The Impact of Brexit on Commercial Contracts
We analyse this in two parts (1) Existing contracts and (2) Contracts being negotiated now
- The legal enforceability of existing commercial contracts should not generally be affected by Brexit.
- Enforceability issues will likely only arise if the operation of a particular contract was wholly or largely dependent on the on-going operation of particular EU legislation in the UK.
- EU laws relevant to commercial contracts have largely been incorporated into UK law, and we do not expect they will be repealed any time soon. Furthermore, UK contract law and rules of interpretation have largely developed through case law, rather than EU regulation, so these principles should remain good.
- However, most pre-Brexit contracts will have been drafted on the assumption of the UK’s membership of the EU. For this reason it is recommended to conduct an audit of contracts to identify which are subject to UK laws, and which have a term exceeding the two-year negotiating window before the UK formally leaves the EU.
- Any contracts that define the EU as its territorial scope should be amended to identify the United Kingdom and the EU. This will be relevant, for example, for distribution, agency and franchise agreements.
- The uncertain nature of withdrawal terms suggest that termination rights for certain contingencies, such as exclusion from the single market, should be negotiated.
- Brexit’s impact on the free movement of goods and services may increase the cost of doing business with UK customers. Trade barriers between the EU and UK may require a renegotiation of prices and/or the level of risk a party is willing to take.
- Contracts which involve a human resource travelling to or from the UK, such as consultancy services, may become more cumbersome and expensive, which again may impact on the cost of these services.
- As UK and Irish laws diverge, commercial contracts will have to address legal issues that were previously aligned in each jurisdiction. For example, UK and Irish competition law, which restrict unfair practices by dominant or colluding companies, may become subject to diverging regimes, the legal implications of which will have to be dealt with when entering into commercial contracts with a cross border element.
- Parties should consider the governing law of new contracts. If a common law system subject to EU primacy is desired then Irish law is an obvious choice.
If you have any questions on the impact of Brexit on Commercial Contracts, please contact one of our team below, or our Managing Partner, Declan Black.