Retail News|March 2019|www.retailnews.ie|23
Brexit & Contracts including express termination rights in agreements, through force majeure or MAC clauses, where an adverse event arises.
these types of clauses can be triggered as a result of Brexit will depend on the wording of the relevant clause. It is unlikely that the very fact of Brexit in and of itself would trigger such clauses, absent specific wording to that effect. It is, however, possible that legal changes that come about as a consequence of Brexit, and the impact of such changes, might trigger those clauses. What is Frustration? A frustrating event would generally be an event which could not have been foreseen by the parties at the time of entering the contract.
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In the event of a no-deal Brexit, one can see how it might be argued that this constitutes an unforeseen adverse event in contracts that were entered into prior to the original Brexit vote in the UK.
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A contract will not be frustrated merely because performance has become more expensive or due to changes in economic conditions. Rather, for a frustration argument to succeed, it would need to be established that
an event has occurred of sufficient seriousness that it renders performance impossible or the obligation fundamentally or radically different from what was agreed to when the contract was entered into. For example, currency fluctuations are less likely to be a frustrating event than an inability to source products that meet revised regulatory standards. The doctrine of frustration is a narrow one and the burden of proving it is onerous. There is very little case law on the doctrine of frustration. One reason for this is that commercial parties have, for many years, sought greater contractual certainty by
What are Force Majeure and MAC Clauses? Force majeure clauses generally operate so as to excuse performance of particular contractual obligations on the happening of certain specified events beyond a party’s control. However, there is case law to the effect that a change in economic circumstances which affects the profitability of a contract or the ease with which the parties’ obligations can be performed, does not constitute a force majeure event in the absence of express wording to the contrary. Similarly, MAC clauses are designed to relieve a party of its obligations on the occurrence of an unforeseen adverse event. These are very common in finance documents. For example, where the prospects of a business have been materially adversely affected by Brexit, a lender might wish to rely on a MAC clause to limit its ongoing exposure to that business. Can You Brexit-Proof New Contracts? In the event of a no-deal Brexit, one can see how it might be argued that this constitutes an unforeseen adverse event in contracts that were entered into prior to the original Brexit vote in the UK. However, for more recent contracts, it will be more difficult to argue that this possibility could not have been foreseen and, for this reason, ‘Brexit clauses’ have been included in commercial contracts more frequently in recent months.