This blog post was written by Amanda Williams – Head of Commercial Law UK
Let me begin by explaining what a Force Majeure Event is… The term is used in Contract Law to refer to extraordinary events or circumstances beyond the control of the contracting parties. Most business contracts have a Force Majeure clause that relieves one or both parties from performance of particular contractual obligations following the occurrence of a Force Majeure Event. In such an event, the party looking to rely on the clause does not want to be liable for its failure to perform its obligations while the Force Majeure Event continues. Most force majeure clauses will also give one or both parties the right to terminate the contract if the force majeure event persists for longer than one month for example.
So, the question is, does Brexit constitute a Force Majeure Event? That depends on the wording of the force majeure clause and the nature of the specific contractual engagement. An example of a Force Majeure clause is: Neither Party will be liable to the other for any delay or failure to perform any obligation under this Agreement (except for a failure to pay Fees) if the delay or failure is due to unforeseen events, which occur after the signing of this Agreement and which are beyond the reasonable control of the Parties, such as blockade, war, terrorism, riots, natural disasters, acts of government, restriction, suspension or withdrawal of any licenses, changes in the law or changes to regulations in so far as such an event prevents or delays the affected Party from fulfilling its obligations. In this example the wording: ‘….acts of government, restriction, suspension or withdrawal of any licenses, changes in the law or changes to regulations….’ could be interpreted to apply to Brexit but before this can be relied upon the party looking to invoke the clause would need to show that Brexit was the sole cause of the delay, that Brexit had prevented or hindered or delayed the performing of contractual obligations and that reasonable steps had been taken to mitigate the effects. I should point out that if Brexit makes your contract less profitable, for example with increases to export tax duty, this alone will not be considered a Force Majeure Event.
We recommend that all new contracts that are entered into after 31st January 2020, that may be impacted by Brexit and the UK’s departure from the EU, should contain force majeure clauses that make specific reference to Brexit related events. On the other hand if you are looking to ensure that the contract you are entering into continues without interruption post Brexit you may want to consider including a clause expressly stating that the UK’s departure from the EU on 31st January 2020 shall not have any adverse impact on the obligations and performance of the contract.
In conclusion – Brexit may constitute a Force Majeure Event but this depends on the specific circumstances of the engagement, the terms of the contract, and particularly the exact wording of the force majeure clause.