HCR Law Events

28 October 2020

10 top tips for supply agreements in light of Brexit and Covid-19

Over the last few years you will have been preparing to ensure your supply chains are ‘Brexit-ready’. More recently, your preparations will have shifted to ensure your supply chains are sufficiently resilient and agile to withstand the global impact of Covid-19.

As these actions ramp up, we have prepared ten top tips to consider when you are reviewing your supply contracts.

  1. Consider termination clauses. Given the uncertainty surrounding Brexit, an express termination which is triggered where a contract is no longer commercially viable as result of a Brexit may be appropriate.
  2. Review your insolvency clauses. Make sure your rights are clear and preserve the best position possible for your company if your customers or suppliers go insolvent.
  3. Preserve access to information and data. Do not allow valuable data about services and products to get sealed up in a supplier or customer who has ceased to trade or terminated their agreement. Consider additional contractual provisions to safeguard against this.
  4. Force majeure and Brexit. Consider a force majeure clause which recognises that any issues connected with Brexit constitute a force majeure event and allow relief from obligations under the agreement.
  5. Territory. Check your agreement to see if it defines ‘territory’ by reference to Europe, the EU or the EEA. If so, parties need to consider if it will be interpreted that the UK will be included as part of the contract ‘territory’ during the implementation period and/or beyond.
  6. Check your forecast. Preparing for changes in demand is imperative. Talk to your suppliers and customers to agree a revised schedule to manage increased volatility and uncertain demand.
  7. Review your jurisdiction/dispute clause. While it is likely that post-Brexit exclusive jurisdiction clauses in favour of the English courts will be upheld by the English courts, consider building in arbitration clauses for cross-border contracts in case there is a risk of post-Brexit judgment enforcement problems.
  8. Currency exposure. Check which currency your agreement deals in. Supply agreements that deal in a currency other than sterling are at risk of currency rate fluctuations, so you need to identify and keep track of these.
  9. Authorised representative. From 1 January 2021, UK manufacturers selling into the EU will need to appoint an authorised representative or responsible person based in the EU, EEA or Northern Ireland.
  10. VAT. Prepare for any additional costs arising as a result of the change in VAT rules. At the end of the transition period, supply of goods between the EU and the UK will be subject to the VAT rules on imports and exports.

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About the Author
Gurinder Hayer, Associate

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