Tariffs on Materials- Is this Force Majeure?

One question that we are receiving is whether the ensuing tariffs on materials qualify as a force majeure event.  The short answer is it depends on the language of your contract.    

For instance, the AIA 201 defines a force majeure event as a labor disputes, fire, unusual delay in deliveries, unavoidable casualties, adverse weather conditions … or other causes beyond the Contractor’s control.  The ensuing tariffs would arguably qualify as a cause beyond the Contractor’s control.  Other contracts specifically define a force majeure event as “restrictive governmental laws or regulations,” which again is beneficial language seeking to enforce a force majeure provision. 

However, some contacts may not include language that would cover tariffs.  Recently, I was reviewing a contract for to see if a subcontractor could recover its increased costs due to tariffs, but the force majeure event was defined as “Acts of God, war, rebellion, strikes or lockouts, epidemics or health crises, landslides, lightning, earthquakes, fires, named tropical storms.”  There is clearly nothing in this clause that would cover the ensuing tariffs. 

For those in the contract drafting or negotiating phase of an upcoming project, be sure to specifically include the specific term “tariffs” in the defined terms of force majeure events. You should also pay close attention to the remedies afforded by the force majeure provision. Many only permit extensions of time, whereas others allow equitable adjustments to the contract price. Think about key remedies that matter to your company and be sure advocate for them in the contract.