Brexit Clauses EM Law

Brexit Clauses – do you need them in your contracts?

Can they be unilateral?

Yes but how likely is it that your opposite number will agree that you alone can benefit from a Brexit clause?

Is there anything else I can rely on? Possibly. Some commentators believe that force majeure clauses can be relied on to offer an escape route if Brexit creates damaging effects but our view is that they should not be relied on unless Brexit-type events are explicitly provided for. If your contract contains a “material adverse change” clause then this may be of help but, again, it depends upon the wording. Material adverse change clauses are more commonly found in corporate acquisition or financing contracts so it is unlikely that your supplier contracts will include one.

If you want a more detailed account of how to protect your business from Brexit then take at look at our other blog post.

Is doing nothing ok?

If you are confident that you will be able to perform your contract despite the possible effects of Brexit then don’t include a Brexit clause because you won’t want your counterparty to have a way of getting out of the contract. This argument disappears, though, if you are in such a strong negotiating position that the other party would accept you have a unilateral right to renegotiate or terminate. If you only enter into short term contracts or contracts that you can terminate quickly on notice then, for the reasons above, it’s probably not worth including a Brexit clause.

Should I include Brexit Clauses in my contracts?

Should I introduce them into my contracts? The main issue for our clients is going to be adverse fluctuations in currency exchange rate. We don’t see changes in regulation being an issue right now. So if you enter into long term contracts that you can’t terminate quickly and exchange rate risk could be a major issue for you then, yes, we would recommend that you introduce them.

If you would like more information on Brexit clauses or to discuss any other commercial law issues contact Neil Williamson at EM Law.