The first place to look is the contract itself:
– Explicit allocation of risk: Some contracts directly address who bears the cost of new tariffs.
– Incoterms: For example, under CIF terms, the buyer handles customs clearance. Under DDP, it’s the seller’s responsibility.
– Force majeure: Many international contracts include force majeure clauses. However, if trade restrictions are not explicitly mentioned, they usually don’t qualify — unless they are truly unforeseeable and prevent performance.
– Change in law clauses: These may cover new tariffs, depending on the wording. Remedies can range from price adjustments to renegotiation.
– Termination clauses: Some contracts may allow for termination due to new tariffs, though this is rare.
If the contract is silent, general legal principles apply:
– Pacta Sunt Servanda: Agreements must be kept even if circumstances change – a fundamental principle in contract law with only narrow exceptions.
– CISG (Art. 79): Under the UN Sales Convention, a party may be excused from non-performance if an unforeseeable, uncontrollable event occurs. However, tariffs might not meet this threshold if deemed foreseeable.
– Frustration (Sec. 313 German Civil Code): Under German law, a drastic, unforeseeable change in circumstances may justify contract adjustments or even termination — but courts apply this narrowly.
– Impossibility (Sec. 275 para. 2 German Civil Code): A party may refuse performance if it would require an effort that is grossly disproportionate to the benefit. Again, this is a high bar.
➡️ Check existing contracts for clauses dealing with new tariffs.
➡️ In new contracts, clearly allocate the risk of tariff changes — or consider burden-sharing mechanisms.