What began as a targeted intervention rapidly escalated into a broader contest, with both allies and rivals erecting new barriers to trade. As a result, the relative predictability of open markets has given way to an environment characterized by volatility, ongoing negotiation, and an urgent need for strategic adaptation. Although several trade agreements have been concluded—or are currently under negotiation—between the U.S. and certain trading partners, the overall tariff environment remains elevated. Significant tariffs continue to apply to key sectors, and third countries have introduced quotas and export licensing requirements in response to the Liberation Day tariffs. These measures will remain in effect for exports, regardless of any bilateral deals reached with the U.S.
This article dissects the contractual and statutory remedies available under German law for supply chain contracts disrupted by these newly minted trade restrictions.
For more details on the Liberation Day tariffs, see the article “A new era of global trade tensions - A&O Shearman” by our International Trade Group.
Impact of tariffs and other restrictions on supply chain contracts and potential legal remedies
On April 2, 2025, the U.S. administration announced a universal 10% baseline tariff on nearly all goods entering the United States, with even steeper “reciprocal” rates for countries with which the U.S. runs significant trade deficits—China, members of the European Union, and a swath of Asian and African nations. In response, many affected countries have increased their own tariffs and deployed a suite of non-tariff barriers, including export quotas and licensing requirements. These trade restrictions can fundamentally disrupt the contractual balance between performance and consideration, placing significant strain on supply chain contracts. For supply chain contracts governed by German law, several legal doctrines are particularly relevant.
Impossibility of Performance
Under German law, a party is relieved from performing an obligation that has become impossible under section 275(1) of the German Civil Code (Bürgerliches Gesetzbuch, BGB). In the context of trade restrictions, the critical question is whether such measures render contractual performance factually or legally impossible.
Typically, even sharply increased tariffs do not make delivery impossible; they simply make it more expensive for the party bearing the additional costs. The analysis changes, however, where export quotas or licensing requirements are imposed. If, for example, a quota for a particular good is exhausted, it may be legally impossible to export that good, albeit often only temporarily. Whether performance is impossible in these circumstances is a fact-specific inquiry, particularly if the purchaser’s contractual use is tied to specific delivery windows. If the goods cannot be sourced elsewhere and the delivery window expires, performance may be rendered impossible; otherwise, performance may be merely delayed. In both scenarios, the supplier’s liability for damages hinges on whether it is at fault for missing the quota. A supplier may be deemed at fault if it failed to monitor quota availability with reasonable diligence or neglected to submit the necessary export applications in a timely manner. Liability may also arise where the supplier did not allocate the available quota fairly among its customers. Conversely, if the supplier acted with due care and the quota was exhausted due to unforeseen or uncontrollable circumstances, fault may be less likely to be established. Ultimately, the assessment will depend on the specific factual context of each case.
A similar analysis applies to licensing requirements. If a supplier cannot obtain a necessary export license, its ability to perform depends on whether it can cure any deficiencies in its application, the urgency of delivery, the licensing timeline, and the availability of alternative sources. The supplier’s liability for damages ultimately turns on fault. Additional complexities arise if the inability to obtain a license is linked to disclosure restrictions protecting the purchaser’s business secrets or intellectual property.
If trade restrictions do not make delivery impossible, section 275(2) of the BGB may still entitle the supplier to refuse performance if fulfilling the obligation would require an effort grossly disproportionate to the purchaser’s interest. This requires careful balancing of the increased effort required of the supplier against the purchaser’s interest in performance. Where goods can only be sourced from one country, or all alternatives are similarly affected, the purchaser’s interest may rise in tandem with the supplier’s efforts, making section 275(2) of the BGB inapplicable. Conversely, if the purchaser can source the goods elsewhere without incurring substantially higher costs, the supplier may be entitled to refuse performance.
Similar to the statutory remedy under section 275(2) of the BGB, many supply chain contracts include hardship clauses to address economical imbalance in certain situations. Hardship clauses are intended to address situations in which performance, although not impossible, becomes economically unreasonable as a result of unforeseen events. This could include substantial tariff increases or the introduction of new regulatory barriers. Rather than granting a party an immediate right to refuse performance, hardship clauses typically oblige the parties to enter into good faith negotiations to adapt the contract to the altered circumstances. This may involve, for example, an adjustment of prices or delivery terms.
Force Majeure
Force majeure is not codified in the German Civil Code but is recognized under Article 79 of the United Nations Convention on Contracts for the International Sale of Goods (CISG) and is a standard feature of many supply chain contracts. These provisions act as a contractual safety valve, excusing parties from liability when extraordinary events beyond their control prevent performance. While force majeure typically covers natural disasters, war, or labor strikes, its application to legal changes—such as new tariffs—demands careful scrutiny under both contract and law.
Drawing on international instruments such as Article 79 of the CISG and Article 7.1.7 of the UNIDROIT Principles of International Commercial Contracts, four cumulative requirements generally apply (for the key factors in a force majeure analysis under English law, see Tariffs and force majeure - A&O Shearman by Maeve Hanna and Jason Rix):
- Impediment beyond the control of the party invoking force majeure: The imposition of tariffs or trade restrictions by governmental authorities is, by its nature, outside the control of private contracting parties. This holds true regardless of the party’s domicile, except in rare cases involving state-owned entities where the analysis may differ.
- Impediment not reasonably foreseeable at contract formation: The foreseeability of tariffs is a nuanced issue. While tariffs are a familiar tool in international trade, the recent volatility and unpredictability of trade policy complicate the analysis. The key is whether a prudent party could have anticipated the specific measure at the time of contracting and, if so, whether it assumed the risk by failing to address it contractually. This is a highly fact-specific assessment.
- Causation: The causal link between the trade restriction and non-performance must be established in accordance with the specific wording of the force majeure clause. Many clauses require that the event “prevents” performance, which typically sets a high threshold and may only be met where performance has become impossible, for example due to regulatory barriers such as export quotas or licensing requirements. Other clauses, however, refer to “material disruption” or “adverse effect,” which may allow for a broader interpretation and could, in certain circumstances, encompass situations where tariffs or other trade restrictions render performance economically unreasonable, even if not strictly impossible. The precise scope of relief will therefore depend on the contractual language and the factual circumstances of the case.
- Impediment could not have been avoided or overcome: The party invoking force majeure must demonstrate that it could not have avoided or overcome the effects of the trade restriction. This may involve showing that alternative sourcing was not feasible, that the cost increase was prohibitive, or that regulatory barriers were insurmountable within the required timeframe.
Doctrine of clausula rebus sic stantibus (fundamental change in circumstances)
Section 313 of the BGB codifies the doctrine of clausula rebus sic stantibus (Wegfall der Geschäftsgrundlage) under German law. This legal concept allows a party to seek contract amendment if the following conditions are met:
- Fundamental change in circumstances: Circumstances or assumptions underpinning the contract must have changed significantly post execution. Depending on the negotiation history of the specific contract, the absence of trade restrictions may have been fundamental. The drastic nature of some recent barriers—tariff hikes, quotas, licensing requirements—may, in specific cases, meet this threshold. However, courts and tribunals have traditionally set a high bar.
- Risk not allocated to party seeking contract amendment: A party cannot invoke section 313 of the BGB to escape risks it has contractually assumed or is otherwise expected to bear. The question of foreseeability and contractual risk allocation is central. In the context of trade restrictions, the same considerations mentioned above in relation to force majeure (section 2(b)(ii)) apply here.
- Unreasonableness of maintaining the existing contract terms: Contract amendment is possible if holding the party to the original terms would be unreasonable based on the totality of the circumstances, in particular as regards risk allocation. This involves a proportionality analysis, balancing the additional effort required for performance against the contract price. Unlike section 275(2) of the BGB, section 313 of the BGB may offer a remedy even if the value of delivery for the purchaser has equally increased due to the changed circumstances as the effort required of the supplier. In the context of trade restrictions, this means that, depending on the circumstances of the specific case, contract adaptation may be possible even if restrictions generally drive up the price of a good.
While section 313 of the BGB may have the broadest application among the remedies discussed in the context of trade restrictions, the threshold for judicial intervention is high. If section 313 of the BGB applies, the affected party is entitled to contractual adaptation reflecting the changed circumstances. Determining an appropriate allocation of additional costs will be challenging. In exceptional cases, if adaptation is not possible or reasonable, the contract may be terminated under section 313(3) of the BGB.
Conclusion
The rapidly evolving landscape of global trade restrictions and tariffs demands a careful, contract-specific analysis to determine the availability of remedies and the allocation of risk under German law. Proactive contract management and a clear understanding of the available legal remedies will be essential to navigating the challenges posed by the new era of trade volatility.
