Frustrated by Brexit? New paper on the implications of leaving the EU for long-term contracts
- Is my long-term contract Brexit proof? explores the options available under English law for dealing with legislative changes which affect long-term contracts – such as the application of a new legal context to existing contracts
- Parties will need to consider renegotiation, termination, or force majeure clauses.
- The threshold for the legal test of ‘frustration’ is unlikely to be met by Brexit in most instances
- New legislation may be required to trigger the right to re-negotiate a contract affected by significant external change
The fifth in a new series of briefs bringing current legal thinking to bear on public policy issues has been published by GLOBE, a research centre within the University of Warwick’s Law School.
Is my long-term contract Brexit proof? by Professor Christian Twigg-Flesner, Chair in International Commercial Law at Warwick Law School, highlights the issues likely to be faced by parties to long-term contracts entered into before Brexit was envisaged and the options available if either party wishes to adapt the contract to reflect the new relationship between the UK and the EU.
In the paper, Professor Twigg-Flesner explains the principles of English common law which apply when the performance of a contract is affected by legal or policy changes, and explores the options available to contracting parties and their legal advisers.
He also discusses the doctrine of “frustration” which applies when an unforeseen event makes the continued performance of the contract extremely difficult, or even illegal. The courts apply a very high threshold to this test.
Professor Twigg-Flesner said:
“There is still significant uncertainty as to the form Brexit will take, but it is very clear that the UK’s withdrawal from the EU will have a significant impact, particularly for contracts and other private law relationships.
“In the absence of legislation, practitioners will look to the principles which have been developed at common law, including the principle that new legislation generally does not apply retrospectively – but there are exceptions to this.
“Given the extremely high threshold that applies to the doctrine of frustration, we may even see calls for legislation which would allow parties to a contract a statutory right to re-negotiate when there is a significant change in the external context.”
Dr Andreas Kokkinis, Assistant Professor at Warwick Law School and editor of the briefing series, added:
‘‘As Brexit continues to dominate the headlines we are delighted to offer this expert insight into the implications of the UK’s departure on long-term private contracts.
“Professor Twigg-Flesner’s brief highlights the need for contracting parties to be aware of the limited options available to them under common law to adapt their contracts, and suggests that Brexit may trigger a radical change to the current non-interventionist stance of English contract law.”
The aim of the GLOBE policy brief series is to improve the factual base on which policy decisions are made and share cutting-edge academic research in an accessible and relevant manner with policymakers, the media, civil society groups and the general public.
Previous papers in the series explored the regulatory impact of the UK’s withdrawal from the European Union on the UK’s financial services sector, and the consequences of Brexit for intellectual property laws and policies, and the UK’s ability to influence European and international norms in this field.
For more information visit: go.warwick.ac.uk/globe/policybriefs
NOTES
The Centre for Law, Regulation and Governance of the Global Economy (GLOBE) at Warwick Law School, created in 2014, is a research and public engagement centre that brings together staff and postgraduate students working in international economic law, business and commercial law, corporate governance and financial regulation.