A new draft law hopes to help individuals and companies in Singapore who are finding themselves unable to fulfil contractual obligations because of restrictions imposed in the Covid-19 crisis.
The Ministry of Law will be introducing what is called the Covid-19 (Temporary Measures) Bill in Parliament next week.
Contracts covered in this bill include those for commercial tenancy, weddings, event catering and hotel bookings, among a host of others.
The ministry said this bill will provide temporary cashflow relief for businesses and individuals who may otherwise have to pay damages or risk forfeiting their deposits or invested assets.
What kinds of contracts are covered under this bill?
This bill covers all Singapore contracts within five broad categories:
- Leases or licences for non-residential property (e.g. lease for factory space)
- Construction contracts or supply contracts (e.g. supply of materials)
- Event contracts (e.g. provision or venue, catering, weddings, business meetings)
- Tourism-related contracts (e.g. hotel bookings)
- Certain secured loan facilities granted by bank or finance companies to SMEs
The bill covers contracts that were signed before Mar. 25, 2020, and obligations that have to be performed on or after Feb. 1, 2020.
It can be applied retroactively, too — meaning if you signed a contract with a hotel (and paid a deposit) on Jan. 15, 2019 to hold your wedding on Feb. 10, 2020, but had to cancel it and ended up forfeiting your deposit because of Covid-19, you can also apply for relief under this bill — though how much of your deposit you can get back depends on what the panel will deem a fair and equitable outcome for both yourself and the hotel.
How does this work?
Once a party to the contract informs the other party that he or she cannot fulfil the obligations in the contract because of Covid-19 restrictions, the latter cannot take any action (e.g. court proceedings, forfeiture of deposit, termination of lease etc) against the former for a prescribed period of six months.
This prescribed period of relief can be extended by the Minister for Law up to a year.
It will be a criminal offence for a party to take action against the other during this period. The penalty for this will be announced by the ministry soon.
If there is dispute between both parties, they may bring it up to a panel of 100 assessors from different professions including legal professionals, industry representatives, and accountants.
These will be appointed by the Minister for Law.
This panel will decide if the non-performance was due to Covid-19 and decide on a fair and equitable outcome for both parties. There will be no avenues for appeal.
Here are some examples where this will apply:
Restaurant owner can't pay rent
A restaurant owner cannot afford to pay rent due to reduced footfall arising from Covid-19.
He tells his landlord that he cannot pay rent for the next three months and requests temporary relief by deferring rental payment for three months.
If the landlord refuses to defer rental and threatens to evict the restaurant owner, both parties can approach the panel of assessors.
It will then be an offence for the landlord to terminate the restaurant lease, repossess the restaurant premises, or start court or insolvency proceedings against the restaurant.
Couple postpones wedding
A couple decides to postpone their wedding in June 2020 at a hotel due to restrictions on event size.
The hotel tells the couple that they have to hold the wedding within three months or forfeit the deposit.
If both parties don't agree, they can approach the panel of assessors for a just and equitable outcome. For instance, the hotel might be required to return part of the deposit, after setting off expenses incurred for the wedding.
Private-hire driver cannot service car loan
A private-hire driver cannot service his car loan because he's earning less from fewer riders in the Covid-19 outbreak.
The finance company threatens to repossess his car.
If relief is given to the driver, it will be an offence for the finance company to repossess the car or start court proceedings against the driver within the six-month period.
According to Law Minister K Shanmugam, the bill can be passed into law as early as mid-April.
Top image via Raffles Hotel.