LawFlash

Tariff-Related Commercial Litigation: What Businesses Need to Know About Force Majeure Clauses & Common Law Defenses

2025年08月04日

Faced with ongoing tariff uncertainty, companies in the United States and abroad are grappling with the consequences of existing or forthcoming trade duties for their businesses. Exacerbating this uncertainty, companies’ commercial agreements may not clearly prescribe which party bears the risks and consequences of tariff-related fallout. These uncertainties have left companies scrambling to understand whether, and to what extent, any force majeure clauses in their agreements may apply.

They have also prompted companies to explore whether traditional common law defenses—including impossibility, impracticability, and frustration of purpose—may excuse performance.

To aid those efforts, we address below the state of the law governing these defenses and force majeure clauses in the tariff context. We conclude with key takeaways for companies drafting or revising commercial agreements to address tariff-related risks.

Specific Contract Language Is the Key to Allocating Tariff-Related Risks

There are only a handful of cases that address the applicability of common law defenses like impossibility, impracticability, and frustration of purpose in the tariff context. In those cases, the doctrines have had mixed success.

The common law defenses of impossibility, impracticability, and frustration of purpose are most likely to succeed when (1) the party invoking the defense had no advance notice of the tariff, (2) the tariff did not merely make performance more costly or burdensome but precluded performance outright, (3) the tariff-related consequences wholly defeated the purpose of the contract, and (4) the counterparty specifically accepted the risk that a tariff could be imposed but then refused to perform anyway.

On the other hand, these defenses are likely to fail when (1) a party has implicit or explicit notice that the tariff was possible, (2) a party directly or indirectly accepts the risk of the tariff, or (3) where the purpose of the agreement was not entirely destroyed. These cases, therefore, underscore the importance of clearly prescribing how, and to which party, tariff-related risks are allocated.

CASE LAW ADDRESSING TARIFFS, COMMON LAW DEFENSES, AND FORCE MAJEURE

Although there are only a handful of cases addressing common law defenses or force majeure provisions specifically in the tariff context, the central takeaway from the opinions of two federal district courts, the US Court of Federal Claims, and a state appellate court is the same: specificity in drafting is key, because a party seeking to excuse performance with a common law doctrine must meet a very high bar. This LawFlash focuses on the following cases:

  • Kyocera Corp. v. Hemlock Semiconductor LLC
  • Shelter Forest International Acquisition Inc. v. COSCO Shipping (USA) Inc.
  • TPL Inc. v. United States
  • Murphy Marine Services Inc. v. Dole Fresh Fruit Co. [1]

1. Kyocera Corp. Case

In Kyocera Corp. v. Hemlock Semiconductor LLC, a Michigan court of appeal addressed whether plaintiff Kyocera Corp. (Kyocera), a Japanese solar panel manufacturer, was excused from performing its obligations under a force majeure clause contained in its agreement with defendant Hemlock Semiconductor (Hemlock), a Michigan-based manufacturer of polysilicon. [2]

Under the parties’ so-called “take-or-pay” agreement, Kyocera was required to buy a specified quantity of polysilicon, a key component in the solar panels Kyocera manufactured, from Hemlock each year during a 10-year period, or pay the full specified price even if it ultimately purchased less than the quantity agreed upon in the contract. Kyocera alleged that the US government’s imposition of anti-dumping tariffs constituted an “act[] of the Government” within the meaning of the force majeure clause. [3]

Kyocera asserted that illegal subsidies provided by the Chinese government to Chinese solar panel manufacturers caused solar panel prices to plummet. When US and European solar panel manufacturers began to suffer financially, the United States imposed anti-subsidy and anti-dumping import tariffs on solar panel components, including polysilicon, manufactured in China. Kyocera further argued that, because China sold products at prices lower than their production value, the price of polysilicon plummeted, rendering the take-or-pay contract, which required Kyocera to purchase a certain amount of polysilicon at a fixed price, unprofitable.

Kyocera argued, therefore, that acts by the Chinese government and the subsequent US-imposed tariffs—which fundamentally altered the market for polysilicon—constituted a force majeure event that properly excused its duty to purchase polysilicon from Hemlock.

The relevant language of the force majeure clause in the parties’ agreement provided: “Neither Buyer nor Seller shall be liable for delays or failures in performance of its obligations under this Agreement that arise out of or result from causes beyond such party’s control, including without limitation . . . acts of the Government or the public enemy” (emphasis added). [4]

The court concluded that the force majeure clause was of no help to Kyocera for several reasons:

First, the court stressed that force majeure clauses are generally narrowly construed and must explicitly and specifically identify the event causing nonperformance. The court reasoned that the force majeure clause did not specifically identify market manipulation, and the language “act of the Government” was inapplicable because no act of government was directly the cause of nonperformance.

Second, the court concluded that the Chinese government’s subsidies did not constitute a force majeure event because market manipulation was a foreseeable risk. The court held that the “the risk of such a deflation of market prices—no matter the cause—was expressly assumed by plaintiff in its take-or-pay contract with defendant. Plaintiff opted not to protect itself with a contractual limitation on the degree of market price risk that it would assume.” [5]

Third, the court emphasized that granting relief for nonperformance because the contracts were unprofitable for Kyocera defeated the purpose of the take-or-pay arrangement, which expressly allocated the risk of market fluctuations. The take-or-pay contract works by sharing risk, where one party benefits from an increase in the market price, to the other party’s detriment, and vice versa for decreases in the market price.

Kyocera Corp., therefore, underscores that attempts to invoke force majeure clauses will likely fail when such clauses do not specify the particular type of event at issue, as well as when the event specified is foreseeable, or the risk has been assumed by the party seeking to invoke it elsewhere in the agreement.

2. Shelter Forest Case

In Shelter Forest International Acquisition Inc. v. COSCO Shipping (USA) Inc., a federal district court in Oregon addressed whether tariffs imposed by the United States on exports from the People’s Republic of China relieved the plaintiff importer, Shelter Forest International (SFI), of its contractual obligations to import a specified quantity of shipping containers from China under a fixed-price agreement with defendant COSCO Shipping Lines (CSL). [6]

Under the agreement executed by the parties in April 2018, SFI was required to ship 5,000 containers on CSL vessels at a specified freight rate, and CSL counterclaimed for breach of the contract’s minimum quantity provision.

SFI argued that its performance of the minimum quantity provision was excused by the doctrine of impossibility, as well as a force majeure clause in the parties’ contract. SFI asserted that tariffs imposed by the United States on Chinese lumber products in late 2017—as well as additional, planned tariffs under Section 301 of the Trade Act of 1974 outlined by the US administration to apply to a broader set of goods—precluded SFI’s performance of the agreement. SFI further argued that the tariffs constituted an unforeseeable, supervening event that excused performance. As support, SFI argued that, while the broader trade war between the US and China was foreseeable, the cited tariffs could not reasonably have been predicted and were outside either party’s control at the time the agreement was signed in early 2018.

The court rejected SFI’s impossibility defense, summarizing the defense’s stringent requirements. The court explained that the defense is only available when unexpected difficulties or expenses impose “hardship[s] so extreme that a practical impossibility exists,” and when those exigencies are “outside any reasonable contemplation of the parties.” [7] The court noted that “mere market shifts or financial inability” to perform are insufficient to invoke the defense. [8] The court reasoned that the tariffs imposed were reasonably foreseeable at the time the contract was consummated in April 2018 because the tariff was imposed in November 2017 and thus already in place when the contract was executed. The court further concluded that SFI had notice of the possibility of additional tariffs, given the ongoing trade war at the time the contract was executed. The court stressed that SFI elected to enter into the agreement regardless of the known tariff risk. Additionally, the court analogized the tariffs to mere market fluctuations, which do not relieve a party of its contractual obligations under established law. Moreover, the risks of such fluctuations were “expressly assumed” by the performing party because of the nature of a fixed-price contract whose whole purpose is to allocate risk in this way. Lastly, the court stressed that SFI continued shipping after the tariffs were implemented—strong evidence that the tariffs did not constitute a supervening event that precluded performance outright.

The court also rejected SFI’s invocation of the force majeure clause in the contract, noting that the clause covered “acts of god , strikes, embargoes, or events similarly beyond the knowledge or control of either party.” The clause explicitly excluded, however, “commercial contingencies, for example changing markets . . . business declines, etc.” The court concluded that the tariffs imposed merely constituted market changes resulting from government policies and, therefore, fit within the foregoing exclusion.

The court noted that SFI did not bargain for language in its force majeure clause expressly addressing tariffs. That election was especially significant, given tariffs were already in place when the contract was signed, and additional tariffs were foreseeable. Finally, the court stressed that SFI’s continued performance of the agreement after tariffs were implemented foreclosed its invocation of the force majeure clause because it demonstrated that the tariffs were not an unforeseen event that would excuse performance and thus did not meet the definition of a force majeure event.

Shelter Forest, therefore, reinforces the limited utility of generic force majeure clauses and the importance of clearly and explicitly addressing tariffs in any force majeure provision.

3. TPL Inc. Case

In TPL Inc. v. United States, the US Court of Federal Claims addressed arguments by TPL Inc. (TPL), a government contractor, that the impossibility and impracticability defenses properly excused its performance of a contract, executed with the US Army in the summer of 1994, to dispose of ammunition. TPL argued that, when tariffs imposed by the US government on foreign pyrotechnic companies in the 1990s were lifted, domestic pyrotechnic manufacturers went bankrupt. The resulting evaporation of potential domestic buyers left TPL with no means of disposing of the ammunition received from the government, rendering performance of the contract impossible and impracticable.

The court swiftly dismissed TPL’s impossibility defense. It clarified that impossibility is only a defense to performance of a contract with the federal government when the party invoking the doctrine establishes that no other contractor could perform the task; merely showing performance would be cost-prohibitive is not enough. The court reasoned, “TPL’s assertion is that the costs of the disposal were prohibitive, which constitutes a claim of commercial impracticability, not impossibility.” [12]

The court likewise rejected TPL’s impracticability defense. The court explained that performance of a contract with the government will be deemed to be impracticable only when, due to unforeseen events, the cost of performance would be excessive and unreasonable. TPL could only prove that their domestic buyers would not be able to take the ammunition, but since TPL assumed complete responsibility and liability for the disposition, it could not now claim impracticability. As to the unanticipated tariff policy, the court noted that “the nonoccurrence of such changes was not a basic assumption of the contract.” [13] Moreover, the court found that TPL assumed the risk that market conditions could change, including that certain firms could become insolvent. Indeed, TPL’s agreement with the government provided that TPL assumed liability for the relevant material once title transferred to TPL.

TPL Inc. v. United States thus reinforces that commercial impracticability requires proof of an unforeseeable risk that makes the cost of performance impossible, that mere market fluctuations are insufficient, and that when the parties allocate liability for market fluctuations in advance, courts will dismiss impracticability and impossibility defenses.

4. Murphy Marine Case

In Murphy Marine Services Inc. v. Dole Fresh Fruit Co., the court addressed whether certain fees, or so-called “tariffs,” levied by the new operator of the Port of Wilmington, after the port was privatized, excused plaintiff Murphy Marine Services’s (Murphy’s) performance of its contractual obligations to defendant Dole Fresh Fruit (Dole). [14] While this case involved tariffs imposed by a private rather than a public third party (i.e., a sovereign state), the court’s extensive discussion of the impracticability defense provides useful guidance for practitioners.

Under the parties’ agreement, Murphy was required to unload Dole’s ships at the port. After that agreement was disrupted when the port’s new operator, Gulftainer, imposed tariffs on all stevedores—making unloading substantially more expensive for Murphy—Murphy allegedly requested assurances from Dole that it would cover the new levies. Dole allegedly provided Murphy with the requested assurances. Thereafter, Murphy paid the tariffs and completed unloading, as required by the parties’ agreement.

After Dole allegedly failed to abide by its promise, Murphy sued Dole, asserting claims for promissory estoppel and fraud. Murphy argued that it never would have paid the new port fees and unloaded Dole’s ships but for Dole’s promise to cover such tariffs; instead, Murphy avers that it would simply have invoked the doctrine of impracticability to excuse its performance. Murphy argued that the privatization of the port was unforeseeable when the parties entered their contract and, therefore, Murphy could not have anticipated the new fees levied. Murphy further argued that the magnitude of the fees was sufficient to render performance impracticable. And although Murphy continued performing under the agreement, it did so only after allegedly receiving assurances from Dole that it would cover the fees levied.

Dole moved to dismiss Murphy’s claims. In denying Dole’s motion, the court addressed whether the doctrine of impracticability would have excused Murphy’s performance of its duties under the contract. To invoke that defense, the court explained that Murphy was required to show that (1) the tariff was not reasonably foreseeable, (2) the tariff disrupted a basic assumption of the contract and made Murphy’s continued performance impracticable, and (3) Murphy did not agree to continue performance once the tariff was levied (or would not have done so but for Dole’s alleged promise to reimburse it).

The court found Murphy satisfied each above requirement and, therefore, denied Dole’s motion to dismiss.

First, the court concluded that the tariff was not reasonably foreseeable when the parties entered into their contract. The court explained:

[T]he Port was state-run. So there was no need for their agreement to cover private fees. Indeed, Murphy says, had the tariff been imposed when the Port was state-run, it would have been a “tax,” which the contract allowed Murphy to pass along to Dole. There were no equivalent private fees to allocate, so the parties likely did not think about it. [15]

Second, the court concluded that the fees imposed “undermined a basic assumption of the agreement.” Indeed, under the contract, Dole paid Murphy a markup on its labor bill plus a management fee. That payment structure “was premised on Murphy's making a profit over its costs.” Due to the tariff, however, Murphy “would lose money on the deal.” Dole thus conceded that “Murphy could not keep operating that way.” [16]

Third, the court found that Murphy never agreed to perform “despite the impracticability.” Rather, it continued performing “only because Dole said it would cover the fees.” [17]

Murphy thus serves as a useful blueprint for successful invocation of the impracticability defense. Such a defense is more likely to succeed when (1) the tariff is not reasonably foreseeable, (2) the contract presupposes no tariff will be imposed, and (3) the tariff would upend a central premise of the contract and foreclose performance.

HOW WE CAN HELP

Our global trade team and commercial litigators are closely monitoring tariff developments and can assist clients with the following:

  • Assessing how existing contract language allocates tariff-related risks, including through force majeure clauses and provisions addressing taxes, price or cost fluctuations, and changes in applicable law
  • Negotiating or renegotiating contracts to ensure that the language adopted explicitly allocates tariff-related risks
  • Crafting language for force majeure, change-in-law, and change-in-circumstances clauses, as well as provisions addressing taxes and price and cost fluctuations, to address tariff-related risks
  • Representing clients in commercial litigation stemming from tariff-related contract breach

The rapidly evolving status of the tariffs creates significant business risk and uncertainty for impacted clients. Our lawyers stand ready to advise clients in all aspects of contract negotiation and litigation, and we are well positioned to advise clients on negotiating contract language to address tariff risks and handle supply chain litigation.

For more information, please refer to our prior LawFlashes :

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Authors
Ari M. Selman (New York)
Raechel Keay Anglin (Washington, DC)
Katelyn M. Hilferty (Washington, DC)
Casey Weaver (Houston)

[1]Shelter Forest Int’l Acquisition, Inc. v. COSCO Shipping (USA) Inc., 475 F. Supp. 3d 1171 (D. Or. 2020); TPL, Inc. v. United States, 118 Fed. Cl. 434, 440 (2014); Murphy Marine Servs., Inc. v. Dole Fresh Fruit Co., 2022 WL 610755, at *1 (D. Del. Jan. 13, 2022); Kyocera Corp. v. Hemlock Semiconductor, LLC, 313 Mich. App. 437, 886 N.W.2d 445 (2015).

[2] Kyocera Corp. v. Hemlock Semiconductor, LLC, 313 Mich. App. 437, 886 N.W.2d 445 (2015).

[3] Id. at 448.

[4] Id. at 449

[5] Id. 453.

[6] Shelter Forest Int’l Acquisition, Inc. v. COSCO Shipping (USA) Inc., 475 F. Supp. 3d 1171 (D. Or. 2020).

[7] Id. at 1186.

[8] Id.

[9] Id.

[10] Id.

[11] TPL, Inc. v. United States, 118 Fed. Cl. 434, 440 (2014).

[12] Id. at 442.

[13] Id. at 443.

[14] Murphy Marine Servs., Inc. v. Dole Fresh Fruit Co., 2022 WL 610755, at *1 (D. Del. Jan. 13, 2022). 

[15] Id. at 2.

[16] Id.

[17] Id.