Implications and Commercial Realities

October 2019

If and when a no deal Brexit takes effect it will not of itself cause significant legal changes relating to commerce within the UK, and in particular it will have limited impact on English law of contract and commercial law generally. However, there is uncertainty about various issues relating to trade with between UK and the EU 27 countries after Brexit takes effect.

As to the possible effects of a “no deal” Brexit on commercial contracts between UK business entities, the position remains as outlined in our blog of February 2019 (available here) for contracts which are subject to English law and the jurisdiction of the English courts. A no deal Brexit might affect the parties’ obligations as set out in a contract. For example, Brexit might give rise to greater expense being incurred in order to perform a contract, or it might make it more difficult or even impossible to perform a contract, or performing it might be commercially unattractive or it might produce a different outcome from that required or expected by one or both parties.

You should review existing contracts to check for any impact that a no deal Brexit might have on them. Where you decide that a no deal Brexit might have an adverse effect on any contract, you should consider whether to terminate it if indeed in the circumstances the contract permits it, or whether to seek to renegotiate it. Alternatively, you might see whether there is a provision in the contract covering the situation, e.g. a material changes clause which, on a proper interpretation, covers Brexit and its effects. You might also see whether, on a proper interpretation, a force majeure clause in the contract covers any effects arising from a no deal Brexit - unlikely in the case of most force majeure clauses.

As to new contracts, whilst adding a Brexit clause to a proposed new contract will not solve all Brexit-related problems, you could consider building in a clause to safeguard your business against uncertainty, e.g. one which allows for rapid termination of the contract or which provides for some financial adjustment (such as a price change) or some other change to be made upon Brexit occurring, or you might decide to add a force majeure clause specifically dealing with Brexit.

The implications and commercial realities for you will be specific to your business, your particular circumstances and the nature and terms of the contracts concerned.

The Government has published guides to prepare your business or organisation for Brexit and Brexit guidance for your business, which you should review as part of your overall “no deal” planning.

The contents of this Newsletter are for reference purposes only and do not constitute legal advice. Independent legal advice should be sought in relation to any specific legal matter.

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