Of course, your ultimate decision will depend on several factors, from how long you want the policy to last, how much you want to pay, and whether you’re happy for the policy to simply pay out a death benefit or whether you also want to use it as an investment tool.

The Differences Between Term and Permanent Contracts

While there are many different types on the market, all types can be categorised as either term life insurance where, as the name suggests, the policy lasts for a specific number of years but will only pay out if you die before the policy expires and permanent life policies which cover you for your entire life and will always pay out a guaranteed death benefit. But which type will be the best option for you? We take a quick look at the pros and cons of each type of coverage – but, of course, you should always consult a financial advisor to help you to assess your situation and make the final decision.

The Pros and Cons of Permanent Insurance

Several different types of cover come under the umbrella of permanent policies; however, the most common, the whole life policy, typically lasts until your death providing you have paid your premiums.

• Pros:
  • It covers you for your whole life.
  • Premiums remain the same throughout the life of the policy.
  • You will receive a guaranteed payout on your death.
  • It also acts as a savings plan, building a cash value which can be withdrawn or borrowed against.
  • You can also sell your policy to one of the companies that will buy existing life insurance policies. Of course, you will need to research your options to find out whether this is the best solution for you.
• Cons:
  • This type of coverage is typically more expensive than term life or other types of permanent policies such as guaranteed universal life.

The Pros and Cons of Term Insurance

With term insurance you opt to cover your life for a specified period of time, so you can choose a policy that will just cover you for a year or one that provides cover for ten, twenty or thirty years or another specific time period.

• Pros:
  • Premiums are fixed throughout the term and amongst the lowest of all types of policies for the level of cover provided.
  • If you simply need a policy to cover you for a brief period of time, an annual policy is a great option. This kind of policy can be renewed annually.
• Cons:
  • If you don’t pass away within the timeframe specified in your policy, it will expire, and no payout will be made to your beneficiaries.
  • There is no savings or investment element to this type of policy. It only provides a payout on death.

Many start-up businesses are short on cash, and there is a temptation to try and save money by missing out costs which are deemed non-essential in terms of the day-to-day operation of the business. In reality, legal protection and a sound financial strategy could be the difference between a short-lived project and a long-term success.

Here are 7 ways to ensure your start-up business is legally protected.

1. Structure your business

When you go to register your business with the state, you will need to choose a business structure and the choice you make will decide how much you pay in taxes as well as your personal liability. Your options are: Sole Proprietorship, Partnership, Limited Liability Company (LLC), Corporation, or S Corporation. While your choice will be dependent on many factors, many businesses become an LLC as this separates your personal assets (home, vehicle, savings) from your business assets. You will also need to apply for a tax ID number and ensure you have the appropriate permits and licenses.

2. Get insurance

Although you might think or hope that you will never need it, every business should take out commercial liability insurance. This protects your business financially if your company is sued by a third party such as a customer or vendor. General liability insurance does not cover things that happen to you, your employees, or commercial premises. Additional insurance policies you may want to consider include professional liability insurance (which covers costs incurred because of errors in your work), commercial auto insurance which covers damage to commercial vehicles and property, and workers’ compensation insurance.

General liability insurance does not cover things that happen to you, your employees, or commercial premises.

3. Contracts for employees

Whether you will be taking on employees soon, or in the future, you need to ensure that you are compliant with the law, your responsibilities as an employer, and employee rights. This is a complex topic, so be sure to consult with a legal professional to ensure you have covered all areas including health and safety, code of conduct, discrimination, working hours, etc. If your employees will be working on premises, you also need to ensure that you are providing a safe work environment with all the necessary risk assessments, equipment, and precautions.

4. Working with outside suppliers

If you will be outsourcing aspects of your business to another company, you need to ensure that you cannot be held liable for their actions. For example, if they are not fair to their employees in terms of health and safety, pay, or ethical working practices, you may become tarnished by association.

It is also essential that you read the fine print of any contracts you sign with suppliers, question any points which you are not comfortable with, and do not be afraid to negotiate.

5. Protect your intellectual property

An original business idea may need to be protected by trademark or copyright to prevent another company from taking advantage of your creativity, but this can be complex, so it is best to get advice from an intellectual property lawyer.

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6. Pay your taxes

While keeping track of income and expenditure might be simple in the beginning, as your business grows it will be easy to lose track and make mistakes. A professional bookkeeper will be able to advise you not only on what receipts you need to keep and what taxes you need to pay, but they can also complete your tax returns and ensure you take advantage of any tax benefits you can claim.

7. Cybersecurity

Whether you are running your business from one computer, several computers, or a combination of devices, all your technology needs to be protected against cyberattacks. You not only need to secure your sensitive data and financial information, but the law is increasingly strict regarding businesses which are not protecting customer and employee data adequately.

Currently, $350 trillion worth of financial contracts reference the LIBOR rate worldwide. Banks and other financial institutions are now required to phase out any agreements that utilise LIBOR as a benchmark and transition to an alternative reference rate by the end of 2021. While this may seem like a long time from now, the process will likely be lengthy and complex. To ensure a smooth transition, banks and other impacted organizations will need to begin preparing well in advance. Right now, only 19% of firms say they’re ready. Neil Murphy, VP of global business development at ABBYY, discusses how these companies can best prepare for the changes to come.

The transition process will be no mean feat. It will involve creating task forces, sorting through immense volumes of documents, adopting new technologies, re-negotiating current agreements and developing entirely new financial products. Preparing early and thoroughly is critical for minimising risk from every angle – financial risk, legal and compliance exposure, and operational disruption. Planning ahead will also facilitate a smooth process for customers, helping maintain – or even increase – client satisfaction and retention.

While the transition may seem daunting for some organisations, it doesn’t have to be. To begin preparing, businesses need to understand what LIBOR is and how it will affect your business, including which products will be impacted, what the replacement options are, and what exactly the complex transition process will involve. Let’s start from the beginning.

What’s behind the transition?

According to the Consumer Financial Protection Bureau, the LIBOR rate is based on specific types of transactions between banks which now do not occur as frequently as they used to, making the rate less reliable. The governing bodies that oversee this index have stated that they cannot guarantee the rate will be available after 2021.

Certain private-sector banks which are currently required to submit information that is then utilised to set the LIBOR rate will stop being required to do so after next year, which means the rate will subsequently not be an accurate reflection of its underlying market. At this point, the quality of the rate will likely degrade to a degree at which it is no longer credible, which could cause LIBOR to stop publication immediately.

The end of LIBOR is imminent, which makes preparing for the transition and implementing alternative reference rates in advance an imperative for financial institutions. All types of banks and financial institutions will be impacted, from small regional banks serving local consumers to large global financial institutions providing commercial services to multinational enterprises. In addition, related industries, such as insurance, will also be impacted by the discontinuation of LIBOR. Even industries that are completely outside of the financial sector will feel a ripple effect.

The end of LIBOR is imminent, which makes preparing for the transition and implementing alternative reference rates in advance an imperative for financial institutions.

What’s the impact?

From 30-page mortgage agreements to 340-page commercial loan contracts, every type of financial product that utilises LIBOR will be impacted. First up is derivatives, including interest rate swaps, cross-currency swaps, commodity swaps, credit default swaps, interest rate futures, and interest rate options. Bonds will also be impacted, including corporates, floating rate notes, covered bonds, agency notes, leases, and trade finance. As for loans, the impact will be far reaching, from syndicated to securitised, business loans, real estate mortgages, private loans and even certain types of student loans. In short, any type of loan that utilises a variable interest rate based, in whole or in part, on LIBOR will be impacted.

There will also be an impact on short-term instruments such as repos, reverse repos, and commercial paper, and on securitised products like mortgage-backed securities (MBS), asset-backed securities (ABS), and commercial mortgage-backed securities (CMBS). Finally, in the retail sphere, it will affect loans, mortgages, pensions, credit cards, overdrafts and late payments.

To replace LIBOR, there will be various Alternative Reference Rates (ARRs), which will vary by geography.

How should we prepare?

Many companies have thousands, even hundreds of thousands, of LIBOR-based financial agreements circulating within their organisations. There are some global investment banks whose volume of related contracts reaches into the millions.

There will be many necessary steps in a successful transition. One of the most important is assessing where LIBOR is used across all business operations and identifying each individual contract, agreement and related document. Without a doubt, finding, collecting, and compiling every contract that utilises the LIBOR rate will be an extensive and complex process.

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Whether it’s a small- to mid-size bank or a large financial institution with hundreds of thousands of contracts, sifting through, reading, and pinpointing every document that references LIBOR will be cumbersome, costly and time-consuming if conducted entirely manually. The right technology, particularly those that are powered by AI and content intelligence technologies, could transform this process. They can sort through volumes of documents, accurately identifying relevant contracts thanks to advanced OCR and NLP technology, and automatically extracting relevant data. The right tools go a long way in simplifying the complex document-related processes involved in the LIBOR transition.

Identifying all related contracts is only the first step, however critical it is. After all relevant agreements have been compiled, the next step is to transition each individual contract to the new alternate reference rate. For many financial institutions, there will likely be a significant degree of re-negotiation involved in this process, particularly for contracts governing high-value financial products or agreements serving commercial clients.

The transition process is one that will likely involve many business units – from legal and compliance for managing risk, to product management for creating new offerings, to marketing and PR for developing effective communication strategies for customers, investors and stakeholders. Successfully navigating the transition will require a clearly defined roadmap, long-term vision, and the right technology. This combination will be crucial for firms to be prepared for the transition, and to ensure their business isn’t adversely affected by it.

While the deadline for transitioning from LIBOR may be over a year and a half away, time is still definitely of the essence. For businesses that want to minimise financial and legal risk, ensure a seamless transition, maintain their market share, and ensure customer loyalty, the time to begin preparing is now.

With the entire world feeling the effects of the COVID-19 pandemic, many businesses have found themselves in a precarious position. While virtually every enterprise is guaranteed to feel some degree of financial sting, the safety of your most precious assets – i.e., your team members – is infinitely more important than profit during this trying time. After all, if your employees can’t depend on you to prioritize their wellbeing at this point in time, when can they count on you? Business owners and entrepreneurs looking for ways to help guide their team members through this global crisis will be well-served by the following pointers.

Fully Embrace Telecommuting

No matter what your personal views on telecommuting are, fully embracing it is one of the most effective ways to keep your team members safe throughout this crisis. In order to flatten the curve and control the rate of infection, people need to isolate as much as possible. The more time your employees spend outside of their homes, the more opportunities for infection they’ll encounter, and it won’t take long for a single COVID-stricken employee to infect your entire workforce. Since carriers can be asymptomatic for weeks before the infection becomes apparent, it may be too late to control the spread by the time the initial carrier is noticeably ill. Additionally, for some carriers, the virus manifests itself through mild to mid-level cold or flu symptoms, so the infected party may believe themselves to be suffering from something less serious and come to work sick. Keep in mind that even if a carrier only has a mild case of COVID-19, the people they spread the virus to can have far more serious cases.

It is also vital that lines of communication be kept open while employees are working remotely. For guidance on how to keep your business’s finances stable during this time, Shakespeare Martineau’s Chris von Strandmann has offered advice on developing effective contingency plans.

Keep in mind that even if a carrier only has a mild case of COVID-19, the people they spread the virus to can have far more serious cases.

Send Money to Employees in Immediate Need

Many of us live paycheck to paycheck. Due largely in part to an ever-increasing cost of living, building robust savings simply isn’t feasible for most members of the workforce. That being the case, a single medical emergency, furlough or delayed paycheck can prove financially ruinous. As such, if any of your employees are in immediate need of emergency funds, now is the time to be generous. Whether they’re dealing with steep medical bills, require help making rent or need money for food, there’s never been a better time to show your team members just how much they mean to you. Fortunately, there are many convenient ways to send money to people in need.

Relax Stringent Deadlines

The world has changed dramatically in a very short span of time. Not only has the virus caused many enterprises to change the way they do business, it’s prompted many people to rethink their individual priorities. With people concerned about their personal safety, worrying about loved ones and dealing with sick family members, some individuals have had no choice but to put career matters on the backburner. In light of all the outside issues your team members are dealing with during this time, you should consider relaxing stringent project deadlines. Work can still be important, but with a pandemic ravaging the globe, it shouldn’t be your team’s foremost priority.

On the subject of deadlines, if you are worried about the pandemic leaving you unable to complete your contracts, then you aren’t alone. Consider looking into whether these contracts might be mitigated by frustration or force majeure clauses.

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Giving Sick Employees Time to Recover

Few things are more difficult than effectively doing your job while sick. Additionally, employers who expect team members to perform their usual duties while stricken will illness generally aren’t looked upon favorably by the general public. With this in mind, allow any employee who’s fallen ill to take a paid break from work until such time as they are completely better. Their recovery is infinitely more important than any financial setbacks you may suffer.

For the vast majority of us, the COVID-19 pandemic is a completely unprecedented occurrence. Aside from the few centurions who were around for the Spanish flu, no one in the developed world has experienced anything of this magnitude in their lifetime. There’s no denying that this is a frightening time to be living through. With infection numbers increasing by the day and a definitive cure not currently existing, even the most levelheaded among us can’t help but feel tremendous worry. Additionally, given the scope and severity of this virus, businesses – and world economies – are sure to be adversely impacted. However, in these troubled times, it is imperative that the safety and wellbeing of your team members take precedence over profit.

The COVID-19 pandemic now dominates every aspect of business and personal life, creating enormous public health and economic challenges across the world. In addition to the large-scale loss of life, we are facing unprecedented disruption to work and business activity. Even if some sectors are bailed out, a glut of insolvencies and bankruptcies seems inevitable. But where will the axe fall? Chris Robinson, a specialist corporate lawyer at Excello Law, explains.

Global supply chains in Europe, the current centre of the pandemic, face protracted disruption as the COVID-19 crisis highlights their fragility: the failure of one link can cause extensive disruption throughout the chain. Supply chains and labour markets are often complex and unstructured, even in ordinary circumstances. But COVID-19 is extraordinary:  the myriad effects of losses created by it will be diverse, disparate and on a scale never previously seen.

Ideally, supply chains are configured with back-to-back contracts and pay-when-paid clauses that allocate the loss appropriately and proportionately across the supply chain, or to parties who are insured. But this is the exception rather than the rule. The reality is that the loss will often fall on the weakest link in the chain, the small business who has not been able to negotiate let-outs, either with their customers or suppliers. You can be liable for breach of contract, including damages for loss of profits or wasted costs, even if the failure was beyond your control.

This raises many questions, not least concerning remedies provided by the law when the performance of a contract becomes impracticable. For example, is a party liable for breach of contract if they simply cannot comply? If the contract terms provide no let-out, then (under English law) the only legal escape is the legal concept of frustration.

You can be liable for breach of contract, including damages for loss of profits or wasted costs, even if the failure was beyond your control.

A contract is frustrated if something happens after the date of the contract that is not the fault of either party that makes further performance impossible or illegal, or is so fundamental that it strikes at the root of the contract, and is beyond what was contemplated by the parties when they entered into it. Frustration ends the contract entirely, with basic rights for advance payments to be refunded and parties to be reimbursed for expenses incurred.

Circumstances arising from COVID-19 are certainly capable of amounting to frustration, but difficulties in performing, extra costs or delays would not be enough. Long-term contracts, or employment contracts, are unlikely to be frustrated.

Many contracts contain force majeure clauses, allowing the parties to suspend performance for a period of time and/or terminate the contract without liability on either side. Whether a public health emergency amounts to force majeure will depend on the wording of the clause: the situation must be beyond the control of the affected party. If compliance with Government advice is voluntary, that might not help to bring the situation within the force majeure clause. Similarly, the presence of a force majeure clause may mean that the contract is not frustrated: if the agreed terms deal with a situation, that situation will not frustrate the contract. Force majeure clauses often require formalities, such a giving notice to the other party.

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Even though the economic havoc created by COVID-19 pales into insignificance compared to the scale of human tragedy it continues to cause, the health of the economy also has a very significant impact in keeping people alive and well. As damage continues to spread throughout the economy, the losses will be uneven, affecting some a great deal more harshly than others. Much of the cost will be felt through business failures, leading to many thousands of people losing their jobs. Employees, business owners, shareholders and pension fund members will bear the cost, but not in an equitable way.

Below Steve Noble, COO at Ultimate Finance, offers insight into the potential changes ahead and the way these will impact business and financing.

Ongoing Brexit discussions may mean it seems much longer ago, but in November both Houses of Parliament passed legislation to end Bans of Assignment contractual clauses. This is great news that lenders and SMEs will have been celebrating since the announcement was made.

What’s the problem with Bans on Assignment clauses?

Bans on Assignment often blocks the provision of vital funding to SMEs as some financiers are hesitant to supply this where clients and their customers have agreed a contract containing this type of clause. If the financier IS prepared to provide funding, they will either have to find a workaround – such as requesting that the business approaches their customer for consent –or request additional security from the client. Each of these options proves time consuming, incurs unnecessary costs and makes it difficult for clients to obtain invoice finance. Unsurprisingly, this can cause SMEs to either struggle on without the support they need or rely on alternative finance options that aren’t right for their business.

What does the change mean?

This means that from 2019 SMEs will be able to access the funding they need more easily. It’s why I’m welcoming the news that after two previously unsuccessful attempts, Bans on Assignment clauses are now null and void in England, Wales and Northern Ireland. SMEs will therefore be able to assign receivables to invoice finance providers without having to spend time and money seeking consent from customers or trying to find workarounds to these clauses which can make things unnecessarily complex.

The legislation also makes clauses prohibiting a party from determining the value of a receivable and being able to enforce it ineffective. Again, this will increase the appeal of invoice finance for so many SMEs across the country.

Does the regulation impact your business?

Clearly, this is great news for SMEs and funding partners across the country. However, there are still caveats in place which will inevitably frustrate some.

• The regulations apply to contracts entered into on or after 31 December 2018
• They do not apply to receivables due to be paid to large enterprises – traditionally defined as businesses with more than 250 employees – or special purpose vehicles
• They exclude certain contracts from the scope of the regulations, for example those relating to land and for the provision of financial services
• They only apply to contracts governed by the laws of England, Wales and Northern Ireland

The final point will likely prove the most frustrating, as the current legislation doesn’t change anything for more than 345,900 SMEs in Scotland, leaving them to potentially continue struggling to gain access to vital funding next year.

Hopefully this won’t be a permanent issue however as the Scottish Government may follow in the Central Government’s footsteps and announce similar legislation to ensure SMEs north of the border aren’t at a disadvantage compared to the rest of the UK.

Onwards and upwards

Despite the caveats, the news that Bans on Assignment clauses will soon be a thing of the past is great news for SMEs and lenders alike. This should result in a simplified invoice finance process and therefore more small businesses gaining access to the funding they need to continuing thriving in 2019. If that’s not good news, I don’t know what is.

Ethereum, currently the second largest cryptocurrency after Bitcoin, will experience a “monumental, defining global breakout” when smart contracts can accept outside data.

The bullish prediction from influential technology expert, Ian McLeod of Thomas Crown Art, the world’s leading art-tech agency, comes as Ethereum’s price jumped 4% on Monday, adding some 8% over the last week, to trade at highs of $210.

Mr McLeod comments: “Ethereum is back in bull territory and is on track to enjoy considerable gains before year-end.

“I maintain that we can expect Ethereum to hit $500 by the end of 2018 and go on an overall upward trajectory throughout 2019.

“However, what will be the monumental, defining driver for its global breakout? Oracles.

“Oracles link Ethereum-run smart contracts to the real world and will be responsible for the digital currency to enter an entirely new phase of mass adoption.”

Oracles are trusted data feeds that deliver information into the smart contract, thereby taking away the requirement for smart contracts to directly access information outside their network. Typically, oracles are usually supplied by third parties which are authorised by the organisations that use them.

Ian McLeod continues: “Oracles are a massive step forward in the practical utilisation of smart contracts. They allow smart contracts to accept outside data to decide upon an action – and this has a myriad of highly-demanded, real-world use-cases in almost every sector.

“For instance, they can help insurance companies with pay-outs on flight delays, sports betting firms with result information coming from various trusted sources, and can help us in the art world by conclusively proving the provenance of artwork quickly and easily.”

He adds: “Using a blockchain to authenticate artwork is an ideal use-case for smart contracts. They provide the ability to store a permanent, immutable record of artwork at the point of creation which can be used to authenticate registered works. Oracles will further enhance this concept and lighten smart contracts’ work processes.”

 The tech expert concludes: “When Ethereum-based smart contracts are fed a robust and reliable information through oracles to make precise and correct judgements, Ethereum’s price will explode.”

Last month, Mr Mcleod noted: “We can expect Bitcoin to lose 50% of its cryptocurrency market share to Ethereum, its nearest rival, within five years.

“Ethereum is already light years ahead of Bitcoin in everything but price – and this gap will become increasingly apparent as more and more investors jump into crypto.”

(Source: Thomas Crown Art)

The recent collapse of Carillion is one of the biggest domestic insolvencies in almost a decade, characterised by some as another Lehman. For Britain’s second largest construction company, its 43,000 global employees also provided a range of facilities management and ongoing maintenance services, most notably to a variety of UK government agencies. Until last July, the combined business had a market capitalisation of nearly £1bn, but today PwC is managing the lengthy liquidation process to salvage what it can for its many creditors. Below, David Allen, Chief Operating Officer of Monimove, delves into the issues that led up to Carillion’s downfall, from contracts to supply chain management.

The current consensus is that Carillion overreached itself, taking on too many risky contracts that proved to be unprofitable. In turn, with just £29m in cash assets, this made it impossible to manage its substantial £900m of bank debt and a similarly burdensome £600m pension fund deficit. Most acutely affected by Carillion’s demise are around 30,000 dependent businesses in its supply chain. Suppliers and subcontractors are owed roughly £2bn according to Carillion’s most recent results statement for “trade and other payables”.

According to a survey by assorted industry bodies, small businesses are owed an average £141,000; those with 50 to 250 employees face a shortfall of £236,000; while £15m is the typical debt owed to larger firms. Many of these supply chain companies are at risk of financial difficulties because of unpaid services: insurers estimate that they will pay out only £3lm to affected businesses who had appropriate cover for trade credit insurance. The future of these supply chain businesses, particularly smaller firms, is in doubt since most are unlikely to be paid anything of what is owed. Inevitably, some will go under themselves.

Many suppliers were using Carillion’s Early Payment Facility system which processed more than £400m in invoices, but this has stopped since the insolvency was announced. Meanwhile some subcontractors will be offered further protection through Project Bank Accounts (PBAs) which ring-fence money from the client when a main contractor goes under. But it is not known how many PBAs have been applied in Carillion contracts.

Under the heading ‘Sustainable supply chain’, the Carillion website boasts: ‘With an international supplier spend of around £3 billion, we believe our supply chain partners can help us make a tangible positive impact on sustainability.’ But the reality is that Carillion was not sustainable in any sense: its collapse was predictable because of a reliance on old school technologies to manage its extensive supply chain.

Lack of modernisation over recent years meant that the Wolverhampton-based conglomerate had poor control of labour, materials and services across its broad portfolio of projects. In this context, the specific problem was Carillion’s use of ineffective and irrevocable letters of credit to its contractors and sub-contractors.

One method employed by Carillion was to sign contracts, receive a large sum of money and then delay payments to subcontractors which allowed it to generate profits from holding that money. These down payments resulted in widespread neglect of key contractual requirements.

There was a systemic failure to ensure that there were robust terms and conditions with the necessary protection of enforcement clauses in the supply of goods contracts combined with an insufficient ability to exercise such clauses and if necessary, undertake injunctive action.

Sales were also prioritised over sound management. Carillion’s use of an inefficient supplier management system facilitated late payments to suppliers – over 90 days in most cases and often up to 120 days or more – which resulted in frequent late deliveries and penalties. The combined effect caused delay in project delivery across several key projects, such as the Royal Liverpool and Midland Metropolitan hospitals, with hefty penalties imposed on Carillion itself as a result, turning what should have been profit-making contracts into loss-makers.

Furthermore, the changing specifications of materials under “value engineering” cost time and encouraged bad suppliers. Consequently, there were no clear effective agreements between contractors, subcontractors and suppliers, which meant that all parties were operating in a “grey zone” that was conducive to gross mismanagement.

Within the context of backward supply chain management, Carillion’s downfall was circumscribed while the implementation of new supply chain technology may have saved it from going under. This is not a case of being wise after the event: these problems were entirely foreseeable and preventable.

As Parliament has now confirmed the implementation of Article 50 and the notification that the UK will commence negotiations to leave the EU tomorrow, the 29^th March, FDR Law’s Commercial Partner John King, considers how commercial contracts could be affected by Brexit.

The Prime Minister has now announced the formal Brexit negotiation process will now be triggered Wednesday 29^th March, following which the UK will then have two years to negotiate an exit deal. This commencement of the exit provisions has now been authorised by Parliament and it is expected that the Prime Minister will make a speech next Wednesday in the House of Commons to set out her aims, shortly after invoking Article 50.  For the time being, EU law continues to apply until the exit negotiations are finalised and it has been suggested that the task of reviewing and, where appropriate, repealing or amending legislation could take up to 10 years.

Both in the run up to and following Brexit, Britain will clearly continue to do business with the rest of the world, so it is important to understand what ‘rules’ are likely to apply to commercial contracts which underpin their business relationships, particularly with EU companies. So to what extent will developments during the negotiation period affect some of the commercial and legal areas?

On the face of it, many commercial contracts would seem to be neutral as to whether the UK left or remained in the EU. They are generally less heavily regulated than many other areas of law, and, as the name suggests, tend to be based on the commercial bargain between the parties. But what if that commercial bargain is in itself significantly affected by Brexit? Now is a good time to start identifying any potential risk areas in your commercial contracts. These could include increased trade barriers, currency fluctuations, the territorial scope of your agreements, and changes in law.

Existing contracts

The UK leaving the EU may well affect the operation of existing contracts, possibly in a manner that the parties had not foreseen or planned for at the time of entering into the contract. For example, if the operation of the contract was wholly or largely dependent on the ongoing operation of some particular EU legislation it is possible that the contract could be frustrated (i.e. terminated) or the force majeure provisions could be triggered at the time of Brexit (or indeed possibly before when the terms of Brexit become clearer).

Short term contracts

Short term contracts are less likely to be affected by the UK leaving the EU due to the two year negotiating window that will start once Article 50 is invoked. This negotiating period should give both parties time to consider how the terms of Brexit might affect their longer term contractual arrangements and give rise to re-negotiation.

New contracts

Before entering into any new contracts with corporates in other EU Member States, careful consideration should be given to these areas if the contract is likely to continue post Brexit, and you should seek to provide provisions in the contract that might include:

• Either expressly including or excluding the UK leaving the EU in or from any force majeure provision
• Giving the parties termination rights when the UK leaves the EU
• Providing for/referring to an alternative mechanism which will apply once the UK leaves the EU

Overseas contracts

The greatest economic impact is being felt by businesses bringing in materials from abroad. Both the annual and monthly rate of producer price inflation increased in February 2017. Output prices rose 3.5% on the year to January 2017, which is the seventh consecutive period of annual price increases and the highest they have been since December 2011. Prices for materials and fuels paid by UK manufacturers for processing (input prices) rose 19.1% on the year, a slight decrease from the year to January 2017 but the second fastest rate of annual growth since September 2008*. The expectation is that in the event that Brexit means that the UK ends up trading with Europe under WTO (World Trade Organisation) rules, anticipated EU import tariffs would add approximately 10% to the price of UK goods sold to the EU. Any party to a contract that is no longer economically viable will need to review their contractual (and common law) termination rights to see how quickly they can bring the contract to an end or whether the contract offers opportunities to re-negotiation the commercial terms.

In these circumstances force majeure and material adverse change provisions are relevant. Whether they are triggered will depend on the exact drafting of the contract and the application of the rules of contract interpretation. Currently, the market consensus seems to be that it is relatively unlikely that force majeure clauses will be triggered in the absence of wording specifically contemplating Brexit. It may be easier to argue that financial consequences following on from Brexit constitutes a material adverse change but not every contract includes a material adverse change provision.

Next steps

If any of your key contracts are likely to be affected by Brexit, you could consider seeking to negotiate amendments to terms that are materially affected. It is also worth considering whether the contract contains any contractual remedies that could be triggered by Brexit.

Trade deals with the remaining EU states are highly likely to take several years longer than that. In the meantime, the ramifications of Brexit will hopefully become clearer so that businesses are able to confidently deal with any contractual issues that it may bring.

*ONS UK producer price inflation statistical bulletin: Feb 2017