Tariffs got you terrified? Consider Mitigation Strategies for Future and Current Contracts
Tariffs got you terrified? Consider Mitigation Strategies for Future and Current Contracts
It seems like every day we hear horror stories of businesses taking on the heavy burden of tariffs, with almost weekly changes to tariff rates and effective dates. While businesses cannot control when and how tariffs will become effective, there are strategies to blunt their impact on the financial well-being of your company.
First, all existing contracts should be reviewed to see if they allow the business to charge tariffs as an additional cost. Such authority is typically found in the sections that discuss contract price or change orders to the contract. Some contracts treat unanticipated government events as force majeure. A "Force Majeure" provision may allow the business to either suspend performance of the contract for some period of time or allow for termination by the business without damages.
Second, you may want to review your contract proposals that are outstanding. Unless already accepted by the customer, your outstanding bids can generally be withdrawn without legally adverse consequences. This action may save you hundreds of thousands of dollars in potentially unprofitable agreements.
Third, hire an experienced business attorney to help you navigate these uncertain times. Your attorney may be able to help you renegotiate existing contracts, deal with existing proposals, and/or revise existing contract terms to ensure your company is protected in future agreements.
Lastly, courts are not receptive to legal arguments that the contract is now less profitable.Mere unexpected difficulty or unforeseen expense encountered by a business does not excuse nonperformance.This means that your business may remain contractually responsible for performing, notwithstanding the potentially significant costs due to tariffs. And while there are certain defenses available where performance may be excused as commercially impractical, the fact that tariffs have been in the news for several months makes it difficult to successfully use such defenses.
At Brim Law, LLC, we are committed to the success of your business and look forward to helping you navigate today's challenging business environment. We are here to assist with your legal needs.