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PROFORMA SALE FORM DURING MOVEMENT CONTROL ORDER

“I have signed a proforma sale form which requires a sale and purchase agreement to be prepared within 21 working days.”

“What happened if I am unable to comply with the 21 working days period as no law firm is operating during this period.”

Most proforma sale form or booking form would have a term which requires a sale and purchase agreement (“SPA”) to be prepared within 21 “working days”.

A working day normally means a calendar day which is the day as distinguished from a holiday. However, the recently announced nationwide Restriction of Movement Order (“MCO”) is not holiday. It merely, among others, restricts movement and assembly nationwide.

However, the 21 working days will be extended for the entire duration of the MCO as law firms were reproached by the Bar Council to remain open for business. The working day as contemplated in the booking form is therefore vitiated by the fact that lawyers are unable to access to their physical office for the purpose of retrieving files, documents and using the facilities of their office to prepare the SPA. Therefore, the period under MCO could not be considered “working days”.

“Can I terminate the agreement as evidenced in the proforma sale form or booking form by relying on the doctrine of frustration?”

Section 57 of the Contracts Act 1950 (“CA 1950”) (which embodies the doctrine of frustration) provides that

“(a) contract to do an act which, after the contract is made, becomes impossible, or by reason of some event which the promisor could not prevent,unlawful, becomes void when the act becomes impossible or unlawful.” An agreement to do an act impossible in itself is void.”

However, one of the 3 important elements of frustration is that the alleged frustrating event “must be such that renders it radically different from that which was undertaken by the contract”.

A proforma sale form or booking form sets out the salient term of a sale and purchase i.e. the identity of the parties, the description of the property and the price. The requirement of a SPA to be signed is mere formality.

Hence, the MCO which merely affects the formality of having to sign the SPA within 21 days does not radically alters the salient terms of the sale and purchase i.e. i.e. the identity of the parties, the description of the property and the price. Therefore, doctrine of frustration does not apply.

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