Expert Guide on Force Majeure and Unforeseen Circumstances in the Context of Global Trade War in Czech Republic

The imposition of import tariffs is not considered a force majeure event by default. However, parties may expressly stipulate in their contract that tariffs (or any other circumstance) are considered force majeure.

A force majeure event is defined as an extraordinary, unforeseeable, and insurmountable obstacle that is beyond the control of the affected party and prevents the party from fulfilling its contractual obligations.

Importantly, the occurrence of a force majeure event only relieves the affected party from liability for damages; it does not suspend the obligation to perform under the contract nor does it confer a right to unilaterally terminate the contract.

Therefore, while tariffs do not automatically qualify as force majeure, contracting parties may explicitly include tariffs into a force majeure clause.

1. Subsequent Impossibility of Performance
   
   Applies when contractual obligations become objectively impossible to perform—not merely more difficult or costly to overcome. For example, if fixed pricing terms in the contract (e.g., INCOTERMS such as EXW or DDP) prevent cost reallocation, tariffs could result in genuine impossibility. However, performance is not considered impossible if the obligation can still be fulfilled, albeit with greater expense or delay.
    
2. Substantial Change in Circumstances

This concept applies when:

• A change occurs after conclusion of a contract (or was only discovered thereafter),
• The change creates a gross disproportion in the parties’ obligations,
• The affected party did not assume the risk of such a change.

In such cases, the disadvantaged party may request renegotiation. If parties do not renegotiate within a reasonable time, either party may petition the competent court to modify the contract.

Note: A lawsuit must be filed within two months of becoming aware (or reasonably should have become aware) of the substantial change. The obligation to perform under the contract remains in place unless modified by the court.

Parties could include the following clauses in their contracts to deal with the (consequences of) government-imposed trade barriers:

1. Force Majeure Clause (Expanded)
   Parties could include government-imposed trade barriers (e.g., tariffs) within the definition of force majeure. Moreover, parties could also stipulate the consequences of such force majeure event and the remedies available to them
    
2. Price Adjustment Clause
   Allows the contract price to be revised in response to increased costs due to tariffs.
    
3. Termination Clause
   Permits contract termination if the imposition of tariffs renders performance economically unfeasible.
    
4. Hardship Clause
   Facilitates renegotiation when unforeseen events substantially alter the contractual equilibrium.
    
5. Import/Export Compliance Clause
   Ensures compliance with evolving trade regulations and mandates cooperation in case of legal changes.
    
6. Insurance Clause
   Requires parties to maintain insurance coverage against trade-related risks.

Final Remarks

In light of increasing volatility in international trade regulations, it is advisable for parties engaging in cross-border transactions to proactively address the risk of tariff imposition through tailored contractual provisions.

Therefore, it is paramount to (re)assess the contractual frameworks in place and, if necessary, seek legal advice which addresses the unique factual, legal, or commercial circumstances of a particular contract or transaction.