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Brexit: commercial contract considerations
9th Dec 2020
Brexit: commercial contract considerations - Linkilaw Solicitors
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As the United Kingdom left the EU as of 31 January 2020 and with the end of the transition period, businesses should consider how their contracts and business are affected from 1 January 2021.

By now, many companies with clear business interests and dealings in Europe may have considered the economic and commercial impact of Brexit.

However, here are some general, practical steps your business can take now in order to prepare.

What to do now?

Review existing contracts

Has your deal changed?  A large number of commercial contracts will remain unaffected, as they are the result of commercial negotiations that reflect the deal agreed between the parties.

However, you should take particular care to identify contracts under which the commercial bargain may be significantly different due to changes that may come into effect as a result of Brexit, such as new trade tariffs or changes in exchange rate, for example.

If it is likely that your contracts will become unprofitable or your services (or those of the other party) are no longer required post Brexit, you should agree specific provisions in order to deal with this scenario, as it may be difficult to rely on existing termination clauses and/or force majeure.

Although it is unlikely that a large number of businesses will be unable to perform their obligations as a result of Brexit, there are instances where this could be possible, for example if there were border delays that go on for a prolonged period which could have the potential to be considered a force majeure event.

Working - commercial contract

However, this will come down to the specific circumstances in relation to the delay (which must be proven as being caused solely by Brexit), alongside the particular wording of the force majeure clause itself.  This will be more of an issue for some industries than others, with those relying on imports from Europe that may be subject to tariffs particularly at risk.

Attempting to rely on force majeure in this uncertain time is not advised, as it really will all turn on the facts. Negotiating now what will happen in the event of increased tariffs, potential delays, etc. is certainly better to do now and for contracts to be amended accordingly prior to experience any of this issues.

English governing law and jurisdiction clauses

Although we have noted that contract law (and a large number of contracts) will largely remain unaffected as a result of Brexit, if you wish to enforce a UK judgement in an EU member state this may be harder post January 2021.

If you have obtained a judgment or court order, you will want to enforce it in a jurisdiction where the judgment debtor has assets or is located. You should take legal advice from a local lawyer in such member state as to how to best achieve this.

Next steps

Review your existing contracts. There is no one size fits all approach, and your contracts should be reviewed individually, taking into account when they are due to expire or renew and any impact Brexit may have.

Consider renegotiating the term and/or specific triggers for termination, should your contracts no longer be viable in a post-Brexit world.

If you would like any assistance in helping to renegotiate your commercial contracts and/or advice on how to best take a flexible approach when contracting, feel free to get in touch with one of our experienced lawyers.

Our legal commentary is not intended to be a comprehensive review of all developments in the law and practice. Please seek legal advice before applying it to specific issues or transactions.

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