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That dreaded 'Brie-xit' word....


 

Whenever I hear the word “Brexit” it fills me with dread and I am sure that I am not alone here.


We have all been beaten into submission by this term and its endless use. How life seemed far simpler before the introduction of this term into our collective lexicon! It’s a Duracell word, capable of infinite lifespan it seems and a word that marches to its’ own consistent and deafening beat.


To my mind the word should simply only exist to describe the name of a cheese to be washed down with a bottle of Rioja or Navarra! This is especially true when one reads about a Hard Brexit or Soft Brexit……………. “……yes, don’t mind if I do….but just a small piece though please….”


But instead we are lumbered with this word of imposing proportions. The Referendum and the insufferable route to it and the now painful negotiations from here on mean that we are somewhat pre disposed to thinking of this process only in negative terms.


And yet it is a subject that demands the attention of business owners across the country in varying ways not least in terms of how their commercial contracts are impacted upon.


EU Law has a significant effect on areas of commercial law such as advertising and marketing, agency, consumer, distribution and E-commerce outsourcing not to mention the general supply of goods and services.


Brexit could have significant implications for commercial contracts. Potential “pain points” include the imposition of tariffs, restrictions on the freedom of movement of people or further charges in exchange rates. Changes such as these could severely affect the commercial bargain between the parties underlying these contracts. Parties to these contracts will want to examine them to see if relief is available or perhaps how quickly they can bring the contract to an end. In financially uncertain times parties often look to force majeure and material adverse change provisions for relief. As ever though, whether they are triggered or not will depend upon the exact drafting of the contract in question and the rules of interpretation.


With new contracts parties will wish to consider how the contract might be affected by the UK’s impending departure from the EU. This might be achieved by inclusion of so called “Brexit clauses” which are clauses that change the parties’ rights and obligations as a result of a defining event occurring.


With regard to commercial contracts therefore, I am advising clients as follows at this time with Brexit in mind:

  • In assessing whether or not a Brexit clause should be included in a new contract in order to “future proof” the contract;
  • Whether provisions already included in a current contract (such as force majeure) can be relied upon instead;
  • Whether certain amendments for specific Brexit-related impacts can be pre-agreed under contract; and
  • Whether a right to re-negotiate can be included with subsequent termination of the contract if this cannot be achieved.

Such steps are important because recent case law confirms that parties will be bound much more tightly to the words of their contract and there will be little relief for those adversely affected by Brexit. In Marks & Spencer Plc v BNP Paribas Securities Services trust Company (Jersey) Limited and another the Supreme Court took a restrictive view of the circumstances in which a term will be implied into a contract emphasising that the Court should only intervene where the term is so obvious that it goes without saying that it is necessary for business efficacy and even then restraint should be exercised.


Brexit impacts the very fabric of our lives both socially and economically and this will continue for many years to come. The stark reality is that Brexit means that contracts could become loss-making or perhaps more difficult to perform. The harsh reality is that it is unlikely that parties will obtain relief from the consequences of these changes in the absence of express provisions.


What makes Brexit such an unruly character is its unpredictability. However, taking advice in advance on current operative contracts whilst future proofing new ones is a proactive measure that businesses can take in order to put the best foot forward on an uncertain path.


 

Andrew Morgan is Head of Company and Commercial at JPC Law.

For more information on all company and commercial matters, please contact him:

E: amorgan@jpclaw.co.uk

M: +44 (0) 7584 139 193

General Enquiries:

E: enquiries@jpclaw.co.uk

T: 020 7625 4424

 

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