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19th December 2018

BREXIT - Thoughts on a consequence of a new bureaucracy

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The UK Government has made clear that if the UK leaves the EU on 29 March 2019 without a deal there will be immediate changes to the procedures that apply to businesses trading with the EU - a new administration. 

Aside from the need for businesses on the cross-border front line to have adequate knowledgeable form-filling resources to handle the changes (which will come at a cost), the prospect of delays in the movement of goods looms large. Delays will have their implications.

Much has been spoken of the prospect of delays arising from increased administration at border points in the event of a ‘no deal’ scenario. Even if you are not a business reliant on overseas trading partners (direct supplier or customer), your product (or service) may very well depend on a business that is so reliant. Where delays are protracted, the need to turn to alternative sources of supply could become imperative. How to eject from a contract could then be very important. On the other side of the coin, what of the risk that an overseas customer might wish to withdraw from a commitment to purchase because you have not delivered within an agreed timescale?

Here the words of a contract could have a significant role to play. In most cases, under English law the fact that an obligation in an agreement is not performed strictly on time will not of itself entitle the innocent party to walk away from the contract. Yes, it might be expected to found a claim for compensation for loss resulting from the delay, but the law does not inevitably vest in a promise to deliver on time, the right to throw up the contract if the agreed date passes without the commitment having been met. A non-performer might be expected to be given a ‘reasonable time’, at least. The position is different however where the parties agreed when the contract was made that the time of the relevant performance was going to be centrally important and that the innocent party could treat the relationship as at an end where that performance is late. Here, words can matter. In a contract governed by English law, the essential character of the time of performance can be found in the expression ‘time is of the essence’.

Of course, each case will turn on the particular terms of the agreement and the facts (legal advice should always be sought before trying to end a contract). The chosen law of the contract may not be English law either, or an agreement might be ‘frustrated’ (prevented from being performed), in which events different principles could apply. Moreover, in the vast majority of commercial cases there will be a pragmatic degree of ‘give’ in the performance requirements of the agreement. There will be sensible degrees of tolerance. All that said however, if time of delivery is going to be critical to your business (at one face or another of a trade), it wouldn’t be a bad idea to dig out your agreements now, check what they say and think through the ‘what ifs?’. Is the importance of delivering on time writ into the contract? Is time expressly ‘of the essence’? It might be worth a look.

Contingency planning is vital and the UK Government is issuing new information to businesses on the subject. For existing Government Guidance on ‘Trading with the EU if there’s no Brexit deal’ (23 August 2018) go to to the Guidance page here. The library of other Guidance can be found here.

Dominic Hopkins is head of Disputes and Litigation at Hewitsons and an Associate Member of the UK Constitutional Law Association. For more information please contact Dominic Hopkins on 01604 233233 or click here to email Dominic.