against the Relief Party;
  • enforce any security over any immovable property or movable property used for trade or business purposes; or
  • make an application for the winding up or bankruptcy of the Relief Party, or appoint a receiver or manager over any property or undertaking of the Relief Party.

Any action taken in contravention of the Act will be dismissed, void or invalid, as the case may be, and any person who takes any such action shall be guilty of an offence.

Key Requirements

In order for a party to benefit from the temporary relief measures under the Act, the following must be satisfied:

(a) Date of contract. The contract must be entered into or renewed (other than automatically) before 25 March 2020.

(b) Type of contract. The contract must be a type specified under the Act. Examples of contracts that fall within the ambit of the Act include event and tourism-related contracts, certain secured loan facilities, a lease or licence of non-residential immovable property, and construction and supply contracts.

(c) Date of performance. The party to the contract is unable to perform an obligation in the contract that is to be performed on or after 1 February 2020.

(d) Reason for non-performance. The inability to perform such an obligation is to a material extent caused by a COVID-19 event.

(e) Notification. The party has served the Relief Notification on the Counterparty in accordance with the Act.

Where possible, the Relief Notification should be sent to the Counterparty via email using the prescribed electronic system established to facilitate submission of the necessary forms and documents. Other modes of service are available if the Relief Notification cannot be sent via the prescribed electronic system. In the Relief Notification, the Relief Party is required to provide, amongst others, details of the relevant contractual obligation and an explanation of how a COVID-19 event has caused the inability to perform the obligation.

Assessors’ Determination

Should parties be unable to reach an agreement after the Relief Notification has been served, any party to the contract may apply for the matter to be determined by an Assessor. The Assessor will determine whether the situation is covered under the temporary relief measures and grant relief where appropriate. No party may be represented by lawyers at the proceedings before an Assessor. The Assessor’s determination is binding on all the parties to the application and non-appealable.

Comments

The COVID-19 pandemic has caused significant disruption to business operations globally. Companies should undertake a thorough review of their contractual obligations, and assess how Singapore’s circuit breaker or other COVID-19 measures elsewhere has impacted their operations. It should be noted that the temporary relief does not take effect automatically. In addition, parties should also consider the viability and manner in which they will fulfil the relevant contractual obligation after the expiry of the relief period.


If you have any questions or require any additional information, please contact Heng Jun Meng or any director of ZICO Insights Law LLC.

This alert is for general information only and is not a substitute for legal advice.