23 April 2020

The Ministry of Law (“MinLaw”) has released a set of FAQs and guides on Part 2 of the Covid-19 (Temporary Measures) Act 2020 (“Act”). Part 2 of the Act, which entered into force on 20 April 2020, provides for temporary relief from legal action for the inability to perform certain contracts due to Covid-19.

The five categories of contracts covered under Part 2 of the Act are (1) secured loan agreements to small and medium enterprises (“SMEs”), (2) hire-purchase or conditional sales agreements, (3) leases or licences of non-residential property, (4) construction or supply contracts, and (5) event or tourism-related contracts. The relief measures apply to relevant contractual obligations that are to be performed on or after 1 February 2020, for contracts that were entered into or renewed before 25 March 2020. The period of relief will last for six months from 20 April 2020 to 19 October 2020 (“relief period”).

This article discusses some of the issues addressed in the FAQs and guides that are specific to each category of contracts to which Part 2 of the Act applies.

For an overview of the temporary relief provisions under Part 2 of the Act, please see our article titled “Covid-19 (Temporary Measures) Act 2020: Provisions on temporary relief from legal action for inability to perform contracts in force from 20 April 2020”, which discusses the types of contracts to which Part 2 of the Act applies, the kinds of relief available, and the framework for the determination of disputes.

Secured loan agreements to SMEs, hire-purchase and conditional sales agreements, and leases and licences of non-residential property

Payment of loan instalments or rent for businesses suffering a drop in revenue due to Covid-19

Businesses which suffer a drop in revenue due to Covid-19 will still have to continue paying loan instalments or rent, as the case may be. However, the Act prevents the following actions from being taken during the relief period

  • Secured loan agreements: Enforcement of security or commencement or continuation of legal action by the creditor. 
  • Hire-purchase and conditional sales agreements: Repossession of the commercial vehicle or plant, machinery or fixed asset that is used for business, or commencement or continuation of legal action by the financing company.
  • Leases or licences: Termination of the tenancy, eviction of the tenant, or commencement or continuation of legal action by the landlord.

The relief applies only to those who can demonstrate that they are unable to pay the instalments or rent (as the case may be) due to Covid-19. It does not allow those who are able to pay to avoid payment. Those who have the ability to pay (even if they suffered a drop in revenue) are not entitled to relief under the Act.

Payment of accrued unpaid instalments or rent after the relief period

Unpaid instalments or rent (and any other charges such as interest or fees for late payment, if provided for under the contract) continue to accrue during the relief period, and may be enforced after the relief period. The Act does not remove or absolve parties’ contractual obligations, but seeks to temporarily prohibit the creditor, the financing company or the landlord (as the case may be) from enforcing the contract during the relief period.

Actions taken before commencement of Part 2 of the Act

Part 2 of the Act commenced on 20 April 2020. It does not apply to enforcement actions (in respect of loans by banks and finance companies), repossessions (in respect of hire-purchase agreements) or terminations or evictions (in respect of leases and licences) that occurred before that date.

Excluded contracts

The Act does not cover unsecured loans such as debts incurred on a corporate credit card. It also does not cover personal loans extended to individuals, whether the loan is secured or unsecured.

Construction contracts and supply contracts

If a contractor or supplier is unable to perform his obligations due to Covid-19, the other party to the contract cannot commence or continue court proceedings or insolvency proceedings against him during the relief period.

In addition, a person who is unable to supply goods or services due to Covid-19 has a defence against any claims for breach of contract or damages (e.g. liquidated damages) if the breach arose due to his inability to perform the obligation, if the inability was materially caused by Covid-19. This defence is available after the Notification for Relief has been served, and may be raised in any adjudication or other legal proceedings in which the other party makes such claims.

Calling of a performance bond in relation to a contracting party’s inability to perform his obligations due to Covid-19 earlier than seven days before its date of expiry will also not be allowed. The party can apply to the issuer to extend the term of the performance bond.

The joint MinLaw and Building and Construction Authority (“BCA”) note on “Commencement of the Covid-19 (Temporary Measures) Act 2020 - Provisions Relating to Temporary Reliefs” (22 April 2020) and the “FAQs on Commencement of the Covid-19 (Temporary Measures) Act 2020 - Provisions Relating to Temporary Reliefs” (22 April 2020), both available on the BCA website, provide further information.

Event and tourism-related contracts


In relation to an event or tourism-related contract, if a contracting party is unable to carry out his contractual obligation due to Covid-19, the other party to the contract cannot take or continue legal action against him in respect of that obligation during the relief period. Further, if the Act applies to the contract, a deposit placed with the vendor for that contract cannot be automatically forfeited. If a deposit has purportedly been forfeited, it must be restored. Restoration does not mean that the deposit is paid back to the consumer. It means that the deposit continues to be held by the vendor, pending a mutual agreement on how the deposit is to be dealt with, or a determination by an Assessor appointed under the Act if a mutual agreement is not possible.

Deposits forfeited before commencement of Part 2 of the Act

The vendor might have forfeited a deposit before Part 2 of the Act entered into force on 20 April 2020. If the contract was entered into before 25 March 2020, and the event or tour was supposed to take place on or after 1 February 2020, but could not because of Covid-19, the deposit can still be restored. A Notification for Relief must first be served on the vendor.

Events or tours occurring after relief period

The Act applies to contracts where the event or tour is to take place after the relief period (i.e. after 19 October 2020), but only if the contract was entered into before 25 March 2020 and now cannot be carried out because of Covid-19.

Airline tickets and bookings made on travel intermediaries

Airline tickets are not covered by the Act. However, most airlines have their own refund or cancellation policy.

Bookings on travel intermediaries (such as aggregate booking websites) will be covered under the Act if these bookings were made under Singapore law.

Form of returned deposit

The Act does not mandate how the deposit should be returned (e.g. whether by way of cash or vouchers). Parties that are unable to agree to a mutually acceptable arrangement may make an application to the Assessor, who will seek to achieve an outcome that is just and equitable in the circumstances. It is possible that the Assessor may determine that giving vouchers rather than cash is a just and equitable outcome.

Reference materials

The following materials can be found on the MinLaw website www.mlaw.gov.sg:

Guides on the types of contracts covered by the Act


Further information

Allen & Gledhill has a Covid-19 Resource Centre on our website www.allenandgledhill.com that contains knowhow and materials on legal and regulatory aspects of the Covid-19 crisis.

In addition, we have a cross-disciplinary Covid-19 Legal Task Force consisting of Partners across various practice areas to provide rapid assistance. Should you have any queries, please do not hesitate to get in touch with us at covid19taskforce@allenandgledhill.com.


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