So What Happens To My Contract During RMO

by | Mar 26, 2020 | Business, Contracts, Featured, Law

Unless your business falls under Essential Services, chances are (unless you are operating illegally), your business has stopped. Not all business can be operated remotely. This unfortunate situation has created uncertainty, especially with extension of the Restricted Movement Order (RMO) to the 14th of April https://www.straitstimes.com/asia/se-asia/coronavirus-malaysias-movement-curbs-extended-to-april-14. It may even be extended further that that. Similar orders are currently being enforced in most countries around the world. With most work almost at a standstill, what happens to all your business contracts? Does it automatically stop? Is there a penalty in place if there is a delay or failure to perform in time?

Here are some of the things you need to do to determine your rights and liabilities in your contract.

1. Find Your Contracts

Most businesses do not keep their contracts and agreements in a proper filling system. Most are scattered in various files and drawers; and not at a central filling system. With the RMO in force, most contracts are kept at the office in physical form. Most don’t have soft copies stored. In order to determine what your rights and liabilities are, you need to have your contracts with you.

2. Can The Contract Be Performed

RMO may restrict movement but does it stop from the contract being performed? This will depend on the type of contract entered. If you are an essential business, all your contracts should proceed as usual as you are allowed to continue operations. Once again, this is subjective and depends on the type of contract. You cannot stop the performance of the contract just because of RMO.

3. Is There a Force Majeure Clause and What Does it Say

Force Majeure is a “standard” clause in most commercial contracts that states that the contract is suspended upon the occurrence of something unexpected and out of the parties control, in this case, disease outbreak and RMO. Even if your contract does not have a Force Majeure clause, it could still be argued in Court that the circumstances would make performance of the contract impossible.

4.  Is There a Penalty Clause

This is where it hurts the most. If there is a delay in delivery, payment or performance, there could be a penalty clause. Not all contracts have this but be extra careful if your contract has this clause. You don’t want to be sued for breach of contract AND be sued for damages. Some penalty clauses have a daily calculation.

5. Communicate with The Other Party

Communication is key to all relationships and that includes business relationships. As a Mediator, most business disputes is due to poor or lack of communication. In such hardships like this, it is important to keep in touch and communicate the difficulties and problems that you may be having in performing the contract. DO NOT IGNORE THEM! I cannot stress this enough. Instead of addressing the difficulty, some take to ignoring the other party. This will end in dispute. I guarantee it. Be frank and honest. Like it or not, we are all facing this situation together. Try to mutually agree to suspend the contract.

6. Put It Down in Writing

Once you have communicated with the other party and there is a mutual agreement to suspend the performance of the contract, do ensure that everything is put down in writing. The best is still a formal and properly drafted written agreement. An agreement that is signed digitally is still a valid and enforceable contract. You do not to physically sign the agreement. Find out more of about our services https://law-aka.com/our-services-law-firm-shah-alam/ At the very least, confirm all the terms by email and ensure the other party reply that email.

Should you require any assistance and advice, do not hesitate to contact our team at general@law-aka.com

NIK ERMAN NIK ROSELI Commercial & Sports Lawyer
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