COMMERCIAL CONTRACTS AND BREXIT: WHAT YOU NEED TO KNOW

Brexit has raised a lot of issues for our commercial clients in London and elsewhere. And as negotiations continue we are experiencing an increase in enquiries from our SME clients and others about the legality of existing commercial contracts. Organisations we work with also have concerns about how they should approach future contracts with EU-based businesses. Our team is ready to help you face these uncertainties with practical and cost-effective advice. 

How does EU law regulate contracts?

Generally speaking when two businesses freely enter a contract the courts don’t rush to dismantle it. Of course there are some restrictions on how SMEs and other businesses can agree commercial deals. But over the years EU law has had less impact on commercial contract law than on other more tightly regulated areas such as consumer and employment law. So does this mean we really don’t need to be too worried about Brexit when it comes to contracts?

Unfortunately not. EU law might not dictate terms of your commercial deals. But it would be a big mistake to think that commercial contracts will escape the effects – whatever they turn out to be – of Brexit.

How will Brexit change your contracts?

Here are some things to think about on how Brexit could impact the contracts you are currently signed up to with EU companies and non-EUcompanies doing business within the single market:

• The free market – will we be out or in? If there is a new system of tariffs post-Brexit how will it affect the pricing structures you have in place in your contract? Doing business in Europe could end up being more expensive than at present. Is there a mechanism in the contract to renegotiate pricing arrangements?

• Free movement – if there are new restrictions on the right of your employees and the employees of the other contracting party to move freely between the EU and the UK what will the effect on your commercial arrangement be?

• Provisions on frustration and force majeure – what happens to a commercial deal when the legal landscape it was built on fundamentally changes? Is Brexit a significant enough event to allow businesses to withdraw from contracts? This will have to be legally tested. And what if – despite the changed context – you want to maintain an existing, mutually beneficial business relationship?

• Compliance with new regulations – After Brexit there is likely to be more than one regulatory regime applicable to contracts for goods and services between EU and UK businesses. So any contract will have to be specific about where the responsibility lies for compliance. Businesses will also need to be alive to the implications of new data security measures , including GDPR

• Enforcement of contracts – How to enforce an English judgment in the EU after Brexit is another area of uncertainty. And it may only be clarified once we know what the final deal looks like. If you are in dispute at present you should think about ways to resolve the dispute under the existing contract terms before any final deal makes enforcement more complicated.

What should my business do now?

As the points raised above show, there are lots of unanswered questions. But it would be an error for businesses to adopt a wait and see approach to the Brexit talks.

You should carry out a review of your existing contracts – without delay. Can a mutually beneficial business partnership be preserved, albeit under a different arrangement? Many existing contracts will have modification of law clauses and may well mention successor legislation. If not, can you renegotiate to anticipate the impact of Brexit? In any new contract you should consider the following:

• Building in flexibility on pricing arrangements
• Widening force majeure provisions to include aspects of Brexit
• Ensure governing law provisions are fit for purpose. As we have said a judgment obtained in a UK court may well prove more difficult to enforce in the EU in future than at present.

Even though as things stand there is a great deal of uncertainty, Nath Solicitors can offer reassurance and explain the practical steps you can take now to reduce your exposure to the consequences of Brexit in existing and future commercial contracts. 

For more information about commercial contracts you can contact CommercialLitigation Firm London City.

 Call us on +44(0) 203 670 5540

Reach us @ https://www.nathsolicitors.co.uk/