{"id":904627,"date":"2025-07-30T15:13:57","date_gmt":"2025-07-30T21:13:57","guid":{"rendered":"https:\/\/www.myconstructionexpert.com\/blog\/?p=904627"},"modified":"2025-07-30T15:13:59","modified_gmt":"2025-07-30T21:13:59","slug":"force-majeure-price-escalation-drafting-smarter-construction-contracts","status":"publish","type":"post","link":"https:\/\/www.myconstructionexpert.com\/blog\/force-majeure-price-escalation-drafting-smarter-construction-contracts\/","title":{"rendered":"Drafting Smarter: Force Majeure and Price Escalation Clauses in a Tariff-Heavy Era"},"content":{"rendered":"\n

Brenda Radmacher | Seyfarth Shaw<\/a><\/p>\n\n\n\n

In light of recent disputes, international construction firms are rethinking how they draft\u00a0force majeure<\/a> and price escalation provisions<\/a><\/strong>\u00a0to better address tariff-induced cost increases. While traditional force majeure clauses often focus on physical impossibility or natural disasters, they should now explicitly include\u00a0governmental actions such as the imposition or increase of tariffs<\/strong>.<\/p>\n\n\n\n

Legal and Contractual Repercussions<\/h4>\n\n\n\n

For contractors and suppliers, the tariff resurgence has triggered a cascade of legal and commercial consequences. First, fixed-price contracts are now high-risk instruments. Without robust material escalation clauses, contractors face margin compression or even breach scenarios. Additionally, in existing contracts and for new projects alike, force majeure and hardship clauses are under renewed scrutiny. Parties are increasingly invoking these provisions to renegotiate terms or seek relief from performance obligations.<\/p>\n\n\n\n

Of importance to consider are the dispute resolution mechanisms. These\u2014especially arbitration clauses\u2014are being tested as parties seek remedies for tariff-induced cost overruns and delays.<\/p>\n\n\n\n

Strategic Responses for Resiliency<\/h4>\n\n\n\n

To mitigate exposure, those involved in the development and construction of projects in the U.S. are adopting several strategic measures to respond to the tariff turbulence that apparently is going to continue for some time to come.<\/p>\n\n\n\n

First, companies are revisiting supply chain structures to prioritize tariff-exempt or domestic sourcing where feasible.<\/p>\n\n\n\n

In addition, when possible, companies are embedding tariff risk into preconstruction due diligence, including scenario modeling and legal stress testing.  Some are also using AI tools to try to model and mitigate risks.<\/p>\n\n\n\n

Finally, when needed, parties are looking at renegotiating joint venture and subcontractor agreements to allocate tariff-related risks more equitably.<\/p>\n\n\n\n

Tips For Drafting Force Majeure Clauses To Address Tariff Turbulence:<\/h4>\n\n\n\n

Considerations to include in contracts to assist in the management of these tariff-related risks include addressing tariffs through by using broad government action language, considering a tiered risk sharing mechanism, evaluating the change in law clauses, and substitution clauses. In addition, consideration should be given to supplementing the termination clause or adding in language to address termination due to tariff increases, to ensure that any impossibility argument can be bolstered.<\/p>\n\n\n\n