Brexit and GP commercial contracts: what should you be thinking about now?
It’s more important than ever for GP practices to think ahead about the potential impact Brexit has on commercial contracts.
You need to be considering your portfolio of commercial contracts to work out whether you’ll have to re-negotiate, or have the right to terminate, contracts, as a result of Brexit. This is particularly important if there’s any concern that your contract will become uneconomical or – in the worst case – unprofitable, post-Brexit.
Below, we’ve listed some of the potential impacts Brexit may have on commercial contracts within GP practices:
The cost of trade
If the UK leaves the single market when it leaves the European Union, GP practices may face additional cost from importing and exporting goods between the UK and EU. Changes in import and export charges, delays in delivery, fluctuations in currency, warehousing costs, as well as the increase in administration costs, could put considerable strain on the feasibility of maintaining and continuing to perform a contract. The most obvious example of this when it comes to the medical sector in general is the pharmaceutical trade. Many of our medicines come from Europe – from there, they are shipped to wholesalers here who then distribute them to pharmacies and hospitals to be dispensed to patients. GP practices may wish to review their pharmaceutical contracts in light of Brexit, although in the shorter term availability of pharmaceuticals throughout the immediate Brexit phase is the primary concern.
Transfer of personal data
GP practices naturally store huge amounts of personal and sensitive data about their patients. Until now, if this data has needed to be transferred between the UK and EU, certain legal frameworks and procedures have been in place. In a post Brexit landscape, this is likely to change. Advice is to monitor developments in the legal framework which governs these types of transfers to make sure there’s no impact on you. Keep an eye on this over the next few months, and post-Brexit, too.
Termination
Brexit may have such an adverse impact on a commercial deal that you might want to terminate it. You’ll need to look at whether or not the contract contains a right to terminate for convenience or on notice. If it doesn’t, you might want to consider whether Brexit constitutes an event of ‘force majeure’ (more below) – or has frustrated the contract, as outlined below.
Frustration
If something happens after you’ve entered into a contract that makes your obligations under it different than intended, or makes it impossible to fulfil, this is called ‘frustration’. If you’re considering relying on frustration to terminate a contract, make sure you establish that Brexit was unforeseeable when you entered into the contract and that it’s now impossible to fulfil as a result. Be aware, though, that a court will have to decide whether frustration has occurred or not.
Force Majeure
You could argue Brexit constitutes an event outside of your control, which has meant you’re no longer able perform a contract. But, to successfully argue this, the contract must have become physically or legally impossible to perform – not merely difficult or unprofitable. If you’re negotiating future contracts, think about including Brexit, or an event arising because of Brexit, as a specific force majeure event.
Brexit clauses
A Brexit clause is intended to trigger a change in your rights and obligations under a contract, which is likely to be a favourable option if you don’t want to terminate it entirely. The trigger event might be Brexit itself, or a defined event that occurs as a result of Brexit. Including this type of clause gives you certainty around your rights and obligations and will trigger changes to avoid the contract becoming uneconomical or unprofitable.
What should I be doing now?
- Audit your contracts – establish if any of them could be affected post-Brexit and take necessary action.
- Renegotiate – Re-negotiating a contract might be attractive to both parties. Even if the contract doesn’t have the right or opportunity to exit or re-negotiate its terms, you may be willing to review and re-negotiate outside of a contractual review period if there’s an incentive to do so, like the uncertainty of Brexit.
- Termination – Consider whether the impact of Brexit is so significant that your only feasible option is to terminate your contract. If so, consider whether you have any express right to do so – whether for convenience, on notice, or because of an event arising as a result of Brexit. If you don’t, explore the possibility of force majeure or frustration.
Stay ahead of the game.
This article was created by employment law specialist Richard Thomas of our partner firm Capital Law, providing expert legal support on behalf of BMA Law.
Whatever the outcome post Brexit, BMA Law are here to help. Contact us now for support in updating contracts to ensure you stay protected.