The Government, rightfully, has taken a very clear stand that during this COVID-19 outbreak, all day-cares have to close their operations. This has caused a mayhem for parents and for the centres. Parents, who now have to work from home, have to juggle between parenting and working from home. On the other hand, the day-care has to weigh between the Government’s orders and its need to survive financially. The question in everyone’s mind is whether the parent is obliged to pay the fees for the time out period.

Force Majeure

Discussions are being held on whether the Force majeure clause can be invoked to absolve oneself from a contract.

The Force majeure is a ‘creature of contract and not of the general common law’. In all likelihood any agreement between a day-care centre and the parents would not carry a Force majeure clause.

Malaysian Law

Section 57(2) of the Contracts Act 1950 states that a contract becomes void when a contract to do an act which becomes impossible to perform after the contract is made by reason of some event which the promisor could not prevent or become unlawful ie this leads to the Frustration of the Contract.

In the case of Taylor v Caldwell (1863) 122 ER 309 a contract was entered into whereby a party had let out its hall to the Plaintiff. Subsequently, a fire occurred destroying the hall. The Defendant could not provide the hall. The Plaintiff sued for Damages. The court held that the contract could not be fulfilled by the Defendant and it was no fault of his. Therefore, the Doctrine of Frustration was invoked. The Contract was impossible to be fulfilled.

This was emulated in the case of GUAN AIK MOH V SELANGOR PROPERTIES BHD (2007) 3 CLJ 695 whereby the courts held that the party must show that it was impossible for him to fulfil the contract.

Once frustration is proven, parties do not have to fulfil their obligation under the contract.

Able & Willing to Fulfil but Unable to do so Because of Moratorium

The day-care is willing and ready to provide the service as a day care. However, due to the moratorium, the day-care is unable to provide its service.

Can the day-care charge its full fees to its clients? If it is a school or a kindergarten, the party can give online classes to mitigate and still charge fees.

However, if it is a day care centre, it is different. A day-care centre is a hands on job. Therefore, there is no other way for the party to fulfil its obligation except by way of opening and providing the service.

The day-care centre itself would still have expenses to bear. Rentals have to be met. Salaries of staff has to be paid.

When the parties come back after the moratorium, the day-care would still need its premise and its teachers. Therefore, sustainability of the day-care is important. And

Must a Client Pay the Fees in Full to the Day-Care Centre?

Let us take a simple scenario of a restaurant. You go and eat their food, you pay on the spot and walk out. So, if the restaurant is closed, there is no case of a patron needing to pay.

Conversely, a day-care is so different isn’t it? On one hand, the day-care cannot open but on the other hand the parent has to pay fees.

The day-care is willing to fulfil its obligation. Nonetheless, due to the Government’s moratorium it cannot open its service. Should the day-care be punished for this?

On the other hand, the parents are not taking leave of absence on their own accord. They are forced to do so because of the Government’s directions to close the day- care centres. Should the parent be obliged to pay fees for the time they did not utilise the service of the day-care centre?

A day-care is giving continued service(s) to its customer. Tomorrow when the day- care opens up, the parent would want to come back for this continued service. Unless a parent is paying on a month to month basis, the parent is obliged to make payment of the fees.

If a parent chooses not to pay, he is invoking the doctrine of frustration and the whole contract becomes VOID. Therefore, the parent cannot come back 3 months later and ask to continue with the contract.

The parent would have to choose whether he wants to continue with the Agreement or does he want to void it and not opt for the services anymore.

What Can the Day-Care Do?

However, the day-care may compensate by giving some sort of concession, such as:

1. By not closing for holidays and making up for lost time (or at least to recover some lost time); or
2. By extending the hours of service; or
3. By pro-rating a discount for a period of 12 months or so beginning from the subsequent term or subsequent year.

Conclusion

In conclusion, it would be best for the parties to compromise. Some give and take would take the parties far.