The impact of Tariffs on international contracts in Itália

A common initial objection from the party impacted by the new or increased tariffs (whether the buyer-importer or the reseller pays the duty) is to invoke force majeure to avoid fulfilling the contract, which has become overly burdensome due to the duty.

To determine whether the prerequisites for a Force Majeure event are met, its consequences, and what behavior the parties should have, it is first necessary to analyze the content of the Force Majeure clause (if any) included in the contract to verify whether the parties have included the imposition of duties among the events justifying non-performance.

In the absence of an express provision in the contract, it will be necessary to consider what the law applicable to the contract states: if the 1980 UN Convention on the International Sale of Goods applies to the agreement, then according to Article 79, a party is not liable for failing to perform its obligation if it proves that such failure is due to an impediment beyond its control and that it could not reasonably have been expected to take it into account at the time of the conclusion of the contract, to foresee or overcome it, or to foresee or overcome its consequences.

However, applying the duty generally does not qualify as force majeure since the parties are not confronted with an unforeseeable event that would render it objectively impossible to fulfill the contract. The buyer/importer can always fulfill the contract, facing only the issue of a price increase.

The situation is very similar under Italian law, where the force majeure principle lacks an explicit definition. Consequently, the determination of what constitutes force majeure is left to case law, which describes it as a cause for exemption from liability for non-performance arising from an objective, extraordinary, and unforeseeable event of such magnitude that it renders performance impossible (rather than merely more difficult or onerous) to fulfill the obligations of the aggrieved party.

The debtor must prove the impossibility of performance, which is complicated because the obligation to pay a sum of money is generally always considered possible, although more onerous.

It is also challenging to argue that the requirements of extraordinariness and unforeseeability are successfully met since the U.S. duties and any reciprocal measures adopted by other states have been discussed for months.

Under Italian law, if excessive onerousness (hardship) arises after the contract is concluded, the affected party has the right to terminate the agreement. However, such termination cannot be requested if the supervening onerousness falls within the contract's usual risks. The party against whom termination is sought can prevent it by proposing to modify the terms of the contract fairly (art. 1467 civil code).

Is this true for tariffs? A case-by-case evaluation is necessary, leading to a determination of hardship if an extraordinary and unforeseeable situation exists (in the case of the U.S. duties, which have been announced for months, it’s difficult to support this) and the price is manifestly excessive due to the tariff's application.

These are exceptional situations that are rarely applied and should be investigated further based on the facts of the contract.  Generally, price fluctuations in international markets are considered part of business risk and do not constitute sufficient grounds for renegotiating concluded agreements, which remain binding unless the parties have included a hardship clause (discussed below).

No, it does not. Contracts already concluded, such as orders already accepted and supply schedules with agreed prices for a certain period, are binding and must be fulfilled according to the original agreements.  In the absence of specific clauses in the contract, the party affected by the tariff is therefore obliged to comply with the previously agreed price and give fulfillment to the agreement.

It is advisable to expressly provide for the right to renegotiate prices, if necessary, by adding an addendum to the original agreement. This can be achieved, for example, by a clause providing that in case future events, including any duties, cause an increase in the overall cost of the product above a certain threshold (e.g., 10 percent), the party affected by the tariffs has the right to initiate a renegotiation of the price and, in the event of a failure to agree, can withdraw from the contract.

An example of a clause might be as follows:

Import Duties Adjustment

"If any new import duties, tariffs, or similar governmental charges are imposed after the conclusion of this Contract, and such measures increase a Party's costs exceeding X% of the agreed price of the Products, the affected Party shall have the right to request an immediate renegotiation of the price. The Parties shall engage in good faith negotiations to reach a fair adjustment of the contractual price to reflect the increased costs.

If the Parties fail to reach an agreement within [X] days from the affected Party's request for renegotiation, the latter shall have the right to terminate this Contract with [Y] days' written notice to the other Party, without liability for damages, except for the fulfillment of obligations already accrued."