No-Deal Brexit: Commercial Contracts/Relationships

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No-Deal Brexit: Commercial Contracts/Relationships

16 Jan 2019

On the 15 January 2019, MPs overwhelmingly rejected Theresa May’s proposed Brexit deal. Assuming she survives today’s no-confidence vote, the PM now has a further period of three working days to present a revised deal or submit a different approach.  If there is not a general consensus in parliament for this (or she does not survive the no-confidence vote), then a “no-deal” Brexit is a real possibility for the UK. Without any positive action from parliament, the UK will automatically fall out of the EU on 29 March 2019. 

Here, commercial advisors from Manchester law firm Kuits consider what businesses should be doing in the context of their commercial contracts in preparation for a no-deal Brexit:

1. Review your supply chain: consider your suppliers and your supplier’s suppliers, where they are located, and how their products are delivered to you. Map out your supply chain from start to finish and identify weaknesses/risk areas.

2. Review your customer base: consider who your customers are and where they are located.

3. Review your processes and procedures: once you have mapped out your supplier chain and customer base, this should assist in identifying key risk areas. In the event of “no-deal”, the UK’s trade with the EU will be subject to non-preferential World Trade Organisation terms and tariffs and required clearances, taxes, duties and labelling (amongst other matters) will change. All of which, if unmanaged, could cause significant delays to your supply and costs to your business.

You should consider carefully how these changes will affect your current processes and procedures – particularly in the context of your lead times, estimated business demand and also your ability to meet your contractual obligations.

4. Review your contracts: you should review your contracts and consider any impact a “no-deal” Brexit may have on your ability to meet your contractual obligations. For example, border delays or required changes to packaging/labelling may make it difficult for you to meet timescales for delivery or agreed prices may simply become uneconomic.

It is unlikely that anything in your contracts will allow you to change your contractual obligations as a result of a “no-deal” and therefore any amendments to contracts will need to be agreed in writing between you and your commercial partners.

Speaking to other businesses in your supply chain at this stage is important to give as much time as possible to resolve any discussion points and minimise the risk of substantial trade disruption in the event of a “no-deal” Brexit.

For further information on how Brexit may affect your commercial position, please contact us or call our commercial team on 0161 838 7986.

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