Impact of US tariffs on commercial contracts under Hungarian law

In Hungary, the conclusion of a lawful and valid commercial contract requires parties to perform their contractual obligations irrespective of subsequent market changes, currency fluctuations, or external economic developments. Unexpected changes in economic conditions, however, such as US tariffs, could affect the performance and interpretation of commercial contracts under Hungarian law.

The following article analyses in detail whether tariffs may qualify as force majeure events or constitute a basis for judicial modification of contracts, and provides practical recommendations for businesses on how to make resilient contractual provisions.

Tariffs as force majeure

Although there is no specific force majeure clause in statutory Hungarian law, under Section 6:179 of the Civil Code, if performance becomes impossible, the contract is terminated. Hence, the existence of a force majeure event in each case falls under the sole discretion of the court, which consider all relevant circumstances and perform case-by-case analyses.

In general, Hungarian court practice considers force majeure an “irresistible force” of natural or man-made origin, which is absolute in nature and cannot be eliminated by means available to man. Courts require that it be impossible, for all practical purposes, to exempt performance from liability on the grounds of force majeure.

There does not seem to be any legal precedent where the imposition of tariffs was considered a force majeure event in a commercial contract. According to the consistent judicial practice, however, changes in economic conditions are part of the business risk of the affected party. As a result, even a major change in price movements and market conditions will not result in the contract becoming impossible.

Tariffs as a basis for the judicial modification of contracts

The Constitutional Court of Hungary has established that under Section 6:192 of the Civil Code, judicial contract modification is a legal institution that may only be used under special and strict conditions. Modification may be necessary if certain conditions occur after the conclusion of a given contract that disrupt the economic balance between the parties or cause significant imbalances, thus making the fulfilment of contractual obligations and the continuation of the legal relationship intolerable for a party unless the terms are changed.

The Constitutional Court, however, determined in line with judicial practice that economic conditions, which affect a significant number of contractual relationships may not be the basis for judicial contract modification, arguing that national legislation is needed to remedy any imbalance in these relations. Hence, it is questionable whether a request for modification of a contract based on the imposition of tariffs would be successful before the Hungarian courts.

Practical recommendations for businesses

In addition to statutory doctrines, force majeure clauses might include governmental actions, including tariffs, as qualifying events if they prevent or hinder performance to such a degree that fulfilling the contract becomes impossible or unreasonably onerous. Parties to a commercial contract governed by Hungarian law can also incorporate bespoke clauses to regulate their responsibilities in the event of tariffs or other unexpected trade barriers. These “renegotiation clauses”, “hardship clauses” or any other mutually agreed mechanism may explicitly delineate the procedure for renegotiating or terminating the contract if tariffs significantly raise the costs of raw materials, manufacturing, or delivery.

For more information on the legal impact of US tariffs on commercial contracts in Hungary, contact your CMS client partner or these CMS experts.

The article was co-authored by János Bálint.