- How is the enforcement of the Prevention and Control of Infectious Diseases (Measures Within the Infected Local Areas) Regulations 2020(“Regulations”) affected a tenant?
These Regulations took effect for the period from 18 March 2020 to 31 March 2020. On 25 March 2020, the MCO was extended for a further 14 days to 14 April 2020.
Paragraph 5(1) of the Regulations provides that:
“(1) Any premises providing essential services may be opened provided that the number of personnel and patron at the premises shall be kept to the minimum”
The tenants which provide “essential services” such as banking, postal, production, healthcare and medical and food supply are permitted to operate, subject to the conditions of the Regulations. However, the tenants that are not in the business of essential services have no option but to cease their operations during the MCO, except with the consent of the Director General of the Ministry of Healh.
- What happens to Tenancy Agreement during MCO?
First, one has to review a particular tenancy agreement to see whether it contains the Force Majeure Clause and mechanism to mitigate the loss (“mitigation mechanism”). Such clause would have provided the consequences of the operation of the Force Majeure principle. Normally, it may allow either a postponement or suspension of your contractual obligation. The Comprehensive Guide On Deca Durabolin – Muscle Building Agent – anabolics-pharmacy natural growth hormone online amazon to buy online pharmacy pillpack, jumping into the drug business party seeking to rely on the Clause may be required to give a written notice.
- What is “Force Majeure” Vegetarian Bodybuilding – Scooby’s Home Workouts olympia bodybuilder cycle muscle growth today clause?
Force Majeure derived from the French word: “superior force”. It refers to a supervening event that is beyond the control of the contracting parties which makes the performance and continuance of that contract difficult or impossible to perform. A tenancy agreement which provides for a Force Majeure clause would usually have defined the Force Majeure events. Parties free to stipulate the terms of the clause. It must be an express term of the Tenancy Agreeent.
- Is a viral pandemic defined in the “Force Majeure” clause?
If a Tenancy Agreement does contain a Force Majeure clause, then one have to look into the construction of the clause to determine whether such a clause is wide enough to cover the contingency of a pandemic outbreak. Normally, it is widely drafted to include any pandemic/epidemic, quarantine restrictions or other public health restrictions or a catch all provision such as by the acts, restrictions, regulations, by-laws, prohibitions or measure of any kind on the party of any governmental, parliamentary or local authority. If such a clause contains the general phrase such as “or such other natural disaster, or change of law or government ruling” or similar words, then it can be easily inferred that the COVID-19 pandemic is covered.
- Does the “Force Majeure” clause have a “mitigation mechanism”?
It is common for a Force Majeure clause to set out a mechanism by which the parties would have, before the event occurred, decided what happens in an emergency, then the tenant is required to follow the stipulated procedures. For example, all rights to rentals may be temporarily suspended and the defaulting parties may be required to take reasonable steps to mitigate the effects of a Force Majeure event.
- What if the “Force Majeure” clause does not have a “mitigation mechanism”?
The direct effect and implication would mean that the parties are released or excused from performing their respective obligations under the contract for the duration of the Force Majeure event.
- What if there is no such “Force Majeure” clause in the Tenancy Agreement?
If a Tenancy Agreement does not contain a Force Majeure clause, then either party to the agreement may not rely on the operation of the Force Majeure principle. However, the issue then is whether the doctrine of frustration is applicable to terminate the contract.
- What is doctrine of frustration?
Section 57 of the Contracts Act 1950 provides that:
“ (1) An agreement to do an act impossible in itself is void.
(2) A contract to do an act which, after the contract is made, becomes impossible or by reason of some event which the promisor could not prevent, unlawful, becomes void when the act becomes impossible.
Illustration (e): A contracts to act at a theatre for six months in consideration of a sum paid in advance by B. On several occasions A is too ill to act. The conract to act on those occesions becomes void.
The Federal Court in Goh Yew Chew & Anor v. Soh Kian Tee [1969] 1 MLJ 138 explained what amounts to frustration:
“The doctrine of frustration is relevant when it is alleged that a change of circumstances after the formation of the contract renders it physically or commercially impossible to fulfill the contract. The doctrine is not concerned with initial impossibility to fulfill and it does not concerned itself as in this case with the initial impossibility which renders a contract void ab initio.”
In order for a party to a contract to rely on the doctrine of frustration under section 57(2) Contracts Act 1950, a party must prove the following three (3) elements, as stated by Gopal Sri Ram JCA. in Guan Aik Moh (KL) Sdn Bhd & Anor v. Selangor Properties Bhd [2007] 3 CLJ 695:-
(1) the event upon which the Promisor relies must have been one which was no provision has been made in the contract;
(2) the event relied by the Promisor must be one which he is not responsible (it cannot be a self-induced event or circumstances); and
(3) the unforeseen circumstances must be such that renders it radically different from that which was undertaken by the contract. The court must find it practically unjust to enforce the original promise or contractual obligation.
- Whether MCO gives rise to a frustration of a Tenancy Agreement?
The party seek to rely on doctrine of frustration would have to prove that the MCO has resulted in the contractual obligation being made radically different from what was undertaken, and that it would now not be just to enforced it. It is noted that the duration of the tenancy may be an important factor to be taken into account. Nevertheless, it is clear that the doctrine of frustration is to be confined to very narrow circumstances, the reason being that commercial bargains should not be lightly avoided merely upon a change of circumstances.
Besides the 3 factors above, the Federal Court in Public Forest Industries Sdn Bhd &
“A contract does not become frustrated merely because it becomes difficult to perform. If a party has no money to pay his debt, it cannot be considered impossible to perform as it is not frustration. Neither can he plead frustration because the terms of the contract make it difficult to interpret. If cannot be performed or becomes unlawful to perform, then the party who is to perform his part of the bargain can plead frustration. The doctrine of frustration is only a special case to discharge a contract by an impossibility of performance after the contract was entered into… A contract is frustrated when subsequent to its formation, a change of circumstances renders the contract legally or physically impossible to be performed…”
By virtue to the above, a tenant will face an uphill battle in proving to the court that the tenancy agreement may be frustrated simply due to any financial hardship to pay the contractual rentals. The Court must find it practically unjust to enforce on the (original) promise.
- What is the effect if the Tenancy Agreement is frustrated?
When the tenancy agreement is frustrated, the contract is brought to an end, it becomes “void” and the parties shall be discharged from the performance of the contract as the contract would be void pursuant to section 57(2) of the Contracts Act 1950.
Section 66 of the Contracts Act 1950 provides for restitutionary remedies in which the party who received an advantage or benefit in the course of the contract must either compensate the losses suffered by the aggrieved party or to restore the same:
“When an agreement is discovered to be void, or when a contract becomes void, any person who has received any advantage under the agreement or contract is bound to restore it, or to make compensation for it, to the person from whom he received it.”
Besides, section 15 of the Civil Law Act 1956 provides that the parties would be able to recover any sums of money paid or valuable benefit given for the purposes of the performance of the contract.
- What is the alternative if a tenant is unable to rely on Force MajeureClause and/or doctrine of Frustration?
A tenant would have no legal basis to impose on the landlord to waive or vary any contractual rent during the period of the MCO or beyond. The best option is for a tenant to engage with the landlord and appeal either for a rental reduction or suspension or waiver of the rental for a fixed duration (during the MCO and/or thereafter) but all the above is subject to the landlord’s discretion. On the other hand, a landlord is advised to confirm any interim arrangement and/or variation in writing, if any, so as not to be deemed as a waiver of the contractual rights and obligations stated in the Tenancy Agreement.
NOTE: This article is presented for informational purposes only. Please consult your legal counsel or solicitor to obtain proper legal advice to ensure your rights and interests are protected.
NOTE: This article is presented for informational purposes only. Please consult your legal counsel or solicitor to obtain proper legal advice to ensure your rights and interests are protected.
Prepared by Lai, Goh & Associates