The « Tariffs Hazard »

08/14/2025

By Thierry CLERC – CLERC AVOCATS

The introduction of 15% tariffs risks upsetting the balance of contracts already signed, in progress or to come. The July 27, 2025, US–US-EU trade agreement imposes a 15% tariff on most EU exports to the US (cars, pharmaceuticals, semiconductors), while strategic sectors such as steel, aluminum, and copper remain subject to a 50% duty.

After the Covid19 episode, which gave rise to much debate, we now have a new storm, the Trump episode.

For the moment, the topic relates to customs duties, i.e. the “price” part of the contract.

We therefore need to focus on the date of transfer of the risk, depending on the Incoterm chosen by the parties.

The seller increases their price.

The buyer considers that the contract has been modified.

The incoterm determines who bears the burden of customs duties.

This can lead to disputes.

But this could relate to a sudden break up of contract by the American co-contractor.

The French Court of Cassation has just handed down a ruling allowing the French supplier to bring an action before a French court if the damage is suffered in France (Cassation Civile 1ere 12 March 2025 N° 23.22051)

What are the legal references for resolving this issue?

• Refer to the Seller’s General Terms and Conditions of Sale and the Buyer’s General Terms and Conditions of Purchase to determine the liability of the parties.

• Unforeseeability/Hardship

Unforeseeability differs from force majeure in that it relates to the additional cost of the product due to an external event, but which does not prevent performance of the contract.

In the USA, a Michigan Court ruled that the tariffs imposed as part of the “trade war» in the solar industry did not constitute “force majeure” (Kyocera Corp 886 N.W 2d at 453).

In France, there is a specific text concerning unforeseeability (article 1195 of the Civil Code) when circumstances unforeseeable at the time of the conclusion of the contract and which arise during its performance, make the performance of the said contract excessively onerous for one party. This leads to renegotiation of the terms and conditions, failing which the contract is rescinded.

Under English law, such a clause must be included in the contract for it to apply. Judgment by Lord Ratcliffe in the case Davis Contractors Ltd v/ Fareham UDC relating to the consequences of the Brexit for a commercial lease

The Unidroit rules provide model Hardship clauses, notably article 6.2.

                (https://www.unidroit.org/)

There are also ICC Force majeure and Hardship clauses.

• Vienna Convention

Articles 72 and 73 of the Vienna Convention on Contracts for the International Sale of Goods contain provisions concerning the non-performance of the parties’ obligations, particularly in the case of contracts involving successive deliveries.

These include cases where one of the parties fails to perform an essential part of its obligations, or where, before the date of performance of the contract, it is clear that one of the parties will commit an essential breach of contract.

In conclusion, the parties have at their disposal a legal arsenal enabling them to find an amicable solution.

14 August 2025

Thierry CLERC

tc@tclerc-avocats.fr

www.tclerc-avocats.fr

mob +33 685 135 077