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  • Overview

    It is fair to say, that businesses are still mostly uncertain about what impact Brexit will have on them.

    But businesses should be able to play a series of “what if?” games and be able to mitigate some of the risks that Brexit could impose.

    One analysis that is worthwhile is looking at contracts with suppliers and customers (in particular standard terms and conditions) and checking whether liability is excluded or limited for possible Brexit ramifications.

    Legal background

    In the absence of anything in the contract to the contrary, a party is liable for all the reasonably foreseeable losses of a failure to perform its obligations under a contract (Hadley v Baxendale 1854.)

    So, in the absence of any limitations to liability, if a pop-star pulls out of a concert at the last minute, they are liable to the ticket holder for the cost of the ticket (definitely foreseeable) and probably their reasonable travel costs (reasonably foreseeable) but not those losses that are too remote, such as their lifetime of lost income because missing the concert meant they were not inspired to a singing career, and therefore did not become, a high-earning pop-star.

    Is Brexit reasonably foreseeable?

    Whatever your views on Brexit; the possibility/probability of it is undeniable for any contracts that were entered into after the referendum result in June 2016. 

    What may happen as a consequence of Brexit? Is “that” reasonably foreseeable?

    This is tougher.

    The Government has prepared for lots of contingent scenarios and these can provide some guidance.

    For example (and of particular relevance in relation to contracts for supply of goods) there has been much worry about disruption and  delay at the borders for goods travelling to and from the European Union and  anyone that lives, works or travels through Kent, will be aware of the preparations made on the local motorway networks, as a result. The sheer fact of the contingency plan means the possibility is out there and therefore foreseeable (although one would hope that the plans make the probability of significant harm much lower).

    Can I rely on Brexit being a force majeure event?

    It seems unlikely that Brexit itself would be declared a force majeure event. 

    Any analysis of whether a force majeure event had occurred would be circumstantial and require a detailed analysis of whether one or more of the consequences of Brexit fell within the particular contractual definition of force majeure. For example, a radical under-staffing problem caused by a lack of migratory labour may be arguable.

    The recent decision of the High Court in Canary Wharf v European Medicines Agency, [2019*] looked at the circumstances of a lease of property in light of Brexit and said in that case, that Brexit was not a frustrating event. As such, businesses stuck in unprofitable contracts or contracts they are unable to perform due to Brexit cannot seek to rely on the doctrine of frustration either.

    What to do then?

    In the case of delay to goods coming or going, businesses should look to amend their terms and conditions of supply and/or sale to expressly exclude any liability to their counterparties for damage related to such delays. Similarly, a business can exclude liability for failure to perform a contract as a consequence of a lack of staffing.

    In general, businesses should think through the “what if” scenarios and be express in their contracts about which party will bear the risk related to possible outcomes, by either apportioning/limiting liability or excluding liability altogether.

    *case being appealed to the Court of Appeal.

  • Related Services

    Brexit

    The UK's vote to leave the EU may have profound implications for businesses and their future plans. 

    Commercial

    We draw on our extensive legal, commercial and industry expertise when working with you to achieve your strategic objectives.

    Commercial contracts

    We can deal with all the stages of a commercial contract – from initial structuring and head of terms to preparing, negotiating and completing the contract documentation. We can also advise you on contractual disputes that may arise during a project and provide assistance with terminating a business relationship.

Get In Touch

By submitting an enquiry through 'get in touch' your data will only be used to contact you regarding your enquiry. If you would like to receive newsletters from Thomson Snell & Passmore please use the separate form below.

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