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Individuals, businesses unable to fulfil contracts can apply for relief from April 20

SINGAPORE — Starting from Monday (April 20), individuals or businesses unable to fulfil their contractual obligations due to the Covid-19 pandemic would be able to get temporary relief from any legal action, the Ministry of Law said in a press release on the same day.

Under a newly enacted law, contractors in Singapore will not be liable for breach of contract or delay in relation to any inability to supply goods or services materially caused by Covid-19.

Under a newly enacted law, contractors in Singapore will not be liable for breach of contract or delay in relation to any inability to supply goods or services materially caused by Covid-19.

SINGAPORE — Starting from Monday (April 20), individuals or businesses unable to fulfil their contractual obligations due to the Covid-19 pandemic would be able to get temporary relief from any legal action, the Ministry of Law said in a press release on the same day. 

The new law allowing this temporary relief, which is part of the Covid-19 (Temporary Measures) Act, was passed in Parliament on April 7. 

The Act was drafted because many people cannot fulfil the contractual obligations that they have committed to before the disease, caused by the Sars-CoV-2 coronavirus, hammered economic and social activities.

HOW LONG WILL THE RELIEF LAST?  

The period of relief will be for six months, lasting from April 20 to Oct 19, 2020, although it may be extended for up to a year.

For six months, no legal action can be taken against the party seeking relief. This is to give both parties time to negotiate and work out their differences. 

WHAT CONTRACTS WILL QUALIFY FOR THE RELIEF? 

The relief applies to contractual obligations that are to be carried out on or after Feb 1, 2020. 

It is only for contracts signed before March 25, 2020. 

The types of contracts that qualify are:

1. Loans by banks and finance companies to Singapore small- and medium-sized enterprises

Relief: Any commercial or industrial immovable property, or movable ones such as plants, machinery or fixed assets in Singapore cannot be seized by the banks over failure to repay loans. 

2. Construction contracts or contracts for the supply of construction materials

Relief: Contractors will not be liable for breach of contract or delay in relation to any inability to supply goods or services materially caused by Covid-19. Calling on a performance bond due to such inability will also be prohibited.

Performance bonds are a type of security, issued by insurers or banks, for property developers to recover any losses they may have suffered when a contractor fails to complete the project or breaches the contract. 

3. Event or tourism-related contracts, such as venue or catering for weddings, cruises, hotel accommodation bookings

Relief: Deposits can be refunded, depending on the extent of the service that has been provided. 

4. Hire-purchase agreements or conditional sales agreements for plant or machinery used for commercial purposes or commercial vehicles

Relief: Repossession of goods is not allowed.

5. Leases or licences of non-residential properties 

Relief: Lease or licence cannot be terminated due to inability to pay rent.

HOW TO OBTAIN THE RELIEF?

1. The parties seeking relief has to confirm if they or their businesses are eligible for relief, and they can visit the ministry’s website and use a self-assessment tool, which will be available by the end of April.

2. They can then serve a notification for relief to the other party with whom they entered into the contract. They can use a form found at the website. Individuals have to log in with their personal SingPass, the passcode for government e-services, while businesses have to log in with their CorpPass.

The notification for relief sets out what is the obligation that cannot be carried out, how it cannot be performed due to Covid-19, as well as a proposed alternative solution. 

If there are any guarantors or sureties for the contractual obligations, or an issuer of any related performance bond, the notification has to be sent to them as well

3. If there is a disagreement between the parties on the inability to carry out the contractual obligations, they should first discuss and try to reach a mutual agreement. 

4. If they are unable to reach an agreement, either party can apply to have an assessor, who will decide on an outcome, for free. The assessor will try to achieve an outcome that is just and equitable.

Parties can apply to the panel of assessors, who are appointed by the Law Minister, at this webpage.

The assessor’s decision is binding and cannot be appealed. Parties are also not allowed to engage lawyers to represent them.

The hearings will be conducted via email exchange, unless the assessor thinks there is a need for them to be conducted over video conference or in person. 

Related topics

Covid-19 coronavirus contracts law business

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