Can the contract be renegotiated due to covid-19 pandemic?

Abstract

The coronavirus COVID-19 pandemic is hitting the country and led the Malaysia’s government imposed the Movement Control Order (“MCO”) across nationwide in combating the pandemic outbreak. Businesses were force to closed, hurting the economy, not least to the construction industry. Results the constructions industry stalled behind. Enforcement of MCO led the circumstances that made contractual commitments more onerous to fulfil and its consequences of its ranged from a decrease in the availability of commodities, human and materials resources , to the suspension and, in some cases, termination of parties or entire projects. As such, much recent discussion has been on contractual rights that permit contractual parties to be released from their duties. Considering the occurrence of the said pandemic in the world is new, it is understandable contractual right will give least positive impact to the contractual parties and may force the parties attempt to renegotiate the contract. The research’s objective is to identify the possibilities of renegotiation of contract in construction industry as to the relief to the negative impact result from the COVID-19. Targeted respondents are derived from the contract department personnel or higher management that has vast experience in project management for contractual matter especially in any renegotiation for the contract. Interviews, questionnaires, are method for data collection as opinion on the problem. Key matter is the resolution to produce the relief rather than negative to the construction industry. Six (6) interviews were conducted. All projects were impacted by the adherence of MCO as constriction site were stopped, five (5) contracts were remain unchanged whereas one (1) contract is renegotiated with precedent of “Change of Law”. Respondents’ opinion that exercising contractual rights only brings the parties to dead-end. Practical benefit is most crucial to the resolution toward the affected project which most recommended to allow the contract be renegotiated. Law evolves throughout the current issue, Man-made Law to disobey. Right and interest of relevant parties especially commercial contract reserve to be amended upon change of circumstance that out of control. Hence, contract is renegotiable due to pandemic Covid-19.