Please see our latest update below. We also invite you to a live webinar: COVID-19 and Construction in Singapore: A Contractor's Guide to Managing the Fallout. In this webinar we will go further than our update below and consider the steps that contractors should take to protect their positions and manage risks arising from the COVID-19 virus. We will consider the options available under the various standard forms of construction contract used in both the public and private sectors in Singapore. Click here to secure your place and receive the webinar access details.
The outbreak of the COVID-19 has already had a significant effect on global businesses due to shortages in the labour market and disruptions to supply chains. Contractors and other parties involved in public sector projects in Singapore are struggling with problems caused by factory closures in China and restrictions in the movement of Chinese staff and labour.
Parties seeking relief from these problems may well urgently dig out their contracts and flick straight to the force majeure clauses.
Force majeure is a well-known contractual mechanism which typically releases parties from their obligations (in practice often only for the duration of the force majeure) when an extraordinary event arises which is outside their control. Law firms have been quick to release guidance in the wake of COVID-19, much of which focusses on force majeure.
However, some parties looking to seek relief in respect of force majeure on public sector projects in Singapore may end up disappointed, confused or both.
Not all forms of construction contract used in the public sector in Singapore include a force majeure clause. Versions of the main contract Land Transport Authority (LTA) form, for example, include no reference to force majeure. However, they do include a 'Frustration' provision (more on this below).
On the other hand, the Public Sector Standard Conditions of Contract for Construction Works form (PSSCOC) do include a force majeure clause, but this only entitles a contractor to an extension of time and does not include any definition as to what would represent a force majeure event.
Singapore law may also allow the parties to be released from all further performance through the common law doctrine of frustration (i.e. outside of the contract's express provisions).
However, the bar is high. It is necessary to establish that a contractual obligation has become incapable of being performed because the circumstances have changed so radically due to an unforeseen event (which the contract does not provide for) that performance required has become entirely different from that which was contracted for.
Versions of the LTA main contract form contain a frustration clause which refers in general terms to "circumstances outside the control of both parties" that prevent a party from fulfilling its obligations, and which operates to release the parties from all further performance. The clause appears to be broader in application than the common law doctrine and may well assist a party seeking to establish that the contract is frustrated.
Other Options under the Contract
Critically, even where construction contracts do include a force majeure clause, this may not be the strongest basis for a party to seek relief in respect of problems arising from COVID-19.
It may of course be the case that a party does not want to be released from its obligations altogether - as it might under some force majeure mechanisms or a contractual frustration - but wants to protect its position and seek relief in terms of time and money. Construction contracts deployed in the public sector in Singapore typically include numerous different bases for doing so, as well as complex suspension, termination and other mechanisms that apply in different scenarios.
Under the PSSCOC form - only by way example - 5 or more different contractual entitlements could potentially be relevant. This could include provisions in respect of force majeure, suspensions, embargoes affecting trades employed, compliance with laws and regulations, access to the site and variations. Importantly, these different rights may also require different steps to be taken – as regards notices, for example - if they are to be protected and pursued.
It is essential, therefore, that parties carefully analyse their specific contracts and factual circumstances in order to identify the best strategy for protecting their positions and seeking relief in connection with COVID-19. Join us at our live webinar on 26 February 2020 as we examine in more detail the remedies available under the different standard forms of construction contract in use in Singapore.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.