COVID-19 in Singapore: Effect of ‘Circuit Breaker’ Measures on Force Majeure Provisions

Increased measures to preempt the spread of coronavirus (COVID-19) in Singapore may cause disruption to commercial contracts, as parties unable to perform their obligations could invoke force majeure.

The Singapore prime minister announced on 3 April the implementation of an elevated set of measures to significantly reduce movements and interactions in public and private places, and to put in place a “circuit breaker” to preempt the trend of increasing local transmission of COVID-19. These heightened measures are likely to cause further disruption to commercial contracts, and parties who are unable to perform their contractual obligations as a result of these measures may potentially invoke force majeure.

COVID-19 ‘Circuit Breaker’ Measures

To preempt escalating COVID-19 infections, the Singapore government is implementing heightened measures requiring Singapore residents to minimize movements and interactions in public and private places, and to stay home unless necessary for essential purposes. The enhanced measures will be in place for four weeks, from 7 April 2020 until 4 May 2020.

Essential Services

• From 7 April 2020, all restaurants, hawker centres, food courts, and other food and beverage outlets will remain open but only for takeaway or delivery. Food suppliers, including supermarkets, will remain open. Retail outlets that provide items and services necessary to support the daily living needs of the population will also remain open, including supermarkets, pharmacies, and food and beverage outlets.
• Essential services such as healthcare, social services, financial services, cleaning services, and water, energy, and environment-related services will also continue to operate. Other selected services required for daily living, such as hairdressers, lift maintenance services, laundry services, transport services, and telecommunications services will remain open. See the list of essential services that are allowed to continue operating.
• All other physical retail outlets shall be closed.

Closure of Workplaces

• From 7 April 2020 to 4 May 2020, all business, social, or other activities that cannot be conducted through telecommuting from home will be suspended. Employers that are able to continue to operate their businesses, in limited or full capacity, with their employees working from home can continue to do so.
• Essential services and their related supply chains, as well as entities that form a part of the global supply chain, are exempt from the suspension and can continue to operate from their premises. They will, however, need to operate with the minimum staff needed on their premises for the continued running of their services, and must implement strict safe distancing measures.
• Except for those allowed to commute for work, Singapore residents should remain largely within their places of residence and should minimise the time they spend outside, other than to buy meals or other essentials or procure essential services.

Home-Based Learning for Schools

• From 8 April 2020 to 4 May 2020, schools and institutes of higher learning will shift to full home-based learning, while preschool and student care centres will suspend services.

Closure of Recreation Venues, Attractions, and Places of Worship

• From 7 April 2020, all attractions, theme parks, museums, and casinos will be closed. Sports and recreation facilities, such as public swimming pools, country clubs, gyms, and fitness studios, will also be closed. All recreational facilities in hotels will be closed.
• Organised sporting programmes and religious services will remain suspended, and places of worship will be closed.

Impact of ‘Circuit Breaker’ Measures on Force Majeure Provisions

Force majeure provisions are generally included in contracts to cover extraordinary events such as the outbreak of war and natural disasters. Typically, a force majeure clause allows for the contract to be terminated or for a party to avoid liability for nonperformance upon the occurrence of certain specified events or unforeseen events beyond the reasonable control of either party, which render the performance of the contractual obligations impossible or radically different from what was contemplated by the parties.

Under the expanded set of measures being implemented in Singapore, only essential services are permitted to operate. Businesses that are not considered essential services are not permitted to operate, unless they can operate remotely.

Businesses performing “essential services” may find it challenging to rely on force majeure provisions as they are permitted, even under the “circuit breaker” measures, to continue operations. Depending on the specific wording of the force majeure clause, a party to an essential services contract may still be able to invoke the force majeure provision if it is unable to perform its obligations as a result of COVID-19, or if the enhanced government measures to curb the spread of COVID-19 have resulted in the disruption of certain nonessential services (e.g., IT providers) on which the party relies to perform its obligations.

Additionally, businesses should also bear in mind that the new COVID-19 (Temporary Measures) Bill, which was announced on 1 April 2020, prohibits a contracting party from taking certain legal actions against a nonperforming party (e.g., court and insolvency proceedings, enforcement of security, and termination of leases of nonresidential property) in respect of certain categories of contracts (e.g., leases for nonresidential property, construction contracts, supply contracts, and goods and services contracts for events) for six months from the commencement of the act. These measures provide contractual parties with temporary relief from certain legal actions, and may potentially prevent a force majeure clause from being invoked.

Coronavirus COVID-19 Task Force

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Contacts

If you have any questions or would like more information on the issues discussed in this LawFlash, please contact any of the following Morgan Lewis lawyers, who are directors of Morgan Lewis Stamford LLC, a Singapore law corporation affiliated ‎with Morgan, Lewis & Bockius LLP:

Singapore
Gina Ng