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News

6th February 2017

 
 

Brexit and Commercial Contracts

With plans in motion to get talks with the EU underway by 31st March 2017, it is currently unclear what the trade model for the UK will look like post-Brexit. 

What is clear is that Brexit could potentially have a profoundly disruptive impact on commercial contracts in the interim, by altering the commercial bargaining that underpins those contracts. 

Where a contract is no longer economically viable, parties may find themselves in a position where they are either reviewing the termination provisions within such contracts, with a view to bringing the contract to an end, or checking whether the contract caters for a situation where they can renegotiate the agreed commercial terms. 

If a contract contains a force majeure provision, businesses may also be hoping they can rely on there being a material adverse change, as a result of Brexit, to trigger these provisions and bring the contract to an end. Whether this is possible will depend on the exact wording of such a provision but the general market consensus seems to be that, in the absence of specific wording contemplating and catering for any negative impact on trade as a result of Brexit, it is unlikely that Brexit could be used as the reason for triggering a force majeure provision within a commercial contract. 

In the meantime, businesses would be wise to review their commercial contracts, particularly if their business is dependent on cross-border trading relationships, sensitive to changes in taxes and tariffs or currency exchange rate fluctuations. Businesses should also consider the wording contained within their force majeure and termination provisions and perhaps look to include price adjustment mechanisms that are robust enough to cater for possible economic hardship that may arise as a result of Brexit. 

For more information please contact Jonathan Masucci on 01622 759051 or by email to jonathan.masucci@gillturnertucker.com

 
 
 

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