Do your contracts need a ‘Brexit Clause’?

Added: 06 January 2020

Hauliers involved in cross-border transport should consider inserting a ‘Brexit Clause’ into their commercial contracts, to avoid being locked into unaffordable agreements.

On her City Law Firm website, business lawyer Karen Holden defines a Brexit Clause as “a contractual clause or document that triggers some change in the parties’ rights and obligations as a result of a defined event occurring, such as Brexit itself. This would

state that for example Brexit would not act as a force majeure event and would not be able to end or frustrate a contract.”

She adds: “For some contracts, the most a Brexit clause may offer is a binding requirement that the parties will attempt to renegotiate relevant aspects of the contract and that business will continue as normal between the parties. For others, where it may be possible to specify consequences of certain events, the risk remains that events may occur for which the parties have not made a provision.

“A Brexit clause is not a ‘silver bullet’ which will solve all Brexit-related issues and problems, but it at the very least provides parties with certainty that the other party will not hold it to onerous terms without the possibility of negotiation.”

Karen Holden also warns that doing nothing is not an option: “The risk to your business of not drafting to address Brexit is that a party could be obliged to continue to perform its obligations in full, even if, as a result of Brexit-related events, doing so has become commercially unattractive or worse and the cost could be unaffordable. An affected party may be unable to renegotiate its contract and so may find itself in breach of contract and facing termination for default and an action for damages or litigation could commence.”