What does Brexit mean for my contracts?

UK EU BrexitI wrote the other day about how Brexit will affect personal data. How will Brexit affect your contracts, including your cloud contracts?

Unbelievably, we still don’t know what Brexit will look like even though it’s only a few months away. Nevertheless, you should use the time remaining to assess whether your existing contracts will be affected by Brexit and whether you need to renegotiate or end the contract. For new contracts, you have the opportunity to address these issues upfront.

Tariffs

Deal or no-deal? If Brexit means the imposition of tariffs on the products or services in the contract, you can absorb these up to a point. But you might wish to revisit this if the tariff sees the price increase by more than, say, 5%. Include the right to renegotiate the price or, in the worst case, end the contract.

Choice of currency

Sterling has dropped since 2016. Is it still the best currency for your contract with a US provider? Or a French customer? Consider adding a clause allowing you to switch currencies.

Currency fluctuations

As with changes to tariffs, you can absorb minor currency fluctuations. But what if there are further drops (or surges) in the currency? Consider a clause which allows you to negotiate prices where the fluctuation is +/-5% or which allows you to end the contract.

Choice of law

The choice of law you express in the contract will continue after Brexit. Much of English contract law is based on common law / judicial precedent and Brexit won’t really change that. But what if your customer or supplier is based in one of the remaining 27 member states? You could stick with English law or swap to their jurisdiction. Remember, there is no such thing as EU contract law – yet.

Choice of courts

Judgments of English courts should continue to be enforceable in the remaining 27 but we wait to see what Brexit will look like. If you prefer, you could switch to arbitration which should continue whatever form Brexit takes.

References to EU legislation

Some EU legislation will cease to have effect including, seemingly, the four freedoms: capital, people, goods and services. The EU Withdrawal Bill will preserve the application of much EU legislation in the UK – such as the protections for employees and commercial agents. So no change there. But the UK Parliament can decide to change it at any time so keep an eye out.

Data protection

I wrote about this previously. If your contract involves the collection, sharing, use or storage of personal data, you should probably adopt robust clauses. Or even the EU model clauses.

Impossible provision

If Brexit renders your contract impossible to perform – perhaps because it relies upon financial passporting rights or the free movement of people – then maybe you should include an express termination right.

Territory

If you refer to the EU in your contract, you should consider whether this should include the UK after Brexit.

Force majeure

If you have not prepared expressly for Brexit you might be able to rely upon the force majeure clause. Remember, a no-deal Brexit is certainly an uncontrollable event for you and your customer / supplier but not really an unexpected event. As you can foresee some form of Brexit, do you really want to rely upon a generic clause that deals with terrorism and severe weather? It’s probably better that you consider Brexit in advance.

What should you do now?

Prepare for Brexit and assess your contracts. If necessary, negotiate changes to your contracts or end them. Oh, and contact your lawyer if you need to. Or contact me. If you’re a client of Wallace already, then feel free to contact the person you normally deal with.

 

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