Without taking steps to protect against existing contract obligations that could be affected by Brexit, you’re inviting risk, says Lindsay Ellis of law firm Wright Hassall.
Here’s his guide on what to check:
Obligations – as Brexit could negatively affect supply chains, businesses should consider the performance of obligations by, and the cost of performance by suppliers and subcontractors; particularly important where increased tariffs apply.
Force majeure – If Brexit was likely when the contract was agreed, a force majeure clause is unlikely to relieve a party from liability, but it may address delays in delivery.
Law compliance – It will be a matter of interpretation whether a clause that states parties must comply with applicable law could oblige a party to absorb the costs associated with Brexit-related law changes.
Change control – Some contacts have clauses outlining procedure if a party wishes to make changes to the agreement. Typically parties are only obliged to make necessary legal or technical changes.
Termination – If the contract has scope for short-notice termination by either party – maybe a consequence of Brexit or failure to agree change – it can be raised as a means of encouraging negotiation.
Frustration – This can apply if later law changes make a contract impossible to fulfil. Unless that is the case, it is generally accepted it won’t help with Brexit for inconvenience, hardship or financial loss.
Interpretation and implied terms – Both relate to knowledge reasonably available at the time of the contract. If Brexit provisions are not included, it might be considered that additional costs have been accepted.
Brexit clause – The best a Brexit clause may offer is a binding requirement for the parties to try and renegotiate the contract.