Sign Up for PublicationsThe trade policies of the United States and its trading parties have evolved rapidly since the inauguration of President Trump’s second term. On April 2, 2025, President Trump announced sweeping tariffs on most goods imported into the United States. Nations such as China responded with retaliatory tariffs, while others have sought to negotiate new trade pacts. U.S. tariffs are now at their highest levels since the Smoot-Hawley Act, and economic policy uncertainty is near all-time highs.
Companies that depend on international trade are reassessing their investment plans, supply chains, and other contractual relationships in light of rising protectionism. Now is the time for parties to carefully review their material contracts for pitfalls and opportunities, including defenses to performance that may be asserted. As reflected in the stylized checklist below, companies and their counsel should (1) map their exposure to protectionism and its knock-on effects; (2) focus on key contract language and requirements; and (3) take proactive steps to preserve leverage. Below we discuss some of the key legal considerations facing businesses in these uncertain times.
I. Will Protectionism Give Rise to Force Majeure?
As contract performance becomes more difficult and expensive, companies should consider whether they or their counterparties may assert that evolving trade policy and its consequences constitute a force majeure. On April 6, 2025, Reuters reported that a supplier of aircraft components had declared force majeure in response to President Trump’s tariff announcement and advised customers that the company “will be excused from supplying any products or services that are impacted by this declared national emergency and/or the tariff executive order.”[1]
Commercial contracts may contain force majeure clauses that excuse one or both parties of its obligations due to certain extraordinary events enumerated in the agreement. Without a force majeure clause, parties will be limited to excusing performance under alternative legal doctrines like impracticability, impossibility, or frustration of purpose. Because a force majeure clause is created by contract, its scope, meaning, and applicability turn on the specific language of the contract, the unique set of facts affecting performance, and the governing law. Below, we briefly address issues that courts may consider in evaluating force majeure defenses. We then turn to other defenses that may be available at law or in equity.
- Is the claimed force majeure event covered by the force majeure clause? If the contract at issue contains a force majeure clause, a threshold issue will be whether it applies to the reason asserted for a party’s non-performance. Force majeure clauses often specify various events (e.g., “acts of God, government restrictions, wars, insurrections, labor disturbances, earthquakes, fires, floods, epidemics”) together with more general language (e.g., “or any other cause beyond the reasonable control of the party”). In addition, certain events may be carved out or excluded from the force majeure clause.[2]
Even when a force majeure clause contains catch-all language, courts will carefully scrutinize assertions of force majeure based on events that are not specifically enumerated as a force majeure. Often, courts will “cabin[] the meaning” of the general provision to “things of the same kind or nature as the particular matters mentioned.”[3] Force majeure clauses are generally construed narrowly. Therefore, the claimed force majeure event must hew closely to the events specified in the contract. Judicial scrutiny is especially demanding when a party seeks to declare force majeure based on economic hardship.[4] For this reason, parties may seek to characterize tariffs and other trade barriers as geopolitical events or acts of government, rather than as purely financial considerations. However, courts often limit “acts of government” provisions to government acts that render performance illegal or impossible.[5]
An instructive case is Kyocera Corp. v. Hemlock Semiconductor, 886 N.W.2d 445 (Mich. Ct. App. 2015), in which a solar panel manufacturer argued that a “trade war” between the U.S. and China excused it from performing its obligations under a long-term take-or-pay contract with a supplier. The Michigan appeals court was unpersuaded, finding that the relevant event was not an act of government, but rather “a depression of prices” that had made the manufacture of solar panels “unprofitable.” The court noted that the solar panel manufacturer “did not (although, again, it could have) negotiate a contractual force-majeure clause that by its terms would have excused contractual performance resulting from unprofitability due to governmental market manipulation.”
Because the current U.S. tariff regime is based on a presidential finding of a national emergency,[6] parties may frame the underlying emergency as the force majeure event. This was the approach reportedly taken by the aircraft components supplier noted above.[7] A declared emergency may constitute force majeure under certain contracts. However, courts may inquire into whether the emergency is the proximate cause of nonperformance, whether it prevented performance, and whether the emergency was anticipated or foreseeable at the time the contract was formed. - Did the claimed force majeure event prevent performance? Generally, a force majeure event must prevent a party from performing its contractual obligations. Whether an event has prevented performance can be a close question. In Mieco, L.L.C. v. Pioneer Natural Resources USA, Inc., 109 F.4th 710 (5th Cir. 2024), the Fifth Circuit held that a force majeure event need not render a party’s performance “literally impossible” but need only render it impracticable. Likewise, in LNG Americas, Inc. v. Chevron Nat. Gas, 2023 WL 2920940, (S.D. Tex. Apr. 12, 2023), the District Court found that a winter storm prevented performance of a natural gas supply contract where “the cost of supplying gas from the spot market [became] totally disproportionate to the contract price” during the force majeure period. However, other cases have held that “[m]ere impracticality or unanticipated difficulty is not enough to excuse performance.”[8]
Although the case law draws few bright lines, a party asserting force majeure based on supply chain disruptions will likely have a better chance of success if the impact is not just increased costs,[9] but extreme scarcity.[10] For this reason, parties may seek to frame the event not in economic terms, but in terms of physical knock-on effects, such as an inability to ship goods or to import constituent parts needed for manufacturing. Such supply chain issues may, in certain circumstances, constitute a force majeure, such as when essential components are unavailable and performance is impossible in their absence.[11] - Was the asserted force majeure event unanticipated? Some courts require an asserted force majeure event to have been unanticipated, or even unforeseeable, at the time the contract was executed. Courts are more likely to impose an unforeseeability requirement where a party invokes catch-all language in a force majeure provision, rather than a specifically enumerated force majeure event.[12] Whether current trade policy was anticipated or foreseeable can be fact intensive. Often, however, the terms and allocation of risks in a commercial agreement provide the best evidence of whether an event was anticipated at the time of contracting.[13] Although the stock market’s reaction might arguably be cited as evidence that the tariffs announced on “Liberation Day” were unanticipated, litigants may also argue that market participants have long been aware of the “persistent annual U.S. goods trade deficits” that prompted President Trump’s tariff policies, as well as President Trump’s past pronouncements on trade policy.
- Have other contractual prerequisites been met? Parties should pay careful attention to the particular requirements of the relevant contract. Contracts may require the party asserting force majeure to demonstrate due diligence, to provide notice, or to satisfy other requirements before force majeure can be raised as an excuse. Courts generally will not overlook these requirements, and neither should parties. Likewise, if a party anticipates litigation over a force majeure clause, it should take care to act fairly and in good faith and keep detailed contemporaneous documentation of the events, which may make the difference in close cases.[14] Parties to contracts for the sale of goods should take heed of U.C.C. § 2‑615, which may require scarce supplies to be allocated in a fair and reasonable manner to existing customers.[15]
II. What Other Contractual Defenses May Apply?
Force majeure is not the only defense that parties may raise to justify non-performance of contractual obligations under the current trade regime. Below we briefly review other defenses that are frequently raised when extraordinary events interfere with contract performance.
Impossibility or impracticability. Even in the absence of a written force majeure clause, a party’s contractual duties may sometimes be discharged under the doctrine of impossibility, also known as impracticability.[16] This doctrine applies when an unforeseen event prevents a party from performing. As set forth in Section 261 of the Restatement (Second) of Contracts, comment d:
A mere change in the degree of difficulty or expense due to such causes as increased wages, prices of raw materials, or costs of construction, unless well beyond the normal range, does not amount to impracticability since it is this sort of risk that a fixed-price contract is intended to cover. Furthermore, a party is expected to use reasonable efforts to surmount obstacles to performance . . . and a performance is impracticable only if it is so in spite of such efforts.
This common law defense may require a higher degree of impracticability than is required to prove a force majeure defense.[17]
Frustration of purpose. Parties may seek to avoid their contractual obligations based on the common-law defense of “frustration of purpose,” under which a party’s duties can sometimes be discharged by certain supervening events, even if performance remains possible.[18] As described in Section 265 of the Restatement (Second) of Contracts:
Where, after a contract is made, a party’s principal purpose is substantially frustrated without his fault by the occurrence of an event the non-occurrence of which was a basic assumption on which the contract was made, his remaining duties to render performance are discharged, unless the language or the circumstances indicate the contrary.
The doctrine is often construed narrowly “so as to preserve the certainty of contracts.”[19] For example, under New York law, the defense has been held to apply when “when a virtually cataclysmic, wholly unforeseeable event renders the contract valueless to one party.”[20] In one classic illustration, an advertiser was found not liable for the cost of souvenir booklets for a yacht race that had been cancelled due to war.[21] However, the defense may not apply if the supervening event merely makes performance less profitable.[22] As with the defenses reviewed above, a party invoking frustration of purpose may face an uphill battle when the risk of the supervening event was anticipated and allocated by contract.[23]
Illegality. The doctrine of illegality generally renders agreements void and unenforceable if they involve illegal activities or violate public policy, such as unlawful transfers of technology or resources to a sanctioned trading partner.[24] Parties to commercial contracts should carefully consider the fast-moving impacts of a trade war on their legal obligations, including any changes that could give rise to an illegality defense. Parties must then consider whether the illegal portion of the contract is severable or if the contract can and should be reformed to cure the illegality.
III. Potential Impacts on Mergers and Acquisitions
Changes in trade policy may also affect mergers and acquisitions in sectors that depend on international commerce. Mergers and acquisitions frequently include conditions precedent, “material adverse effect” clauses, and other provisions that may excuse a party’s performance based on adverse developments prior to the closing of the deal. We briefly review such clauses below.
- Material Adverse Effect: Mergers and acquisitions agreements frequently contain clauses that condition one or both parties’ obligation to close on the absence of a “material adverse effect” (or “MAE”). Unlike force majeure clauses, MAE clauses commonly exclude events material and adverse events that affect an industry generally.[25] However, an industrywide event may occur if the business in question is materially and disproportionately affected.[26] Courts presented with an applicable MAE clause will generally inquire whether the supposedly material event was unknown at the time of contracting and “substantially threaten[s] the overall earnings potential of the target in a durationally-significant manner.”[27] Our prior publications discussing MAE in the context of the COVID-19 pandemic provide useful insights on MAE that are broadly applicable to market uncertainty caused by a trade war.[28]
- Ordinary Course Covenant: The impacts of a trade war could affect parties’ ability to comply with contractual “ordinary course” covenants, which typically require the seller, during the period between signing and closing, to operate its business in the “ordinary course.”[29] Ordinary course covenants allocate risks and incentives between the parties, particularly as to decisions within the target’s control regarding the conduct of its business, including in response to external changes. Given rapidly changing economic conditions, it may be difficult to operate in the “ordinary course,” which may provide an avenue to avoid performance of an otherwise enforceable merger and acquisition agreement.
- Regulatory Approvals: A trade war could affect regulatory approval of proposed mergers and acquisitions, such as review by the Committee on Foreign Investment in the United States (“CFIUS”). Litigation could arise over the reasonableness of parties’ efforts to obtain regulatory approval, as occurred in Desktop Metal, Inc. v. Nano Dimension Ltd., C.A. No. 2024-1303-KSJM, 2025 WL 904521 (Del. Ch. Mar. 24, 2025).
- Conditions Precedent: Companies involved in mergers and acquisitions should consider the potential impact of a trade war on their ability to satisfy conditions precedent to closing. For example, acquisitions by private equity buyers often require financial engineering that may be challenged by the financial stresses caused by adverse changes in trade policy. Determining whether conditions precedent are satisfied or capable of being satisfied amid rising trade tensions requires subtle and thorough analysis of the terms of M&A agreements.
IV. Notable Representations
Changing trade policy creates significant business risks and opportunities for parties to commercial contracts, mergers, and acquisitions. If trade policy gives rise to disputes with your counterparties, Quinn Emanuel has the nation’s preeminent force majeure litigation practice, with extensive experience litigating force majeure and other excuses in the wake of events such as the COVID-19 pandemic, Winter Storm Uri, and the Ukraine war. A summary of some of our notable representations is presented below and in the appendix.
If you have any questions about the issues addressed in this memorandum, or if you would like a copy of any of the materials mentioned in it, please do not hesitate to reach out to:
Michael Carlinsky
Email: michaelcarlinsky@quinnemanuel.com
Phone : +1 212 849 7150
Christopher Kercher
Email: christopherkercher@quinnemanuel.com
Phone: +1 212 849 7263
Andrew Rossman
Email: andrewrossman@quinnemanuel.com
Phone: +1 212 849 7282
Brian Timmons
Email: briantimmons@quinnemanuel.com
Phone: +1 213 443 3221
Isaac Nesser
Email: isaacnesser@quinnemanuel.com
Phone: +1 212 849 7253
Nathan Goralnik
Email: nathangoralnik@quinnemanuel.com
Phone: +1 212 849 7049
To view more memoranda, please visit www.quinnemanuel.com/the-firm/publications/
To update information or unsubscribe, please email updates@quinnemanuel.com
Appendix: Notable Representations
Force Majeure Cases
- We secured summary judgment in favor of our client, luxury private jet company FlexJet, in litigation over Honeywell’s breach of a jet engine repair contract. Honeywell asserted that the COVID-19 pandemic and the war in Ukraine constituted a force majeure excusing its non-performance. Honeywell is currently appealing the decisions. Flexjet LLC. v. Honeywell International Inc., No. 651078/2023 (N.Y. Sup. Ct.).
- We have extensive experience litigating force majeure issues in the energy sector. We successfully defended Koch Energy Services, LLC in a force majeure dispute based on the impact of Winter Storm Uri on natural gas infrastructure in Texas. Luminant Energy Co. v. Koch Energy Services, LLC, No. 1:2021-cv-03335 (S.D.N.Y.). We are representing NextEra in two force majeure cases arising from Winter Storm Uri. HF Sinclair Refining & Marketing LLC v. NextEra Energy Marketing, LLC, No. 3:2023-cv-01798 (N.D. Tex.); NextEra Energy Marketing, LLC v. Macquarie Energy LLC, No. 1:2022-cv-01345 (S.D.N.Y.).
- We represented numerous parties to renewable energy agreements in the wake of Winter Storm Uri. We obtained a favorable resolution for a wind energy operator in bet-the-company litigation against Citigroup, its hedge counterparty, shortly after we had obtained a stay of Citi’s remedies from New York’s Appellate Division. Stephens Ranch Wind Energy LLC v. Citigroup Energy Inc., No. 652078/2021 (N.Y. Sup. Ct.). Other representations in this area include P. Morgan Ventures Energy Corp. v. Miami Wind I, LLC, No. 652094/2021 (N.Y. Sup. Ct.); Mariah del Norte LLC v. Citigroup Energy Inc., No. 652312/2021 (N.Y. Sup. Ct.); Buckthorn Wind Project LLC v. JPMorgan Chase Bank N.A., No. 4:21-cv-00562 (N.D. Tex.); Flat Top Wind I LLC v. Citigroup Energy Inc., No. 2021/23588 (Tex. Dist. Ct. Harris Cnty.).
Mergers and Acquisitions
- We obtained a favorable post-trial decision for our client, which the Court described as “a victory for deal certainty,” compelling a buyer to close on a $550 million acquisition of the world’s largest professional cake decoration supplier and rejecting the buyer’s argument that the COVID-19 pandemic constituted an MAE. Snow Phipps Group LLC v. KCake Acquisition Inc., C.A. No. 2020-0282 (Del. Ch.).
- We successfully resolved litigation on behalf of a private equity firm that terminated an agreement to purchase a stake in AmEx Global Business Travel based on the impacts of the COVID-19 pandemic. In Juweel Investors Ltd. v. Carlyle Roundtrip LP, C.A. No. 2020-0338 (Del. Ch.).
- We achieved a favorable settlement on behalf of affiliates of private equity fund Advent International in connection with litigation filed by cybersecurity company Forescout Technologies, alleging violation of the terms of the parties’ $1.9 billion acquisition agreement, including an MAE, related to Forescout’s business performance following the COVID-19 pandemic. Forescout v. Ferrari Group Holdings, L.P., C.A. No. 2020-0385-SG (Del. Ch.).
- We won a post-trial decision finding, inter alia, that the sellers of a hotel chain had breached their covenant to operate the business in an “ordinary course” manner due to shutdowns and cutbacks related to the COVID-19 pandemic. The Delaware Supreme Court affirmed the decision on appeal. AB Stable VIII LLC v. MAPS Hotels and Resorts One LLC, C.A. No. 2020-0310 (Del. Ch.), aff’d, C.A. No. 71, 2021 (Del.).
- We obtained a post-trial order compelling high-tech electronics board maker Nano Dimension to secure CFIUS approval for its acquisition of Desktop Metal, an Israeli defense contractor. Desktop Metal Inc. v. Nano Dimension Ltd., C.A. No. 2024-1303 (Del. Ch.).
- We successfully defended and obtained a highly favorable settlement for a subsidiary of Koch Industries, which sold a natural gas power plant to a Vistra subsidiary which sought to reform the earn-out provisions of an asset purchase agreement following a major storm. Koch Ag & Energy Solutions LLC v. La Frontera Holdings LLC, C.A. No. 2021-0219 (Del. Ch.).
[1] Allison Lampert & Tim Hepher, Aircraft supplier Howmet may halt orders if hit by Trump tariffs, letter says, Reuters, Apr. 7, 2025, https://www.reuters.com/business/aerospace-defense/aircraft-supplier-howmet-may-halt-orders-if-hit-by-trump-tariffs-letter-says-2025-04-04/.
[2] For example, energy contracts frequently exclude supply issues from the ambit of force majeure. See, e.g., Constellation Energy Servs. of New York, Inc. v. New Water St. Corp., 146 A.D.3d 557, 558 (N.Y. App. Div. 1st Dep’t 2017) (“Force majeure shall not include loss or failure of either Party’s markets or supplies.”).
[3] JN Contemp. Art LLC v. Phillips Auctioneers LLC, 29 F.4th 118, 124 (2d Cir. 2022).
[4] See, e.g., Macalloy Corp. v. Metallurg, Inc., 284 A.D.2d 227, 227 (N.Y. App. Div. 1st Dept. 2001) (no force majeure where plaintiff “shut down its plant voluntarily” due to costly “environmental regulations”); Urb. Archaeology Ltd. v. 207 E. 57th St. LLC, 891 N.Y.S.2d 63, 64 (N.Y. App. Div. 1st Dep’t 2009) ( “downturn in the economy” did not excuse performance).
[5] See, e.g., N. Ill. Gas Co. v. Energy Co-op., Inc., 461 N.E.2d 1049, 1058 (Ill. App. Ct. 1984) (for a regulation to constitute a force majeure event it must “direct or prohibit an act which proximately causes non-performance or breach of a contract”).
[6] Exec. Order No. 14257, 90 Fed. Reg. 15041 (Apr. 2, 2025).
[7] See Lampert & Hepher, supra note 1.
[8] Phibro Energy, Inc. v. Empresa De Polimeros De Sines Sarl, 720 F. Supp. 312, 318 (S.D.N.Y. 1989).
[9] Rochester Gas & Elec. Corp. v. Delta Star, Inc., 2009 WL 368508, at *10 (W.D.N.Y. Feb. 13, 2009) (increased steel prices).
[10] See, e.g., Tejas Power Corp. v. Amerada Hess Corp., 1999 WL 605550, at *3 (Tex. App. Aug. 12, 1999).
[11] See, e.g., PT Kaltim Prima Coal v. AES Barbers Point, Inc., 180 F. Supp. 2d 475, 481–82 (S.D.N.Y. 2001).
[12] See E. Air Lines, Inc. v. McDonnell Douglas Corp., 532 F.2d 957, 990 (5th Cir. 1976).
[13] See, e.g., Gen. Elec. Co. v. Metals Res. Grp. Ltd., 293 A.D.2d 417, 419 (N.Y. App. Div. 1st Dep’t 2002).
[14] See Toyomenka Pac. Petroleum, Inc. v. Hess Oil Virgin Islands Corp., 771 F. Supp. 63, 67 (S.D.N.Y. 1991) (finding defendant used “reasonable diligence” by allocating port capacity on a first-come, first-serve basis after hurricane).
[15] See Cliffstar Corp. v. Riverbend Prods., Inc., 750 F. Supp. 81, 84 (W.D.N.Y. 1990).
[16] See Tractebel Energy Mktg., Inc. v. E.I. Du Pont De Nemours & Co., 118 S.W.3d 60, 66 (Tex. App. 2003) (“Generally, impracticability excuses a party’s breach of contract when the contract itself doesn’t provide an escape clause and the doctrine’s other requirements are satisfied.”).
[17] See Mieco, L.L.C. v. Pioneer Nat. Res. USA, Inc., 109 F.4th 710, 718 (5th Cir. 2024) (reasoning that if a force majeure clause “required impossibility, there would be no need to single out such events as not rising to the level of force majeure,” and “the force majeure clause [would be] redundant of the common law impossibility defense”).
[18] See Aukema v. Chesapeake Appalachia, LLC, 904 F. Supp. 2d 199, 211 (N.D.N.Y. 2012) (“Both parties can perform, but as a result of unforeseeable events, performance by party X would no longer give party Y what induced him to make the bargain in the first place.”).
[19] Le Fort Enters., Inc. v. Lantern 18, LLC, 199 N.E.3d 1257, 1264 (Mass. 2023) (quoting 17A Am. Jur. 2d Contracts § 641 (2022)).
[20] Beardslee v. Inflection Energy, LLC, 904 F. Supp. 2d 213, 221 (N.D.N.Y. 2012), aff’d, 798 F.3d 90 (2d Cir. 2015).
[21] See Marks Realty Co. v. Churchills, 90 Misc. 370 (N.Y. App. Term 1915).
[22] See Frazier v. Collins, 187 S.W.2d 816 (Ky. 1945).
[23] See, e.g., Hugo Boss Retail, Inc. v. A/R Retail, LLC, 145 N.Y.S.3d 329, 329 (N.Y. Sup. Ct. 2021) (frustration of purpose defense unavailable where risk of government restrictions “was not only foreseeable, it was actually foreseen”).
[24] Cf. Amtorg Trading Corp. v. Miehle Printing Press & Mfg. Co., 206 F.2d 103, 105 (2d Cir. 1953) (rejecting illegality defense “where delivery to the buyer is to occur in this country” and did not violate export restrictions).
[25] See, e.g., Hexion Specialty Chemicals, Inc. v. Huntsman Corp., 965 A.2d 715, 736–37 (Del. Ch. 2008).
[26] See Akorn, Inc. v. Fresenius Kabi AG, 2018 WL 4719347 (Del. Ch. Oct. 1, 2018), aff’d, 198 A.3d 724 (Del. 2018).
[27] In re IBP, Inc. Shareholders Litig., 789 A.2d 14, 68 (Del. Ch. 2001).
[28] See US Outlook: Novel Legal Challenges from the New Coronavirus, https://www.quinnemanuel.com/media/25ypsjrb/client-alert-us-outlook-novel-legal-challenges-from-the-new-coronavirus.pdf; Report from the Front Lines: COVID-19 M&A Litigation in Delaware, https://www.quinnemanuel.com/the-firm/publications/report-from-the-front-lines-covid-19-m-a-litigation-in-delaware/.
[29] See AB Stable VIII LLC v. MAPS Hotels & Resorts One LLC, 268 A.3d 198 (Del. 2021).