The recent introduction of new U.S. tariffs is sending ripples through international supply chains, but the real impact may lie buried in your contracts.
For companies with agreements governed by U.S. law, these tariffs could trigger price changes, disruptions in delivery, legal disputes, and even early termination of commercial relationships. Whether these new measures will be legally challenged is yet to be seen. But one thing is certain: ignoring the fine print is no longer an option.
This guide explores the most critical contract clauses to review in light of the tariffs and how legal teams can use AI to respond faster and smarter.
Why These Tariffs Matter for Legal Teams
Tariffs are not just economic levers, they’re legal triggers. They can activate, nullify, or stretch clauses that were agreed to in a different commercial reality.
Without a structured and comprehensive review, businesses risk:
- Unexpected cost obligations
- Renegotiation opportunities
- Legal disputes and penalties
- Damaged client or supplier relationships
Legal and procurement teams must act quickly to identify exposure, understand contractual obligations, and determine where renegotiation is needed.
Key Clauses to Review in Light of the U.S. Tariffs
Here’s a breakdown of the most relevant contract provisions that may be directly or indirectly affected:
-
Goods Impacted
- What to check: Confirm if the goods or services covered by the contract are directly impacted by the tariffs.
- Country of Origin: Some contracts may include specific sourcing clauses. Determine whether the source country triggers new tariff obligations.
-
Price-Related Terms
Economic Price Adjustment (EPA) Clauses
- Often allow price changes due to increased external costs like tariffs.
- Review how the adjustment is calculated, notice requirements, and whether either party must provide supporting evidence.
Price Increase Caps
- Some contracts cap how much prices can rise, but may still allow increases if thresholds are crossed or certain events occur.
Volume Commitment Clauses
- Tariffs could affect a party’s ability to meet volume obligations.
- Review if non-compliance due to cost spikes could lead to renegotiation or termination.
- Understand how change orders operate.
-
Delivery & Risk Allocation
Incoterms (e.g., DDP or Ex Works)
- These determine who’s responsible for tariffs and duties, buyer or seller.
- DDP (Delivery Duty Paid): Seller bears the costs.
- EXW (Ex Works): Buyer takes responsibility from the seller’s facility.
Impracticability Under the UCC (Section 2-615)
- In U.S. law, performance may be excused if it becomes “commercially impracticable.”
- Tariffs may not qualify unless they impose an unreasonable or unforeseeable burden.
- Case law interpretation will be critical here for guidance on viability.
-
Force Majeure & Changes in Law
- Review whether the clause includes tariffs or trade regulations as a trigger.
- Identify any contingency clauses
Look for references to:
- “Material Adverse Change”
- “Changes in Law” (especially discriminatory laws)
- “Raw materials price increases”
Note: Many force majeure clauses exclude foreseeable events. Whether these tariffs are considered “foreseeable” will depend on timing and drafting.
-
Termination and Renewal Clauses
Check if the new tariffs provide a basis to terminate for:
- Material Economic Adversity.
- Convenience (with or without liquidated damages).
- Review auto-renewal terms to determine if now is the right time to renegotiate.
-
Conditions Precedent
Look for clauses that delay performance until certain events occur, including pricing approvals, regulatory reviews, or tariff changes.
-
Compliance & Regulatory Provisions
- Does the contract incorporate any external compliance standards (e.g., U.S. FAR or state equivalents)?
- Review any referenced addenda or attachments for extra obligations tied to tariffs or taxes.
-
Dispute Resolution Provisions
Arbitration or mediation clauses might offer faster resolution if disputes arise.
Check:
-
Governing Law and International Rules
Governing Law
- Understanding which jurisdiction governs interpretation is essential for assessing risk under new conditions.
U.N. Convention on Contracts for the International Sale of Goods (CISG)
- If not explicitly excluded, CISG may apply automatically to cross-border sales.
- Article 79 of CISG provides a possible excuse for non-performance due to an “impediment beyond control”, but this must be proven and may only reduce damages, not excuse performance entirely.
Contracts Aren’t Just Paper Anymore, They’re Data
Whether signed in ink or electronically (via EDI or other platforms), every clause matters. But manual contract review won’t scale when you’re dealing with hundreds or thousands of agreements.
That’s where legal tech steps in.
How AI-Powered Contract Review Can Help
With platforms like ThoughtRiver, legal teams can:
✅ Search for tariff-relevant clauses at scale
✅ Compare language across contracts to identify risk
✅ Understand how interconnected terms (e.g., pricing + force majeure + delivery) influence one another
✅ Build an actionable playbook for renegotiation or remediation
Lexible™ is the largest legally-trained, human-labelled language model in the market, designed specifically for contracts, not just general AI.
This isn't just about avoiding risk. It’s about creating clarity, improving negotiation leverage, and giving legal teams the power to lead with data.
Tariffs are a reminder that commercial realities can change overnight. Contracts need to flex with those changes, and legal teams need the insight to respond quickly.
Start with the contracts that matter most, by relationship or financial impact, and use technology to surface what matters.
Want to see how Lexible™ works in action? Book a demo today and find out how ThoughtRiver helps legal teams stay ahead of change.
As always, this isn't legal advice, just a perspective. Talk to your lawyers before acting on any of it.
