What Contract Provisions Relate to Tariffs?
What Contract Provisions Could Impact Tariffs?
Here are the most common contract provisions that could be examined to determine who pays any tariffs, whether suppliers may refuse to supply products for the agreed price, or a supplier may pass through any tariffs to their customers:
Force Majeure Clauses generally allow a party to delay or refuse performance if performance is made impossible or more difficult by certain events.
Tax Clauses — many agreements have a provision that the products are provided exclusive of taxes or allows the supplier to pass through or assess the tax onto the customer on an invoice.
Pricing Clauses — It is worthwhile to examine the pricing provisions of an agreement. Does the pricing provision allow the supplier to increase prices, and if so when and by how much. Many multiyear supply contracts have pricing provisions that allow the supplier to raise prices annually, usually up to a specified limit, such as the consumer or producer price index.
Delivery and Title Risk of Loss Clauses — Many supply and customer contracts provide where the products are to be delivered and who pays shipping. In some cases, the parties may have used the term “FOB location”.
Customs Clauses — These provisions are typical in contracts which are between a foreign manufacturer and a customer. While rare in the typical domestic supplier contract, a contract may include a provision stating who is responsible for getting the products through customs.
Term and Termination Clauses — While more remote, it is worth examining the term of the agreement and the provisions dealing with how the parties may terminate the agreement. In some cases, an agreement may be past its initial term and be in some form of renewal term.
Product Clauses — Many supply contracts specify the products that are covered by the agreement. In some cases, the supplier had the ability to discontinue products. Further, in many supplier or customer agreements, the parties can add products with the mutual agreement of the parties.
For a fuller discussion of the impact of tariffs and contract clauses, see our blog post, Here Come The Tariffs: Tips for In-House Counsel Reviewing Contracts.
For more information on contracts and commercial law in general, see our corporate and commercial law services page.
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This article is provided for informational purposes only and does not constitute legal advice. For guidance on specific legal matters under federal, state, or local laws, please consult with our IP Lawyers.
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