Hartford Business Journal

HARTFORDBUSINESS.COM | MARCH 24, 2025 21 By Edward Heath C ommercial contracts tend to be full of "boilerplate provisions" that, to para- phrase Mark Twain's assessment of classic novels, everyone knows are important, but no one actually reads. When COVID-19 struck, manufacturers learned all about the significance of one particular boil- erplate provision — force majeure. This type of provision can excuse or postpone contractual performance in the face of a mate- rially unforeseen event beyond the party's control. It was a pivotal tool for countless manufacturers seeking relief from their contractual burdens because of severe operational challenges brought on by the global pandemic. This boilerplate provision may become critical again as manufac- turers in the U.S. and abroad face the increasing threat of new federal tariffs. Triggering events Force majeure translates as "supe- rior force." Arising from the Napole- onic Code, or French Civil Code, which EXPERT'S CORNER Here's how commercial contracts can ease the cost burden of new tariffs impacting manufacturers Edward Heath was established in France in 1804 and remains in amended use today, this legal concept excused a commercial party from damages liability under a contract if their nonperformance (e.g., the product was not delivered) was "by consequence of a superior force or of a fortuitous occurrence." Force majeure provisions have been part of American commercial contracting since at least the 19th century, when the U.S. Supreme Court recognized their validity in a case called The Tornado. Like the pandemic, tariffs may present a new severe operational challenge for manufacturers that rely on imported raw materials, components or equipment. "A 25% tariff on Canada and Mexico threatens to upend the very supply chains that have made U.S. manufacturing more competitive globally," according to Jay Simmons, the president and CEO of the National Association of Manufacturers. "The ripple effects will be severe, particularly for small and medi- um-sized manufacturers that lack the flexibility and capital to rapidly find alternative suppliers, or absorb skyrocketing energy costs," he added. This begs the question: Could these new federal tariffs constitute a force majeure event that excuses, or at least delays performance under a commercial contract? The answer depends on the specific language used in the contract. A provision's heading is generally irrel- evant to the parties' rights, so merely including the words "force majeure" in a contract is unlikely to provide relief. Facing serious supply chain prob- lems in 2020, many manufacturers were disappointed to learn that the force majeure provisions in their contracts listed a series of triggering events, such as acts of God, natural disasters and war, but said nothing about pandemics. The COVID-19 case law was not a model of consistency when it came to whether these provisions are interpreted narrowly, but some courts have been reluctant to imply that "pandemics" were meant to be covered when they were not expressly listed in the provision. The options may be better for manufacturers this time around. Force majeure provisions often list "govern- ment action" as a triggering event, and a tariff could qualify as such an action. If tariffs are not specifically listed, however, the rule of narrow inter- pretation might lead to a contrary result. The outcome will depend on the applicable state law and precise contract language. Additionally, force majeure provi- sions sometimes include requirements that the triggering event must be unan- ticipated and/or make performance impossible. Lawyers might argue that tariffs were not unanticipated events, particularly for contracts drafted since January 2025, or that substantially increased costs make performance "unprofitable" or "very difficult," but not impossible. The development of a new commercial contract, or the renewal or amendment of an existing one, presents an ideal opportunity to miti- gate uncertainty around this point. Manufacturers may want to evaluate whether (or not) a contract needs a force majeure provision excusing performance because of tariffs, and insist on language that explicitly includes (or excludes) tariffs and identifies the circum- stances under which they may (or may not) qualify as a triggering event. The details matter here. Edward J. Heath is a partner at law firm Robinson + Cole in Hartford. He chairs the firm's business litigation group and co-leads the government enforcement and white collar defense and internal investigations and corpo- rate compliance teams.

• Cover