When disaster strikes — whether a pandemic, wildfires, or global supply chain issues — who is responsible for the delay? The answer often lies in a part of the contract called the “force majeure” clause. 

What Is Force Majeure, and Why Should You Care?

In a construction contract, a force majeure clause is a provision that deals with unexpected events that are outside of the parties’ control and foreseeability, including:

• natural disasters (fires, floods, hurricanes);
• global events (like COVID-19 or wars);
• labour strikes or government shutdowns; and
• shortages of materials due to tariffs or supply chain disruptions.

This clause determines whether and how a contractor or owner can shift risks and responsibility, including getting more time or avoiding penalties, when an unpredictable event happens.

COVID-19, Tariffs, and Supply Chain

Before COVID-19, most people did not pay much attention to their force majeure clauses. However, when the pandemic occurred, and materials from overseas were delayed or became dramatically more expensive, it suddenly mattered a lot.

International politics is also another major source of sudden change in project economics. For example, new or increased tariffs on steel and aluminum can cause major cost increases for construction materials. Contractors locked into fixed-price contracts may be unable to recover those costs — unless their contracts allowed it.

Tariffs — especially those imposed with little warning — can have a big impact on business. They disrupt sourcing, increase costs, and cause delays as companies scramble to find alternatives. Yet courts may not treat tariffs as force majeure events unless the contract says so.

Force Majeure Is Not a “Get Out of Jail Free” Card

Just because something unexpected happens does not automatically excuse delays or extra costs. Courts and owners often ask:

• Was the event truly unforeseeable? (e.g., COVID in 2020? Yes. A new round of tariffs in 2025? Maybe not, if tariffs have become a recurring risk.)
• Did the contractor take reasonable steps to avoid or reduce the impact?
• Does the contract clearly cover the specific event that caused the delay or price change?

Here is where contractors often get caught: many force majeure clauses do not mention tariffs, trade wars, or supply chain disruptions at all.

The contractor may not get extra time for completion, or compensation, if tariffs are not listed in the clause or price escalation relief is not included. Courts may conclude the risk was the contractor’s to manage.

The Importance of Specific Language in Your Contract

The bottom line: Vague force majeure clauses can cost the contractor. Courts and owners will look closely at the wording. For example:

• Broad terms like “acts of God” or “events beyond control” may not cover government-imposed tariffs.
• Better-drafted clauses list specific events—like “pandemics,” “government embargoes,” “trade restrictions,” or “tariff-related material cost escalation”—and spell out precisely what happens, such as allowing time extensions, cost recovery, or substitution of materials.
• Contractors should also pay attention to notice requirements. Some contracts require the contractor to give written notice within a certain number of days after the triggering event. If the impacted contractor misses that window, the contractor could lose the right to compensation or a time extension.

Change Clauses and Price Escalation: Another Risk Area

What happens if a subcontractor sends the contractor a change order because material prices have increased due to new tariffs? Can the contractor pass that cost on to the owner? Once again, it depends on the contract.

Suppose the contract has a no-damage-for-delay clause or does not allow equitable price adjustment. In that case, the contractor might be left covering the increase out of pocket, even if the tariffs were imposed after the parties had signed the contract.

Some contractors have argued that tariff-driven price hikes should fall under force majeure or change-in-law clauses. However, courts do not always agree, especially if the contract is silent on government actions or price volatility.

To protect themselves, the parties may need to be especially attentive to a combination of clauses:

• force majeure that includes tariff events;
• material escalation clauses that allow for price renegotiation; and
• substitution rights for sourcing alternative products.

Practical Takeaways for Contractors

Here are some actions that contractors may take:

• Read your force majeure clause carefully—and get legal help if the contractor is unsure of what it means.
• Negotiate specific language when signing contracts. Do not rely on vague terms like “acts of God.”
• Add tariffs, embargoes, and government actions to the list of covered events.
• Include price escalation clauses tied to objective indices or actual invoice increases.
• Keep detailed records of delays, material shortages, and cost increases due to tariffs or trade issues.
• Send timely written notices if something outside the contractor’s control affects the performance of the contractual obligations.

Practical Takeaways for Owners

Conversely, here are some actions that owners may take:

• Carefully review force majeure clauses—seek clarity and specificity regarding the events covered under force majeure.
• Ensure that clauses on change-in-law are well defined (e.g., specify the types of government actions).
• Set clear boundaries and limits of relief to which the contractor is entitled. Define what relief (e.g., time extension or cost compensation) is permitted for each type of force majeure event.
• Maintain owner’s rights to approve substitutions if the contractor wants to substitute materials due to supply chain or tariff related issues.
• Require prompt and detailed notice from the contractor (e.g., full documentation and proof of delay and/or cost impacts). If the contractor does not notify the owner within a set timeframe, the contractor should not be entitled to claim time extension or cost compensation.
• Use price escalation clauses with caution. Ensure a limit on allowable increases or define thresholds (e.g., price escalation is only applicable if costs rise more than a certain percentage).
• Stay updated on industry trends to reassess foreseeability and conduct periodic contract review.

Final Thoughts

Force majeure clauses are not just legal fine print—they can make or break your project when the unexpected happens. COVID-19, tariffs, and supply chain disruptions have changed how contractors view risk.

If you are a contractor, owner, project manager, or construction business owner, your best defence is a well-drafted contract and a clear understanding of your rights and responsibilities.

Need help reviewing your force majeure or escalation clauses before your next project? We invite you to connect with us! Let’s schedule a chat to explore how we can work together. You may contact the author at peewara.sapsuwan@nicol.law.