CONTRACT LAW FAQs ON

MOVEMENT CONTROL ORDER

VOL. 1

FOR MORE INSIGHT INTO

THIS AREA OF LAW,
PLEASE CONTACT OUR
PARTNERS IN THE
DISPUTE RESOLUTION
PRACTICE GROUP

COVID-19 VS MOVEMENT
CONTROL ORDER P Jayasingam
jaya@zulrafique.com.my

CONTRACT FAQS ON
MOVEMENT CONTROL ORDER

In light of the recent Movement Control Order (“MCO”)

announced by the Malaysian government on 18 March 2020,

Farah Shuhadah Razali
many businesses particularly, those that do not fall under the farah.shuhadah@zulrafique.com.my
"Essential Services" category find themselves in a quandary not

only in terms of their daily operations but more importantly, in

regard to their contractual obligations towards various other

companies across the supply chains.

In the first part of this publication, we shall address several

frequently asked questions (FAQs) which would hopefully assist

business owners in Malaysia specifically in treading through

Idza Hajar Ahmad Idzam
these challenging times.
idza.hajar@zulrafique.com.my

LISTEN . UNDERSTAND . RESOLVE

 FAQS

Q1: MY BUSINESS HAS TO SHUT DOWN

basis. For instance, force majeure clause
TEMPORARILY DURING THE MCO,
which uses wordings such as “pandemics”,
WHAT DO I DO?
“epidemic” or “disease” would apply to the

current COVID-19 outbreak.

Firstly, ascertain the actual part of your

business that really needs to be “shut down”. Further, given the Malaysian Government's

In most cases, this would involve the recent imposition of the MCO, any force

production part of the business whereas other majeure clause which covers “governmental

parts such as the administrative or operations action” may likely be applicable as well.

(other than physical operations) may still be

continued either remotely or “from home” as

the case may be.

Q4 : MY CONTRACT HAS A FORCE
As for your contractual obligations, review
MAJEURE CLAUSE WHICH APPEARS TO
INCLUDE THE COVID-19 OUTBREAK.
your existing contracts or purchase orders or
WHAT DO I DO NEXT?
work orders etc with the various clients or

suppliers to ascertain if they contain any force

First, ascertain if the contract sets out
majeure clause.
specific steps to be taken in such

circumstance as much would depend on the

Q2 : WHAT IS A FORCE MAJEURE wordings in the respective contracts.

CLAUSE?
As a general rule or in the absence of any

specific requirements, it would be prudent to

A  force majeure clause is a contractual
notify your counterparty on the following in a
provision which allows party to temporarily
timely manner:-
suspend its obligation/performance under a
A detailed explanation substantiated by
contract when facing a force majeure event.
evidence as to why the performance of the

A force majeure event generally refers to contract is physically and/or legally

unforeseen events beyond the control of both impossible;

parties that makes the performance of the Steps that you are taking to

contractual obligation impractical and/or mitigate/reduce the effects of the force

impossible. Typical examples of  force majeure event; and

majeure  include natural disasters, epidemic Regular updates as to your effort to resume

and wars etc. the performance of the contract if it can

still be performed.

Q3 : IF WE HAVE A FORCE MAJEURE

CLAUSE THEN CAN COVID-19 BE Q5: HOW TO ESTABLISH THAT A
AUTOMATICALLY CONSTRUED AS A CONTRACT HAS BECOME PHYSICALLY
FORCE MAJEURE EVENT? OR LEGALLY IMPOSSIBLY TO
PERFORM?
No, unless the contract provides for it.
This is usually the challenging part and again

The scope and effect of a force majeure differs on a case by case basis. The mere fact

clause depends on the wordings of the same that performance of a contract has become

and has to be determined on a case-by-case more difficult, more...

The contents do not constitute legal advice, are not intended to be a substitute for legal advice and should not be relied upon as such.

D3-3-8, Solaris Dutamas, No 1 Jalan Dutamas 1, 50480 Kuala Lumpur

Tel:+60-3-6209 8228 | Fax: +60-3-6209 8331 | Web: www.zulrafique.com.my
 FAQS

...expensive, or less profitable does not satisfy

Q6 : WHAT IF THE CONTRACT DOES
NOT HAVE A FORCE MAJEURE
the physically or legally impossible to perform
CLAUSE OR THE FORCE MAJEURE
threshold.
CLAUSE DOES NOT SPECIFICALLY
Physically impossible – has been interpreted
MENTION “COVID-19” OR “EPIDEMIC”
OR “PANDEMIC”, CAN COVID-19
by the Courts to include the occurrence of
STILL BE CONSTRUED AS A FORCE
supply chain disruptions, closure of supplier
MAJEURE EVENT?
offices and cancellation of orders by

suppliers.
In the absence of force majeure clause, a

Legally impossible – includes but are not party may rely on the common law doctrine of

limited to the implementation of certain frustration in very limited circumstances.

temporary laws such as a declaration of Doctrine of frustration operates to bring a

emergency that lead to the inability to make contract to an end when there is an

deliveries of products, the inability to intervening post-contract event without any

continue production of goods and the inability fault of parties which radically transform the

to provide certain services and/or contractual obligations into something

implementation of new laws such as different.

criminalizing certain products that leads to

Similar to the threshold requirement for
the inability to produce them.
physical or legal impossibility to perform a

In the current circumstance, with the contract, the fact that it has become more

enforcement of the MCO, movement has onerous or more expensive for one party to

become limited and companies are forced to perform the contract is not sufficient to bring

cease certain operations. Therefore, many about frustration of the contract.

companies would be in a position where they

are unable to fulfill their contractual

obligations as they have become legally

impossible.

Please keep a look out for our next publication which will address the remedies or options available where

a force majeure event is established and other COVID-19 and contract related issues.

The contents do not constitute legal advice, are not intended to be a substitute for legal advice and should not be relied upon as such.

D3-3-8, Solaris Dutamas, No 1 Jalan Dutamas 1, 50480 Kuala Lumpur

Tel:+60-3-6209 8228 | Fax: +60-3-6209 8331 | Web: www.zulrafique.com.my