The much awaited Temporary Measures for Reducing the Impact of the Coronavirus Disease 2019 (COVID-19) Bill (“Bill”) has finally arrived and is expected to be tabled in Parliament for debate before being passed as soon as September this year. The long title of the Bill is a mouthful and it is more conveniently referred to as the COVID-19 Bill. Once it is passed in Parliament and gazetted, it would be referred to, in short, as the COVID-19 Act.
The COVID-19 Bill as the long title suggests, provides only a temporary measure with the aim to reduce the impact of the COVID-19 disease in Malaysia. The period of operation of the Act would therefore only be for two years after the Bill is gazetted. The Bill would take effect retrospectively and would be deemed to have come into operation on 18 March 2020 until 31 December 2020. The period may be extended but only for so long as it is within the operation period of the Act.
A sneak preview into the inability to perform contractual obligations under the Bill.
According to the Bill, a moratorium would be in place during the period of operation of the Act. During the moratorium, parties are prevented from exercising their rights under contract in the event of non-performance that is due to the COVID-19 control measures imposed by the government. In plain words, this simply means that if you did not perform your contractual obligations, the other party would not be able to take legal actions based on contract against you. However, do note that the reason that you could not perform your contractual obligations must be due to the COVID-19 measures imposed by the government. The onus would be upon you to show that the movement control order or some other measures imposed by the government in response to the COVID-19 pandemic has caused you to breach your contractual obligations. It is only then that the moratorium applies and the other party will be prevented from taking you to court.
Before you jump for joy, there are further caveats to the above, the moratorium does not apply to all contracts but only to the following 7 categories of contracts:
(1)Construction work contract or construction consultancy contract and any other contract related to the supply of construction material, equipment or workers in connection with a construction contract;
(2)Performance bond or equivalent that is granted pursuant to a construction contract or supply contract;
(3)Professional services contract;
(4)Lease or tenancy of non-residential immovable property;
(5)Event contract for the provision of any venue, accommodation, amenity, transport, entertainment, catering or other goods or services including, for any business meeting, incentive travel, conference, exhibition, sales event, concert, show, wedding, party or other social gathering or sporting event, for the participants, attendees, guests, patrons or spectators of such gathering or event;
(6)Contract by a tourism enterprise as defined under the Tourism Industry Act 1992 [Act 482] and a contract for the promotion of tourism in Malaysia; and
(7)Religious pilgrimage-related contract
If you are able to show that you do in fact fall into the applicable categories of contracts eligible for a moratorium, what then does that mean for you? Does the fact that the other party cannot sue you for breach of contract means that you do not have to make payments at all or deliver the goods or services promised. There is nothing in the Bill that proposes for one to be exempted from one’s contractual obligations, the parties continue to remain liable under contract. Under the Bill, the legal rights of the parties under contract are merely put on hold but they are not extinguished. As such, parties continue to be obligated to perform their contractual obligations and as soon as the moratorium period ends, parties can exercise their rights under contract and take legal actions for breach of contract.
The key point to note is that the Bill does not propose to exempt you from your contractual obligations and as such, you do eventually have to pay your suppliers, perform the services or deliver the products promised.
For updates on the extension orders in respect of the COVID-19 Act, please click here.