Despite the gradual Brexit process, uncertainty lingers over businesses on both sides of the Brexit border. The true impact of Brexit on the EU-UK trade will inevitably become apparent with time.
Meanwhile, fulfilling the contractual obligations and rights has become increasingly complex for all parties, raising concerns regarding the disastrous results for businesses bound by cross-border contracts. This brings us to the question that everyone has been thinking about – could Brexit constitute a force majeure event? Read on to find out.
The Significance of the Force Majeure Clause
The first thing to understand is that businesses can rely on the Majeure clause only if the initial contract contains a force majeure clause. The primary reason why a force majeure clause is included in the contract is to excuse one of both parties of the contractual obligations in case of certain events beyond the control of the parties. It is crucial to understand that the wording of the clause determines whether it can be invoked for a particular event like Brexit.
Does a Force Majeure Clause Cover Brexit?
Businesses may be able to invoke a force majeure only if the initial contract includes a force majeure clause. However, it is easier said than done. There are numerous complications and hurdles along the way.
For instance, if the force majeure events are defined as happenings beyond the parties’ consent, invoking the Majeure clause for Brexit will present certain challenges because events are described as outside of a party’s control only if the party has taken all possible steps to avoid the event or at least minimize its effects. If Brexit was a possibility at the time the contract was signed, the parties entering the contracts should have accounted for the risks involved and planned for the potential effects.
Furthermore, even if the exact wordings of the clause mean that the particulate Brexit event falls within the definition of the force majeure, the party seeking to invoke the close Majeure clause must demonstrate that Brexit is the sole reason preventing them from fulfilling their contractual obligations and duties. Demonstrating the effects of Brexit to prove it is the sole reason the party is unable to perform the obligations under the contract can be a challenge.
Even if the contract is deemed less profitable because of currency fluctuation or any other reason associated with Brexit, it does not constitute a force majeure event as long as Brexit does not prevent one or both parties from performing the cross-border contract.
The Bottom Line
While it is highly unlikely that the force majeure clause will assist in regards to the effects of Brexit, it ultimately boils down to the precise wordings of the clause used in the cross-border contracts. Get in touch for further inquiries or schedule a free consultation with our international team of lawyers to explore your options.
