How to “Brexit-proof” your contract
04 October 2018
With Brexit looming ever larger on the horizon, it would be prudent for businesses to consider the potential impact which Brexit may have on the contracts which they are entering into; and which are likely to run beyond March 2019. We would encourage businesses to explore what provisions they could put in place in order to promote contractual certainty in the, as yet, uncertain post-Brexit commercial land scape.
The features which these provisions should include will vary from contract to contract dependent upon the nature of the contract. An example of some of the provisions we would suggest considering include:
- Provision for the potential effects of Brexit on your supply chain. For example, if your business relies on goods supplied from within the EU; or if you supply goods to customers throughout the EU it may be worth considering putting in place express provision for what will happen in the event of: tariff increases; currency fluctuations; or increased import/export costs.
- Provision for a change to the definition of the territory governed by the contract. If the territory governed by the contract is the EU, then it would be sensible to confirm in the definition of the territory that it will include the UK post-Brexit.
- Provision for contracts which reference EU legislation. To the extent the contract refers to a particular piece of EU legislation it is advisable to state that the applicable legislation referred to should be the relevant EU legislation and any successor UK legislation post-Brexit.
- Provision for material Brexit related changes in circumstance. It is worth considering whether an express right of termination is worth including in the event of Brexit in order to minimise the commercial risk of entering into a contract which may impose unacceptable obligations and/or hardships which were not or could not have been anticipated at the time the contract was initially entered into.
In summary, whilst the post-Brexit landscape is still very unclear, we would encourage you to bear Brexit in mind when negotiating contracts which will continue in force post March 2019. This will enable you to put appropriate provisions in place to ensure that, post-Brexit, you are still a party to the contract which you initially intended at the time you signed the agreement.
If you have any further queries, please get in contact with [email protected]