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Brexit and your contracts – plan now for the great unknown

Edinburgh, Scotland: As Brexit negotiations continue and uncertainty remains, there is something that you can do now to minimise the risks to your business, writes Claire Scott at law firm Burness Paull.

“It is true that we don’t yet know what a post-Brexit world will look like. What will the economic impact of Brexit be? Will a transitional deal be agreed and if so, on what terms? What will happen at our borders in relation to goods and people? How will Brexit affect our laws? What will the final deal be? Indeed, will there be a deal?

This uncertainty creates risks. However, there is much that businesses – large and small – can do now to prepare for the best and worst case scenarios. Many companies are already assessing risks and opportunities and putting in place post-Brexit plans.

As part of this strategic planning, we are working with clients to review long-term contracts and also carefully consider the terms, and timing, of any contracts that will be negotiated prior to Brexit. Any existing contract which extends past exit day (currently 30 March 2019 unless a different date or extension is agreed) is worth sense-checking. At the very least it is good to plan for the risks, and possibly the opportunities, involved. In some circumstances you may even be able to re-negotiate certain terms to deal with any Brexit impact.

Do you anticipate increased costs or delays? Could there be difficulties in meeting the contract as a result of Brexit? Have you thought about your pricing? Might you need an escape route? How might Brexit affect the other party? What about enforcement of the contract? These are just some of the issues to think about. For new contracts which you are currently negotiating, the same issues need to be considered.

Whether you are renegotiating existing long term contracts, or entering into new contracts, the risk is that events unfold in an unexpected manner which adversely affect one of the other parties to a contract. That can lead to conflict. Conflict can lead to litigation.

The UK courts will not necessarily interfere in ‘a bad bargain.’ Nor will they rewrite carelessly drafted agreements, or come to the aid of a party who gambled on a future outcome just because, in a post-Brexit world, the contract did not pan out as intended. Instead, judges will look at the ordinary meaning of the language used in the contract.

The words you use in your contracts matter – take the time now to review them. Clear drafting for the uncertainties around Brexit is critical.

Do not assume, that the terms of existing pricing, termination or breach of contract clauses will be enough for the purposes of Brexit. Some clauses may not work or make sense. They may result in unintended consequences post-Brexit. You may need a Plan B. Plan now.