Many business owners in Malaysia are severely affected by the imposition of the Movement Control Order (“MCO”) because they shall pay high operating costs despite the closure of businesses.
The business owners who are renting premises may consider requiring the Landlords to waive or discount on the rental payable during the MCO, subject to the terms and conditions of the Tenancy Agreement.
FORCE MAJEURE
Can parties rely on the force majeure clause in the Tenancy Agreement? The court will read and interpret the Tenancy Agreement carefully. Cases that involve decisions regarding pandemic/global diseases would be helpful.
The Court will assess the factors below:
(a) Is the force majeure clause wide enough to cover a situation like COVID-19? Is there any express word such as disease outbreak, public health emergency, lockdown, pandemic, epidemic, legal prohibitions, governmental restrictions, unexpected and unforeseen events, causes which are beyond parties’ control and so on?
(b) What are the consequences of the force majeure events? Do the parties’ obligations be suspended or varied to a certain extent?
(c) Are the parties prevented from performing their obligations of the contract?
It depends on how your tenancy agreement is drafted.
FRUSTRATION
Many people resort to the argument that the agreement is frustrated due to the supervening events, COVID-19 and it is impossible to perform the contract during the MCO.
However, a Tenancy Agreement is not void due to frustration merely because a Tenant has no money to pay his/her debt (Please refer to the Federal Court case of Pacific Forest Industries Sdn Bhd & Anor v Lin Wen-Chih & Anor [2009] 6 MLJ 293).
We suggest that landlords and tenants who are severely affected should read their tenancy agreement carefully before deciding to revise the rental rate.
The contents of this article do not constitute legal or other professional advice or an opinion of any kind. It is provided for general information purposes only.
CALL US FOR FREE CONSULTATION
By Chloe Lim & Carmen Leong