One of the unintended (and increasingly urgent) consequences of any Brexit is the possible impact on existing commercial contracts. 

Some sectors (notably, insurance) have engaged early on the question of ongoing policy validity in the UK and EU after Brexit. 

But the impact on existing contracts is not yet clear for many other sectors. So, a huge number of business critical contracts are yet to be reviewed for Brexit resilience.  

Although English contract law will be largely unaffected by even a "hard Brexit", there are a number of ways that Brexit-related events could affect contractual relationships. For example, suppliers' costs may increase where tariffs and customs requirements are introduced or exchange rates fluctuate significantly. This could render existing payment mechanisms obsolete. 

The loss of "passporting" rights would mean that a financial services firm may not be able to continue to deliver services under the existing contract. 

Although existing Change in Law provisions may assist in the event of a Brexit-related legislative change, many businesses have adopted (or are considering) so- called "Brexit clauses”. 

These are specific contractual provisions which address particular Brexit circumstances and set out the consequences for the contract. Such provisions give more legal certainty than attempting to rely on more general boilerplate terms. 

A standard Brexit clause will set out 1. what specific circumstances must arise for the clause to be engaged and 2. the changes in the parties' rights or obligations which arise as a result of that specific event. 

Brexit clauses can provide for the full range of consequences. Common examples include contract termination/contract shortening; allocation of extra costs between the parties; or allocation of responsibility for a particular obligation arising out of Brexit (such as to obtain any new authorisations or permits which may be required). 

Clyde & Co is hosting Brexit: Ensuring Supply Chain Resilience on 10 October 2018 in London. For more information and to register to attend, please click here.

For more information or advice, please email brexit@clydeco.com or your usual Clyde & Co contact.