It is unlikely that the fundamental principles of contract law will be affected by Brexit. However, the structural changes that will follow may well affect the way certain contractual terms are interpreted and enforced by a court. The commercial terms of existing contracts may not adequately deal with the risk of adverse consequences arising from a changing regulatory, tax and territorial landscape. Likewise, it may not be clear how parties could take advantage of opportunities that may flow from Brexit, such as potential relaxation of competition law and other forms of de-regulation.
Existing and standard form agreements may well need to be looked at to ensure that businesses are managing future risks and are in a position to take advantage of potential benefits.
What should businesses be thinking about?
Entering into and reviewing commercial agreements during a period of such uncertainty gives rise to unique challenges. We have set out below some of the potential issues with commercial contracts that businesses may wish to consider:
- References to the "European Union": what does this mean post-Brexit and what should it mean?
- Currency fluctuations: where is the risk allocated?
- Regulatory regimes: if parallel regulatory regimes emerge post-Brexit who is responsible for achieving compliance?
- Protections: is your business adequately protected from potential adverse effects of:
- tariff impositions and other taxes or levies;
- increased customs checks; and
- restrictions on the freedom of movement
- Variation provisions: does the contract provide an opportunity to terminate or renegotiate if, as a result of Brexit, the agreement becomes unworkable?
- Enforcement Can the business enforce the terms of its agreements conveniently and effectively, should things go wrong? Could the dispute resolution procedure and applicable jurisdiction provisions be improved to assist with this?
A review of existing contracts and standard terms of business to ensure the flexibility necessary for the business to flourish in a post Brexit world should be a top priority now to assess the risks and challenges. Those contracts should continue to be kept under review as more details of the deal emerge or a ‘no deal’ scenario becomes a reality.
For more information please contact Bill Thatcher