The Brexit Series: Warranties and Contracts
There is a raft of EU legislation which underpins many major and minor contracts for companies. Clauses related to governing law, data protection, TUPE/ARD, and outsourcing to name but a few are often underpinned by EU legislation. However, the application of Rome 1 and Rome 2 regulations which establish contract law for contractual and non-contractual terms is now uncertain. Likewise, the Brussels Regulations dealing with legal and contractual jurisdiction may also be impacted.
In addition, it is possible that Brexit will result in changes to the underlying trading costs of contracts depending on the future of the single market negotiations. It is possible that new tariffs or additional transaction charges may be imposed on UK trade with EU member states post-Brexit.
"Of the employers surveyed, 70% wanted a clear message that EU residents could continue to live and work in the UK" Business Insider UK
Until further clarity emerges, companies should consider including additional wording and legal constraints in any new contracts to be signed following the Brexit vote. For example, there may be a need to include clauses that provide an express right to amend or terminate contracts in the event of the Brexit negotiations triggering certain occurrences, and to provide protection from significant currency fluctuations that cause a contract to become commercially unviable.
Much of the law governing warranties (such as the compulsory 2-year warranty period on electronics and other hardware) is underpinned by EU law. The general view is that equivalent legislation is likely to be put in place. However until this is assured, organisations may want to ensure that for any significant purchases in the UK, the relevant warranties will still apply under English law, independent of the EU post-Brexit.
Consider these key questions in relation to your Warranties and Contracts and Brexit:
- Has your procurement team done a health-check on existing major contracts, in particular to review governing law, termination clauses and territorial restrictions?
- If your costs change due to Brexit, do you have the ability to change the pricing of contracts in certain conditions if you had to?
- For any new purchases, are you requesting a warranty underpinned by English (and not just EU) law?