By Georgia Jones
Solicitor
Borneo Martell Turner Coulson
THERE isn’t a single person who knows what is going to happen after Brexit but, whatever it brings, it will affect all of us whether personally or commercially. For businesses, the most significant change is likely to be the effect Brexit-related developments haves on trade and the subsequent impact this will have on the viability of its commercial contracts.
Most businesses will be affected directly or indirectly (via its supply chain) by changes in trade tariffs on goods, freedom to provide services in the EU, EU recognised licences and consents, freedom of movement of workers, changes in the law and currency exchange rates.
Existing and new contracts which run past 29 March 2019 may contain terms that will no longer be commercially viable or attractive post-Brexit. Parties may find themselves in a position where they either need to renegotiate terms or will be in breach of contract and potentially facing an action for damages.
Brexit could affect almost every aspect of doing business but its actual impact is still uncertain. This uncertainty may be addressed by including a so-called Brexit clause in commercial agreements.
There are two main types of Brexit clauses; specific event with specified consequences clauses or clauses which are triggered when a Brexit-related event has occurred allowing for renegotiation and in some cases termination of the agreement.
Specific event with specified consequences clauses have to be bespoke to reflect the needs of the parties. The idea is that when a specific event happens (for example, interest rates rise), a specified event will follow (for example, the price will be adjusted by a pre-determined amount).
Trigger clauses can be more general and offer a binding requirement that the parties will attempt to renegotiate relevant aspects of the contract should it be affected by a Brexit related event.
To limit the scope for disputes arising what is defined as a Brexit related event and who will determine this should be decided at the time of drafting the contract.
Is doing nothing an option?
Some contracts may already include a provision by which the agreement may be terminated early in the event of a ‘material change’ (which works in the same way as a Brexit clause). The usual force majeure provisions are unlikely to be wide enough to allow a party to terminate a contract because of Brexit and UK law does not generally accept that changes in economic or market circumstances as being a force majeure event.
Whether you choose to include a Brexit clause or not, there is no ‘one size fits all’ answer on how to Brexit proof your contracts, particularly as no one yet knows what will be agreed in terms of trade.
To give your business a sporting chance you should consider;
* Whether Brexit will have an effect on your businesses own commercial agreements and supply chain,
* For new contracts consider whether you have allowed for the opportunity to renegotiate or terminate following a Brexit-related event and;
* For existing contracts consider your options should the contract no longer be viable – what are the relevant notice periods?
Georgia Jones is a commercial solicitor at Borneo Martell Turner Coulston, for further information or for a review of your agreements contact her at 01604 622101 or email
