The end of the Transition Period on 31 December 2020 will have an impact on the leisure and hospitality sector, both for businesses within the UK and those domiciled in the EU. In this article, we highlight seven key contractual considerations:
The existence of EU/UK trade tariffs has not been confirmed, but it now seems very unlikely that there will be free trade across the board between the UK and the EU. In addition, the wider economic impact of Brexit on the economy could have a knock-on effect on currency values and exchange rate fluctuations. Businesses in the leisure and hospitality sector taking bookings from abroad should therefore consider the assumptions upon which their pricing is based and where possible use flexible pricing models. If fixed pricing is a necessity for the end-customer, it is advisable to specify the period for which the quoted pricing applies and include change control mechanisms to allow the pricing to be varied as a result of any substantive effects that the end of the transition period has on the cost of doing business.
It is likely that lead times will be increased by greater customs formalities and red-tape at the border after the transition period. Suppliers to hospitality businesses outside the United Kingdom should specify that “time of delivery is not of the essence of the contract”. This will, in most circumstances, prevent the customer from terminating the agreement for late delivery. For businesses with suppliers in Europe, beware late delivery and include such clauses in your contracts specifying that “time is of the essence”.
3. Force Majeure
Force Majeure typically applies when an extraordinary event or circumstance beyond the control of the parties prevents them from fulfilling their contractual obligations. The effect of a force majeure clause will be to excuse a party from further performance of a contract, either in part or in full, for the duration of the event. Given the foreseeability of the end of the transition period, it is unlikely that Brexit will, in and of itself, constitute a force majeure event. For the avoidance of doubt, businesses in the leisure and hospitality sector which regularly take bookings for events should consider expressly excluding Brexit and its consequences from their list of force majeure events.
More important than entering into a contract is considering how to end it if the effects of the end of the transition period mean the contract is no longer financially or commercially viable. Unilateral termination for convenience clauses can be used in circumstances of particular uncertainty. Alternatively, businesses can consider using termination triggers to cover specific risks, for example, the introduction of trade tariffs above a particular amount.
5. Data Protection
At the end of the transition period, the UK will be considered a “third country” with respect to the GDPR. The government has said that transfers of data from the UK to the European Economic Area (EEA) will not be restricted. However, from the end of the transition period, GDPR transfer rules will apply to any data coming from the EEA into the UK. Businesses receiving personal data, for example from booking agents based in the EU, will need to consider whether it is necessary to safeguard the transfer of personal data by using the EU’s Standard Contractual Clauses.
6. Change Control
In the event of a no-deal Brexit, the legislative landscape in the UK will be uncertain. The UK may, in such circumstance, choose to diverge significantly from the current legal status quo with unforeseeable consequences. Contractual flexibility is therefore essential for businesses in the leisure and hospitality sector. Change control/contractual variation procedures should therefore be carefully drafted in order to incorporate the introduction of any new legislation in the UK. It is also worthwhile for parties to agree in advance who will bear the costs of compliance with any new laws in order to avoid unforeseen termination or unwittingly entering into an agreement that is not commercially viable.
The issue of which regime will govern jurisdiction and the enforcements of UK judgments in the EU is currently uncertain. However, it is clear that the straightforward enforcement of UK judgments in the EU (and vice versa) under the Brussels Recast Regulation will no longer be an option. Businesses contracting with parties outside of the United Kingdom are, for the time being, advised to include arbitration clauses in their terms and conditions and rely on the New York Convention to enforce the outcome of arbitration.
For more information about commercial contracts with Brexit, please do not hesitate to contact Calum Parfitt on [email protected]
Consistent with our policy when giving comment and advice on a non-specific basis, we cannot assume legal responsibility for the accuracy of any particular statement. In the case of specific problems we recommend that professional advice be sought.