In today’s disrupted global trade environment, where policy shifts and trade sanctions can emerge unexpectedly, buyers and sellers of goods face heightened legal and financial uncertainty and risk. Sudden changes in trade laws, particularly tariffs and sanctions, can materially affect contract performance and pricing. To mitigate these risks, parties to commercial contracts may benefit from incorporating a tailored provision, which we shall refer to as the “Trump Majeure Clause” (TMC).
The TMC is a hybrid of the traditional force majeure clause and a change in law clause, designed specifically to address disruptions caused by newly imposed tariffs or trade sanctions. Its purpose is to allow contractual flexibility in the face of government actions that frustrate the original purpose of entering into the agreement.
Force majeure clauses traditionally excuse parties from performance due to extraordinary events beyond their control, such as natural disasters, wars, or pandemics. Change in law clauses, meanwhile, allow parties to modify or terminate a contract when legal or regulatory changes make performance impracticable or illegal.
However, these clauses often lack the specificity needed to address targeted trade-related disruptions, such as the recent imposition of tariffs (or retaliatory measures in response to such tariffs) affecting parties’ abilities to perform their contracts as intended. The TMC attempts to fill this gap by creating a structured contractual method to address the disruption.
Triggering event – trade policy change
The TMC is activated when a new tariff, trade sanction, or government-imposed restriction significantly alters the cost, legality, or feasibility of performing the contract. The clause should be narrow in scope and focused on external economic and regulatory events, to increase the likelihood of enforceability.
Renegotiation window – 90 days
Once triggered, the clause grants both parties a 90-day period to renegotiate the terms of the contract, especially price adjustments, to reflect the new economic reality. This preserves the commercial relationship and promotes good faith efforts to adapt rather than terminate or breach the agreement. It can also serve as a pause in performance pending resolution of threatened economic sanction.
Clause remedies – suspension, termination, supplemental agreement
Depending on the subject matter of the contract, the parties may wish to allow for differing remedies to suit the transaction. Performance under the contract might be paused for ninety (90) or one hundred twenty (120) days to allow time for greater certainty regarding whether the detrimental trade action will be withdrawn or modified. The parties may stipulate a negotiation process aimed at achieving terms for an amendment to the contract. This could include senior executive meetings or the use of a mediator to arrive at new more equitable terms.
If the parties cannot reach a supplemental agreement within the renegotiation window, either party may terminate the contract. Depending upon the subject matter of the contract, this could involve a penalty payment, or payment for work performed as of the date of termination, or no penalty being incurred. This process should avoid disputes and litigation and serve to preserve the business relationship.
The legal rationale underpinning the TMC is the doctrine of frustration of purpose—a principle that releases parties from their obligations when an unforeseen event destroys the primary reason for entering into the contract. Frustration of contract is a common law contracting principle that may or may not be available in some jurisdictions. Incorporating the concept into the contract allows for the remedy in those jurisdictions where it may not otherwise be a well-regarded legal principle.
Practical considerations for drafting
The clause should clearly define what constitutes a “change in law,” specifying relevant agencies, jurisdictions, and types of measures (e.g., tariffs over a certain threshold; government action reducing or increasing pricing by greater than 30%). The clause should have a clear and detailed procedure for the parties to follow once a triggering event occurs.
The parties should consider incorporating a good faith obligation to renegotiate, and to reinforce the parties’ obligation to seek a resolution where a triggering event has occurred. Again, having a detailed, clear procedure set out in the TMC will encourage good faith participation in the process.
Should the parties reach a supplemental agreement or arrangement, the amendment needs to be well-documented. The parties should be sure to include original terms that remain in force under the amendment. We would suggest that the parties also make it very clear if they would like the supplement agreement or arrangement to be effective only with respect to certain specific tariff or restrictive government measures.
As the drafter, you should make sure that the TMC does not conflict with force majeure, change in law, price adjustment, or dispute resolution clauses already in the contract. The TMC may be tied to the dispute resolution clause in the event that the negotiations fail. The drafter should consider whether there would be any challenges to enforce the clause under the governing law of the contract. The drafter should also carefully consider from a detailed operational perspective how the TMC (or any supplemental trade agreement or arrangement) would work together with the transaction contemplated by the agreement.
As geopolitical tensions and trade uncertainties continue to impact the global economy, the Trump Majeure Clause offers a proactive legal tool for commercial parties. It combines legal flexibility with contractual discipline, allowing buyers and sellers to adapt – or exit – agreements affected by sudden trade disruptions.
By incorporating the TMC, parties can better allocate risk, preserve business relationships, and reduce the likelihood of litigation arising from geopolitical events that are beyond their control.
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