Hardwire tariffs into contracts without losing control and flexibility 

Tariffs are unpredictable, but your contracts don’t have to be. Agiloft recently surveyed 600 legal, procurement, and commercial professionals across the U.S. and U.K. to find out how businesses are adapting to trade policy shifts, and what top-performing teams are doing to turn volatility into a competitive edge. 

One of the clearest findings from our survey is that organizations are no longer treating tariff clauses as optional add-ons, they’re building them directly into the foundation of supplier agreements. The challenge? Doing so in a way that protects the business without locking teams into rigid, one-size-fits-all terms.  

Including tariff-related language in contracts is now standard, but it must be precise. Read on to learn some specific positions and criteria that should be addressed in a contract:  

1. Price Adjustment / Escalation 

What it means: Lets parties adjust prices when tariffs increase input costs. Without it, the seller might eat margin losses, or the buyer might face unpredictable hikes. 

• Buyer-friendly: Adjustments only if tariff hikes exceed 8%, with documentation. 

• Seller-friendly: Automatic adjustments above 3%, no negotiation. 

• Sample neutral clause: “If, after the Effective Date, any new or increased tariff, duty, or surcharge is imposed by a government authority resulting in a cost increase of 5% or more on goods sold under this Agreement, the affected party may request a price adjustment. Such request must be supported by documentation and shall be subject to good-faith negotiation.” 

Tariffs are one of those reminders that the world can rewrite your business model without asking for your permission. Crista M. Cuccaro, Assistant Professor of Public Law and Government at the University of North Carolina (UNC) School of Government, explains that a sound price adjustment clause should clearly define tariffs and adjustment benchmarks, establish thresholds for review, require documented proof of increased costs, and maintain the government’s discretion to approve changes. 

2. Force Majeure 

What it means: This clause often covers unforeseeable and unpredictable events such as natural disasters but tariffs can hit suddenly and disrupt business just as much. This clause normally does not directly address tariffs, but it sometimes should. 

• Buyer-friendly: Tariffs excluded; seller still must perform. 

• Seller-friendly: Tariffs count as force majeure, suspending obligations. 

• Sample neutral clause: “A sudden, extraordinary imposition or increase in tariffs by more than 15%, not reasonably foreseeable at the time of contract execution, may constitute a Force Majeure event. The impacted party shall promptly notify the other, and the parties shall cooperate in good faith to suspend, modify, or renegotiate the affected terms.” 

For example, copper prices surged after Freeport-McMoRan Inc. declared force majeure on contracted supplies from its Grasberg mine in Indonesia following a fatal mudslide. The incident, which iimpacts the second-largest copper mine globally, caused prices to spike to their highest level in over a year due to a significant disruption to the supply chain. Sudden events like this show just how important force majeure clauses are and why they are a key part of tariff contracts. 

Linda Frembes’ “When Hollywood Meets CLM” highlights how the recent Hollywood strikes pushed studios to invoke force majeure clauses – much like how tariff changes can disrupt global contracts. As Agiloft’s Prashant Dubey notes, CLM systems help organizations quickly assess risk and respond when unforeseen events hit. Whether it’s a labor strike or a tariff hike, visibility into contract terms is key to managing disruption. 

3. Change in Law / Regulatory Change 

What it means: Tariffs are usually born of legal or regulatory changes, so these clauses decide who pays for that fallout. 

• Buyer-friendly: No cost pass-through unless mutually agreed. 

• Seller-friendly: Any regulatory change justifies renegotiation or recovery. 

• Sample neutral clause: “If a Change in Law, including the imposition or modification of tariffs, duties, or similar governmental charges, materially impacts the cost of performance (defined as a ≥5% change), either party may request an equitable adjustment to pricing or other affected terms. Supporting documentation must be provided.” 

The Association of Corporate Counsel (ACC) recommends that “contract drafters should consider the possibility of a legislative or regulatory change during the contract duration and the potential consequences that this change may have on the contract outcome. These risks may be reduced through stabilization or harmonization clauses to a limited extent, and subject to a change of the law.”  

Without a robust Change in Law clause, businesses may face unexpected costs or disputes when legislation changes after a contract is signed. 

4. Termination for Convenience / Hardship 

What it means: Tariffs can make deals commercially impossible. These provisions let parties walk away without it being considered a breach. 

• Buyer-friendly: Buyer can terminate on 30 days’ notice if tariffs increase costs >10%. 

• Seller-friendly: Seller can terminate when tariffs cause a material adverse effect. 

• Sample neutral clause: “Either party may terminate this Agreement upon 60 days’ written notice if cumulative tariff changes applicable to the products or materials under this Agreement increase landed cost by more than 15%. The terminating party must provide documentation of such impact and engage in good-faith discussions before termination.” 

When tariff rates shift mid-contract, the financial risk isn’t always evenly distributed. According to the National Chamber of Commerce, “it has become a common practice to include in most international commercial agreements standard clauses on force majeure and/or hardship.” In global supply chains, it’s one of the few mechanisms that protects both sides from being locked into an economically impossible agreement. 

5. Incoterms / Delivery Terms 

What it means: Defines when risk, cost, and tariff obligations shift between parties. A mis-match here often means expensive surprises. 

• Buyer-friendly: Delivered Duty Paid (DDP), seller bears tariff/duty risk. 

• Seller-friendly: Ex Works (EXW), buyer takes all tariff risks. 

• Sample neutral clause: “Unless otherwise agreed, delivery shall be made FOB (Free on Board) [Port], and all duties, tariffs, and import-related charges incurred after the transfer of title and risk shall be borne by the Buyer. The parties agree to cooperate to minimize tariff exposure where legally permissible.” 

The concern isn’t about the tariff itself, but about the contract that assumes someone else will pay for it. DHL describes International Commercial Terms (Incoterms) as a “globally recognized set of rules defining the responsibilities of buyers and sellers for the delivery of goods.” “They provide a common language that clarifies who is accountable for tasks, costs, and risks at various stages of the shipping journey,” adds DHL. Later is always the most expensive time to figure this part out. 

Well-crafted tariff clauses go beyond managing today’s risks; they set the stage for smarter, more flexible supplier relationships tomorrow. In a volatile trade environment, adaptability is every bit as valuable as protection. 

Tariffs aren’t slowing down, and neither should your strategy. Our on-demand webinar, “Navigating Tariff Turbulence: Why Every Contract Needs Political Risk Planning” walks through the playbook – clauses, data, workflows, and real examples of how organizations are managing tariff turbulence.  

The information in this article is provided for informational purposes only. It should not be relied upon as legal, financial, or compliance advice. Readers should consult with qualified professionals and monitor official government resources for the most up-to-date guidance on tariffs and trade-related matters.