Builders’ relief as Singapore moves to ban lawsuits over unmet contracts

Construction firms in Singapore have welcomed a new law now being fast-tracked that would make it illegal for a client to sue them for not fulfilling their contractual obligations because of the coronavirus pandemic.

The "Covid-19 (Temporary Measures) Bill" is set to be introduced, debated and voted on in a single sitting of parliament next Tuesday, 7 April.

If passed, it would come into force the following week and last for a year.

One construction company boss told Singaporean news website Today Online that construction firms are bleeding cash and facing severe disruptions to labour and material supplies.

"You continue bleeding," said Kenneth Loo, chief operating officer of Straits Constructions. "You have outflow, but you have no inflow… Our resources are finite and limited. They don’t last forever."

The law covers the construction and materials supply sectors, as well as industrial property leasing, events and tourism, and some loan facilities.

It will be retrospective, covering obligations due to be met from 1 February 2020, but it excludes contracts signed from 25 March, Today reported.

Contractors must notify clients that they cannot fulfil the contract because of conditions created by the pandemic.

Clients can lodge a counter-claim arguing that the non-fulfilment of the contract is not down to the pandemic, and such disputes will be judged by assessors appointed by the law ministry.

Assessors’ rulings cannot be appealed.

Commenting on the predicament faced by clients and builders, Kenneth Loo of Straits Constructions said: "In this instance, there is no gain, and everybody is suffering losses. Nobody is gaining… It is about survival – that’s the most important thing."

Another construction boss, Johnny Lim, executive director of Teambuild Construction Group, told Today that the bill would protect builders from having to pay liquidated damages for delays, a burden that could amount to tens of thousands of dollars a day.

He said that "a delay of three to six months would easily wipe out even companies with the strongest financial standing".

Investment banking analyst Keith Magnus, of advisory firm Evercore, told Today that without such a bill, economic recovery after the pandemic would be harder.

He said businesses needed "breathing room – room to recover, defend, recalibrate, galvanise – to survive".

Image: Singapore’s Central Business District at dusk, from the sky observation deck of the Marina Bay Sands Hotel (Basile Morin/CC BY-SA 4.0)

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