PR&MB 2020 – Contractual Obligations

Where the declaration of a pandemic affects the performance of contractual obligations by a party to a contract, several remedies that would be available to the other party are waived. As such, the following activities are prohibited:

  1. Commencement of levying of execution;
  2. Enforcement of security over movable and immovable property used for the purpose of a trade, business or profession;
  3. Repossession of any goods used for the purpose of a trade, business or profession; or termination of lease or licence of immovable property in connection with non-payment of rent or other monies.

The Bill appreciates that a pandemic may cause significant frustration and hardship in performance of contracts and seeks to cushion parties whose performance of obligations is impaired. The Bill also takes cognizance of the fact that not all contracts may be affected by the pandemic and thus only those rendered incapable of performing their obligations may take advantage of this clause.

However, several commentators have argued that this clause of the Bill seems to ignore the fact that parties may have other obligations which may be tied to the performance of particular contract. As such, these measures would lead to a negative ripple effect and cause further disruption of the economy.

It is worth noting in certain cases, the pandemic may constitute force majeure (unforeseeable circumstances preventing parties from fulfilling their contractual obligations hence making the performance of the contract impossible). While the mere existence of a pandemic isn’t sufficient enough to invoke force majeure, measures taken to mitigate its effects such as lock-down of movement and business could ultimately constitute force majeure or cause hardship.