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BREXIT AND COMMERCIAL CONTRACTS: Part 1 (B2+)

As most people in Europe know, in June 2016 the United Kingdom (UK) voted to leave the European Union (EU). The process of the ‘British exit’ (‘Brexit’) had begun. Since then, much of the focus of Brexit, certainly in the UK, has been on the politics of the issue. In many ways, it seems almost like the business and commercial aspects, and impacts, of Brexit have been forgotten.


In late October 2020, it is still uncertain what kind of trade agreement the UK will have with the EU after 31st December 2020 – or if there will be one at all! This, of course, creates a lot of uncertainty for businesses, both in the UK and the European Union, who have existing contracts for the supply of goods and services. Whatever the future trading arrangements may be between the UK and the EU, it is easy to see the potential for contractual disputes to arise in the coming months and years.


Pausing here for a moment, can you think of any potential contractual issues that may arise in relation to cross-border commercial contracts between businesses in the UK and EU after 31st December 2020? Make a note of a few. In this series of posts, we will look at just some of the potential issues.



Here are a number of possibilities:


· whatever trade arrangements are agreed, no contractual issues will arise;

· the new trading arrangements now make an existing contract a ‘bad bargain’, or a ‘worse bargain’, for one or both of the parties;

· the new trading arrangements make performance of some or all of the existing contract illegal;

· the new trading arrangements make performance of the contract impossible;

· some parts of the existing contract have changed the meaning of some parts of the contract.

Companies and firms both in the UK and EU have faced uncertainty for a long time about how the final trading arrangement will actually affect their own cross-border contractual relationships in the longer term. This uncertainty is still not resolved. However, they can – and should – start to look at their contracts and think about the kind of general problems that may arise in the future.


In the next post in this short series, we will look at some of those potential problems. In the meantime, you can think about the following:


1. What possibilities exist in your jurisdiction if political, social, or economic changes take place which now make an existing commercial contract a ‘bad bargain’ or a worse bargain than the parties had imagined at the time the contract was executed?


2. How does contract law in your jurisdiction deal with contracts which are illegal from the start (also called illegal ‘ab initio’ (pronounced ‘ab in-ish-ee-oh) or become illegal because of some later political or legal change?


3. How does contract law in your jurisdiction deal with the situation when something makes a contract impossible to perform?

See you next time.


Notes:


1. ‘Contract’ is a noun. When it is being used as an adjective (to describe something), the adjective form is ‘contractual’. We would therefore say:

A contractual dispute has arisen.

rather than ‘A contract dispute has arisen.’ Likewise, an obligation in a contract is referred to as ‘a contractual obligation’.

2. ‘cross-border’ is an adjective. However, it is a ‘compound adjective’. This means that two different adjectives are brought together to form one adjective. When this happens, it is important to remember to hyphenate (-) the two adjectives that are being used. For example, if your contract has 6 pages, we call it ‘a 6-page contract’.

3. A ‘bad bargain’ is a deal or agreement which, for some reason, is not advantageous to one or both of the parties to it. In English, it is used in an idiom, ‘to make the best of a bad bargain’. This means to deal with and create the best outcome from a bad or negative situation.

4. ‘Illegal’. There is a difference between something which is ‘illegal’ and something which is ‘unlawful’.

· Illegal – ‘Illegal’ essentially means something is specifically forbidden because of a law that has been passed which forbids it. Something which is illegal is ‘against the law’. ‘Illegal’ is often used in relation to criminal acts; for example, ‘It is illegal to steal someone else’s property.’ (because there is a law that forbids it).

· Unlawful – ‘Unlawful’, essentially, means something which is not permitted or authorised by the law. ‘Unlawful’ is often used in relation to breaches of civil law; for example, ‘It is unlawful to trespass on someone else’s property.’ (because the law does not authorise it).


5. 'Execute'. 'To execute a contract' essentially means 'to sign'. Once a contract is signed, or 'executed', by the parties to it, it becomes legally binding and enforceable.

© Cambridge Legal English Academy 2020

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