Relief for contracts affected by construction delays
The COVID-19 (Temporary Measures) (Amendment) Bill (the “Amendment Bill”) was passed in Parliament on 5 June 2020.
The Amendment Bill will provide relief for certain parties affected by breaches or delays in construction or supply contracts (defined here), where such breach or delay is due to COVID-19.
The relief will apply to a contract between A and B (the “affected contract”), where:
a. The affected contract does not fall within a prescribed class of contracts
b. The affected contract is in force during the prescribed period (20 April 2020 to 19 October 2020)
c. During the period from 1 February 2020 to 19 October 2020 (both days inclusive), the affected contract (between A and B) is affected by a breach or delay in a construction or supply or related contract (which need not be between A and B)
d. That breach or delay:
- Is due to COVID-19, and
- Occurs during the period from 1 February 2020 to 19 October 2020 (both days inclusive)
Where the relief applies, A or B may make an application to the Assessor, who will seek to achieve an outcome that is just and equitable in the circumstances. The Assessor may make adjustments to certain of A’s and B’s contractual obligations. The contractual obligations that may be adjusted by the Assessor will be prescribed by the Minister.
This relief will not apply to all types of contracts. MinLaw is considering the scope of this relief and the Assessor’s powers, and will release details at a later date.
The example below illustrates how the relief will work.
A is a tenant of B, a landlord. The term of the tenancy is 1 February 2020 to 31 January 2025.
The tenancy agreement provides A with a 3-month rent-free period (from 1 February 2020 to 1 May 2020) for the purposes of renovation and fitting out.
A enters into a contract with C for C to renovate A’s premises from 1 February to 1 May 2020.
Due to the COVID-19 circuit breaker measures, C will only be able to complete the renovation works on 1 July 2020 (2 months delay).
A will be in the difficult position. The agreement to provide a 3-month rent-free period was affected by the circuit breaker measures. Further, A’s business cannot operate from 2 May 2020 to 1 July 2020, as the premises are under renovation. Despite not having any cashflow, A will still have to pay B rent during this period.
A or B may make an application to the Assessor, who will seek to achieve an outcome that is just and equitable in the circumstances. The Assessor may make adjustments to A’s and B’s contractual obligations, as prescribed by the Minister.