Force Majeure Clauses Alone Will Probably Not Mitigate Tariff Effects

Washington, D.C. (July 8, 2025) - With the “pause” in imposition of substantial “Liberation Day” tariffs expected to end July 9, give or take some short implementation delays, businesses are evaluating whether force majeure clauses are appropriate avenues for relief from contract performance. This alert provides an overview of force majeure clauses and explains why, in isolation, these clauses are not the best solution for tariff mitigation.

Force Majeure Overview

Force majeure clauses are contractual provisions that excuse one or more parties’ performance obligations when an unforeseen event occurs that is beyond the impacted party’s control. Unlike doctrines such as impossibility and frustration of purpose, force majeure does not arise at common law. This means companies cannot rely on established common law protections in the absence of express language in the contract. Instead, courts narrowly construe force majeure clauses based on the language agreed upon by the parties.

Whether a force majeure clause will excuse performance depends on the language, the particular circumstances giving rise to inability to perform, and applicable state law. Force majeure provisions often include three key features: a list of qualifying events, a catch-all clause, and exclusions. Qualifying events are events beyond the impacted party’s reasonable control and may include events like natural disasters, explosions, war, government orders or actions, national emergencies, acts of terrorism, riots, and power outages. Force majeure provisions often include a “catch-all” clause to cover other similar events beyond the reasonable control of the impacted party. Additionally, contracts with force majeure provisions may contain exclusions such as economic circumstances or financial hardship.

Force Majeure Provisions’ Applicability to Tariffs

When government acts cause price fluctuations, courts are hesitant to classify the impacts on companies as force majeure events unless the contract at issue unambiguously includes such events. Although economic policy changes are outside of companies’ control, courts reason that force majeure is not supposed to protect from normal contract risks, such as changes in the market. The core argument accepted by courts is that tariff-related impacts and other market changes are foreseeable, and force majeure is supposed to protect companies from unforeseeable risks. If the sole reason for seeking relief from contract performance is economic in nature, a court is not likely to excuse performance because economic risks underlie all contracts. Even price increases exceeding 100% have not qualified for force majeure or commercial impracticability relief.

Courts interpret enumerated force majeure events narrowly and normally would require some reference to economic impacts to consider tariff mitigation at all. General principles regarding enumerated force majeure events as they relate to tariffs include the following:

• Clauses that list force majeure events such as “significant price increase,” “change in economic circumstances,” or “financial hardship” are more likely to apply to tariff-related impacts. For example, in In Re Old Carco LLC, New York’s bankruptcy court affirmed a debtor was excused from performance because the contract’s force majeure provision included “change to economic conditions,” which was held to include filing for bankruptcy. Language referencing economic impact may similarly help with tariff mitigation, especially in the event of draconian tariff rate increases that arguably are beyond predictable market variations. 
   
• Courts are not likely to hold that force majeure events such as “government action” or “requirements of law” apply to tariff-related market changes. In Seaboard Lumber Co. v. US, the U.S. Court of Appeals for the Federal Circuit held government fiscal or monetary policy decisions are not “government acts” for force majeure purposes. There, the court rejected the argument that a regulatory change, which in turn increased the cost of timber, constituted a force majeure event. This was because the government action made performance less profitable but not impossible. By contrast, force majeure clauses are likely to protect government actions that prohibit performance such as embargoes or blockades. Given the sheer scale of some of the new tariffs, however, some affected parties may seek to argue that this is more than a matter of mere price increase impact, but something approaching catastrophic supply chain disruption or impossibility that deserves a different analysis.
   
• Enumerated force majeure events must also be unforeseeable in some jurisdictions. The Third Circuit held that listed force majeure events must also be unforeseeable in Gulf Oil Corp. v. F.E.R.C. The Fifth Circuit reached the opposite conclusion in Eastern Airlines Inc. v. McDonnell Douglass Corp. when it held parties do not need to prove an event was unforeseeable if it is listed in the force majeure clause.

Catch-all clauses within force majeure provisions are not strong candidates for tariff mitigation because events covered by these clauses must be both unforeseeable and in-kind with enumerated events. General principles regarding catch-all provisions include the following:

• Courts have repeatedly found that changes in economic conditions are foreseeable contract risks. In TEC Olmos v. ConocoPhillips for example, the Court of Appeals of Texas held that, “[a]n economic downturn in the market for a product is not such an unforeseeable occurrence that would justify application of the force majeure provision.”
   
• Courts will often apply the doctrine of ejusdem generis to evaluate whether an event is captured in the catch-all provision. This means that events covered by the provision must be in the same general kind or class as the listed events. If the force majeure list is restricted to extreme events, it is unlikely price increases due to tariffs will excuse performance.

Force majeure clauses may also expressly carve out tariff-related events, such as “economic circumstances” or “financial hardship.” In these instances, courts will be much less likely to afford performance relief due to imposition of tariffs.

Key Takeaways

Unless businesses explicitly address the impact of tariffs in force majeure provisions, they will face many difficulties attempting to use them for relief from contract performance. Going forward, companies can draft agreements to include tariffs or other economic circumstances as force majeure events to avoid this outcome. However, there may be more effective ways to mitigate the effects of tariffs in existing and prospective agreements. For more information concerning contractual tariff mitigation provisions and strategies, see this Lewis Brisbois Client Alert.

Lewis Brisbois’s attorneys are actively engaged in the wide range of legal issues in this area and are advising clients on managing legal and business risk as events continue to develop at an accelerated pace. Visit our Ukraine Conflict, International Trade, Export, Import and Investment Controls & National Security Practice page for additional alerts in this area.

Author:

Courtney Clark, Summer Associate 

Editors:

Andrew Pidgirsky, Partner & Chair of Ukraine Conflict, International Trade, Export, Import and Investment Controls & National Security Practice 

Jane C. Luxton, Co-Managing Partner - Washington, D.C. 

Anna Luczkow, Partner

Griffen J. Thorne, Partner