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Emergency legislation 'would help builders deal with delays'

Emergency legislation 'would help builders deal with delays'

Source: Business Times
Article Date: 24 Mar 2020
Author: Siow Li Sen

He suggests looking to Parliament to enact emergency legislation to help the construction industry as force majeure is not a recognised legal right in Singapore.

The common standard form contracts in use in Singapore do not specifically identify pandemics or acts of foreign governments as amounting to "force majeure" that provide grounds for performance by the contractor to be modified, or relaxed, said Derek Loh, TSMP Law Corp partner.

He suggests looking to Parliament to enact emergency legislation to help the construction industry as force majeure is not a recognised legal right in Singapore.

"The mere fact of the Covid-19 outbreak or pandemic and the attendant actions of governments worldwide in and by themselves do not automatically give rise to any excuse for a contractor under Singapore law," he said.

In summary, a contractor can only be excused is if the contract contains wording that allows or suggests some form of abatement for Covid-19 and its effects, he said.

"Therefore each individual contract must be examined to determine if a contractor can seek and obtain relief for the effects of the Covid-19 outbreak or pandemic and the attendant consequences under the terms of that particular contract."

The situation is more serious between main contractors and subcontractors. Most of these subcontractors are obliged to absorb all risk under their subcontracts with the main contractors and this means that they shoulder all the financial consequences, he said.

"I suspect that many subcontractors will be carrying a hefty bill when the Covid-19 pandemic ameliorates."

Given that Covid-19 is an extraordinary phenomenon, he said it is "entirely feasible for Parliament to consider giving relief to an industry that is most affected by restrictions on human migration and movement."

He suggested a one-off targeted emergency event-linked legislation - for as long as Covid-19 continues. Such legislation is quite different from executive orders from the authorities (such as the Minister or regulator).

If Parliament passes legislation then the Courts will have to implement it, and the lack of rights in the contracts (regardless of whether standard form, or subcontract) to address the Covid-19 situation will be ameliorated, said Mr Loh.

The impact of Covid-19 on construction projects differs from project to project, given that the workers' profile, materials used and progress of construction are unique to each project, said a Building and Construction Authority (BCA) spokeswoman.

To help in mitigating the impact on the industry, BCA has informed contractors involved in public sector projects that they may put up requests for extensions of time if their projects are affected as a result of Covid-19, she said in response to queries on government support for contractors.

Public sector construction demand, which is expected to reach S$17.5 billion and S$20.5 billion this year, makes up about 60 per cent of overall projected construction demand for 2020.

BCA has also sought the support of Redas for private sector projects similarly affected by Covid-19.

Additionally, to ease contractors' potential cashflow problems, government procuring entities will be accepting fortnightly payment claims, in lieu of monthly payment claims. BCA is monitoring the current situation and may include additional measures to help the businesses.

The government has also announced that a second economic stimulus package is being prepared, which would include both broad and targeted approaches, she said.

Source: Business Times © Singapore Press Holdings Ltd. Permission required for reproduction.

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