15 October 2018

Brexit: Impact on commercial contracts

Potential impact

    • Many of our general contractual principles are not EU-derived so should be largely unaffected.
    • More problematic are existing, and particularly long-term, commercial contracts with provisions now having an unintended effect on the commercial deal originally struck.
    • Volatile currency fluctuations are not something many long-term commercial contracts cater for as it is, by its nature, an unusual occurrence. However, these can have a major impact on provisions in contracts which permit price changes on either side of the bargain.
    • Price change clauses in commercial contracts – if clauses permit price increases due to increased costs of raw materials, for example, the commercial deal originally struck may no longer be financially viable.
    • The introduction of trade tariffs specific to each country with which we have a trade deal will likely have a significant effect on the commerciality of existing arrangements. It is very probable that these long term contracts will need to be re-negotiated in order to ensure they remain commercially viable.

What to do at this stage

    • Ensure your business has a contract register so you have a clear view on which of your commercial contracts are long term in nature and which might be impacted by changes in currency, price changes and changes in export and import tariffs.
    • Evaluate from that contract register which contracts are most vulnerable to being commercially unprofitable in the event of changes such as price fluctuations, tariff changes and therefore any that might need re-negotiation sooner rather than later.

For a more in-depth analysis of the impact of Brexit on commercial agents read our article.

For a more in-depth analysis of the impact of Brexit on distribution agreements read our article.

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