Commercial law - Brexit - your contracts

Contracts to undergo Brexit audit. It seems likely Brexit will take place in March 2019 so an existing contract expiring or terminable before then is less likely to be affected. Future proofing will be easier if a new contract is about to be entered. The main concern will be with contracts with an international element now existing and continuing after Brexit. These should be reviewed now to identify post Brexit dangers/ problems surrounding them, followed by an attempt to negotiate change.

Commercial problems flowing from Brexit. These look likely to arise from a change in quotas and tariffs, VAT, exchange rates, difficulties sourcing appropriate labour, and loss/ change of passporting rights if involving financial services. Different transportation routes or storage may become crucial for example.

Legal problems flowing from Brexit. In existing contracts you should be wary of references to the EU in the context of geographical territory or source of law. Will rights be lost when the UK ceases to be within the wider EU territory for the purposes of licensing for example or is the EU territory defined by a permanent list of countries? Does the definition of law/ legislation/ regulation extend to successor law as substituted by domestic law when the treaties cease to be the source? These questions may well be answered by construction of the contract.

By contrast, whether you will be able conveniently to enforce an English court's judgment in the EU member state of a defendant post Brexit depends on what is negotiated between the UK Government and the EU. If nothing replaces the current Brussels regulation the enforcement procedure will depend on the attitude of the court system in the defendant's jurisdiction or wherever else the defendant's assets are located. This considerable uncertainty might be sidestepped by requiring disputes to be resolved by means of arbitration. Awards are likely to continue to be recognised and enforceable in a EU member state by virtue of the EU-external New York Convention and the defendant's domestic laws which will have adopted that international regime.

Existing contract rendered loss making. Brexit will have a significant effect on the commercial substance of some arrangements. If deleterious, will English law/ our courts come to your aid? Where the effect is to transform the obligations into something radically different or makes the contract physically or commercially impossible to fulfil the doctrine of frustration may apply to relieve both parties as might, if lucky with the drafting, a force majeure clause.

Less frequently found is a clause prescribing what is to happen if a material or adverse change takes place. This may allow variation or termination in circumstances less extreme than impossibility but it would come down to the purpose and drafting of the clause and which of the parties it is intending to benefit if not both/ all.

The rules on interpretation of contracts and on the inserting of an implied term can each come to the aid of a problematic contract, but not simply because the contract has become less profitable or loss making as a result of a change in the business or market environment. Those sort of risks lie where they fall amongst the parties. Suppose in an existing contract the goods are being delivered dockside at Rotterdam and suppose post Brexit tariff changes render the EU supply route disadvantageous: the buyer would struggle to persuade that the natural language of the contract permitted a non EU supply route instead, or that a term should be implied giving the buyer a right to insist upon a different route.

Substituted laws. The above are general principles that will cover many contracts. One will also need to monitor the substitution or abandonment of EU regulation in our domestic law such as TUPE, agency and VAT. The transfer to domestic while potentially imposing less stringent law may nevertheless affect the convenience and value of the bargain to one party or the other and thus one's desire to retain, vary or be rid of the contract.

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