The Impact of Tariffs on International Contracts in Czech Republic

In Czech law, force majeure is not explicitly defined but can be regulated under the Civil Code (Act No. 89/2012 Sb.). According to the definition of the force majeure made by Supreme court of the Czech Republic, force majeure is an unavoidable event, such as a natural disaster, which the creditor could not have foreseen, which could not have been prevented and which could not have been averted, even with all the efforts that could reasonably have been expected by the contractual party.

Under this Code and definition made by Supreme court, the imposition of tariffs does not automatically amount to force majeure; however, it may be argued so by the parties, as force majeure may be invoked when the fulfillment of contractual obligations was prevented due to an extraordinary, unpredictable and insurmountable obstacle beyond the party’s control (Sec. 2913). Therefore, tariff imposition may amount to force majeure and may be included by the parties in a force majeure clause.

Hardship represents an unforeseen and substantial change in circumstances that would increase the cost of the performance of the contractual obligations in an excessive manner (Sec. 1765). This excessive manner cannot be measured in percentual increase of the price. Excessive manner can be found only in situation which constitutes a state which goes against a principle of honest business negotiations.

Therefore, if the tariffs were to cause a disproportionate increase in the cost of performance, they might classify as a cause of hardship, but only if the change occurred after the contract was concluded and if it could not have been foreseen by the affected party.

The imposition of tariffs does not automatically imply an obligation to renegotiate prices. This may be the case if the parties included a price adjustment clause in their contract. If it classifies as force majeure or as hardship, the affected party may request a renegotiation of the contract.