Here’s a quick guide on using force majeure and related clauses to navigate unexpected tariffs or other government actions—and practical tools to adjust pricing when duties bite.
Congressional tariffs and sudden regulatory shifts can slam supply chains. Relying solely on a force majeure clause often falls short because courts demand proof that performance was truly impossible or illegal, not merely unprofitable.
Instead, blending force majeure with “hardship” or “material adverse change” clauses and price‐adjustment mechanisms gives companies a stronger footing.
🔍 Force Majeure vs. Hardship & MAC Clauses
Force Majeure & Government Action
Most force majeure clauses list “government acts, laws, or regulations” as triggers, so new tariffs can qualify—if they render performance literally impossible or commercially impracticable. Yet courts narrowly interpret “impossibility,” so this path alone is risky.
Hardship & Material Adverse Change (MAC)
Hardship clauses allow renegotiation when tariffs fundamentally upset the deal’s economics. MAC clauses similarly trigger consultations—and, if unresolved, permit termination—when material cost increases occur. Both require good‐faith talks and often an expert arbiter if parties can’t agree.
💲 Pricing Adjustment Tools
Price‐Escalation Clauses
Tie contract prices to specific indices (e.g., steel tariffs) or thresholds. When costs exceed agreed bands, prices adjust automatically.
Duty Pass‐Through Provisions
Explicitly state that any new import/export duties will be added to the contract price, with a defined notice period and retroactive reconciliation.
Suspension & Exit Rights
Include short‑term suspension rights until tariffs lift, or step‑down termination if renegotiation fails after a set period (e.g., 60 days).
By layering these mechanisms—force majeure, hardship/MAC, price escalation, duty pass‑through, and clear procedures—you gain flexibility to weather tariff shocks and renegotiate on fair terms.
Contact a Galkin Law attorney to discuss your commercial contracting needs.
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