David Lowe
Partner
Head of Commercial Contracts
Co-Chair of ThinkHouse
Article
Brexit Bitesize
6
If Brexit happens at the end of this month, that brings a real risk of increased costs and delay to supply chains. We outline the eleven actions to take now to reduce the impact of cost hikes and delays - and answer the most common Brexit supply chain questions.
Brexit will almost certainly mean that there will need to be checks and possibly tariffs on the border between the UK and the EU. Any business exporting or importing goods in or out of the UK will be impacted. This means any business which buys or sells goods in the UK will near certainly be impacted, as most goods have some international element. Brexit brings a high risk of increased costs and delay:
Probably not. A force majeure clause normally provides some protection (eg suspending the contract) if an event outside the control of a party happens which could not reasonably be anticipated. It will be hard to prove this for contracts entered into since the referendum. And the courts have indicated that even contracts pre referendum may not be able to use this – case law shows well that the English courts are not going to want to allow parties to avoid contracts because of Brexit and the costs of Brexit. Higher costs are not usually (ie, virtually never) enough for force majeure, or for frustration as a matter of English contract law.
However, this will depend on the precise wording of the clause in the contract and the actual issue that arises.
We have not seen general Brexit clauses frequently used. This is because it is difficult to say in general terms what the impact of Brexit should have on a contract.
It is better to focus specifically on the terms around duration, price and delivery in the specific contract.
In new contracts what is the key issue to deal with?
If there is one issue, it is making clear where the delivery point is and what the parties' responsibilities are around delivery. If you use an Incoterm with the delivery point it will the allocate responsibility for many of the key issues.
Dealing with customs is the key practical issue for exporters and importers. Read our article on getting customs, VAT and excise regimes ready for no deal brexit.
How to ensure your supply chain is Brexit ready
ICC Incoterms® 2020 has arrived - Key changes and how to prepare for the rules coming into force
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