Covid-19 Implications for Contracts under Singapore and English Law

COVID-19 Implications for Contracts under Singapore and English Law

The COVID-19 pandemic has disrupted businesses worldwide, causing significant disruptions in supply and demand chains, postponement of events and contracts being unable to be fulfilled. This has led to a lot of uncertainty and confusion among parties who have contracts in place. There are two types of contracts that are governed by laws in Singapore and the United Kingdom respectively, i.e., contracts under Singapore law and contracts under English law. It is important to understand the implications of COVID-19 on these contracts and how they could potentially be affected.

Contracts under Singapore Law

The Singapore law provides for force majeure clauses in the event of unforeseeable circumstances that hinder the fulfillment of contractual obligations. However, specific words have to be included in the force majeure clause to invoke this provision. In the absence of such a clause, the doctrine of frustration can be invoked. This doctrine applies when an event, not caused by the default of one of the parties, makes it impossible for the parties to perform their obligations.

In the context of COVID-19, it is possible for the pandemic to be considered a force majeure event if it is specifically included as one in the contract. If not, it could potentially fall under the doctrine of frustration, especially if the pandemic was not foreseen and not caused by the default of one of the parties. However, the courts in Singapore have a high threshold of what constitutes frustration, and it would be examined on a case-by-case basis on whether the impact of COVID-19 on the performance of the contract is so severe that it could be deemed impossible to fulfill the contract.

Contracts under English Law

English law also provides for force majeure clauses, but like Singapore law, it needs to be specifically included in the contract to be invoked. However, English law provides for a wider interpretation of the clause, which includes “acts of God” or events beyond the control of the parties. This could potentially encompass the COVID-19 pandemic even without it being specifically included in the contract.

In the absence of the force majeure clause, the doctrine of frustration can again be used if COVID-19 makes it impossible to fulfill the contract. However, this is a high threshold, and the courts have been historically reluctant to invoke this doctrine. Moreover, an event has to be truly unforeseeable, which may not be the case given the prior epidemics that have occurred, such as SARS in 2003.

Conclusion

In conclusion, the COVID-19 pandemic has caused significant disruptions worldwide, leading to implications for contracts under Singapore and English law. It is important for parties to understand the specific provisions of their contracts and whether they have included force majeure clauses, and if they have, whether it covers pandemics such as COVID-19. In the absence of such clauses, the application of the doctrine of frustration would need to be considered. However, it is important to note that the threshold for invoking these clauses is high, and each case will be examined on a case-by-case basis. It is advisable to seek legal advice in such situations to minimize the risk of disputes arising from contractual obligations being unfulfilled.