April 8, 2020

COVID-19 Singapore: Construction Considerations for the Singapore (Temporary Measures) Act

The Construction industry in Singapore was amongst the first affected by COVID-19, with contractors reporting difficulties in getting plant, equipment and personnel out of China after Chinese New Year.

Things have gone from bad to worse and, except for some projects which are deemed essential, all building works in Singapore have now ceased for the “Circuit Breaker Period”, except for some exempted works such as maintenance of structural safety, vector control and environmental protection. 

Often the underlying construction contract will deal with a situation such as this where the works are effectively stopped by Government Order and it is important for contractors and suppliers who have been affected by the cessation order to look at their rights under the applicable law and contract in their entirety before deciding how to proceed.  It may well be that contractual remedies, such as force majeure or applicable contractual clauses given entitlement to additional time and money  may be more beneficial than the temporary relief provided by the Act. 

However, the general relief provided by the act is available for all construction and supply contracts in Singapore (as defined in the Security of Payments legislation).  Further specific relief is provided to construction contracts including a bar on calls on performance bonds arising as a result of a COVID-19 event until 7 days before the date of expiry of the relevant bond.  A contractor who is concerned that this 7 day period is approaching can make an application to the issuer of the bond for an extension, in which case the Act intervenes to automatically extend the bond to a date 7 days after the period of temporary relief.

In addition, as mentioned above, the Act provides that liquidated or other delay damages are not payable during the period of temporary relief and, indeed, regardless of the contractual allocation of responsibility, where a party becomes unable to perform a contractual obligation and such inability was caused “to a material extent” by a COVID-19 event, the Act provides a defence to any claim for breach of contract.

It is important to note however that the Act does not operate automatically and those wishing to seek its protection must serve a compliant notice.  It is also worth noting that assessors are required to take into account “the ability and financial capacity” of a party to perform the obligation in question.  It is therefore likely that applicants will be treated differently according to their financial standing, even if they are within the same supply chain.