Construction

COVID-19 – Issues Affecting Performance Of Contractual Obligations In Construction Contracts: A Comparison Between English And Malaysian Law

ZUL RAFIQUE & partners collaborated with Quinn Emanuel to provide the Malaysian law perspective in an article on "COVID-19 – Issues Affecting Performance of Contractual Obligations in Construction Contracts: A Comparison between English and Malaysian Law".

Introduction

The COVID-19 crisis has set in train a cascade of events that will impede, delay or prevent performance of many contracts in the coming months. Businesses are likely to face pressure from many directions: shortages of materials, shortages of staff, limitations on movement of personnel, restrictions on conducting operations, other legislative and administrative actions, and the insolvency of contractors, subcontractors and suppliers, to give only what is ultimately likely to be a limited set of examples.

Through no fault of their own, many businesses will find themselves in a position where it is impractical to perform some or all of their contractual obligations and where they will be forced to seek, by whatever means they can, temporary or permanent relief from performance.

As a measure to curb the COVID-19 pandemic, the Government of Malaysia has issued the Prevention and Control of Infectious Diseases (Declaration of Infected Local Areas) Order 2020. Essentially, with effect from 18 March 2020 to 31 March 2020, all States and Federal Territories in Malaysia are declared to be infected local areas. By virtue of the Prevention and Control of Infectious Diseases (Declaration of Infected Local Areas) (Extension of Operation) Order 2020, the relevant period was extended to 14 April 2020.

During this period, the Government of Malaysia implemented a Movement Control Order (“MCO”) across Malaysia, where, save as provided under the Prevention and Control of Infectious Diseases (Measures Within The Infected Local Areas) Regulations 2020 and subsequently, the Prevention and Control of Infectious Diseases (Measures Within Infected Local Areas) (No. 2) Regulations 2020 1 (“Regulations”), movements and gatherings are controlled. At the time of writing, the Prevention and Control of Infectious Diseases (Measures Within Infected Local Areas) (No. 2) Regulations 2020 apply until 14 April 2020.

In summary, most activities are halted – be it business premises, schools, universities, all operations related thereto, or any other sort of social gatherings or activities. Only premises providing “Essential Services”, as specified in the Schedule to the Regulations, may be opened. Examples of such essential services include those relating to food, water, energy and logitics confined to the provision of essential services.

The general construction industry, however, does not fall within the list of Essential Services under the Schedule to the Regulations.

The Ministry of Works (“MOW”) (for government-owned projects) and the Ministry of Human Resources (“MOHR”) (for privately-owned projects) have, by virtue of the FAQs issued by both Ministries on 23 March 2020, directed that only critical works which, if not continued, will result in danger or cause harm to workers, the public or the environment, are exceptions to the general rule.

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