Supply Chain Disruptions Are Reshaping Pricing, Force Majeure, and Step-In Terms

Supply chain disruption is no longer a temporary inconvenience. It's the new normal.

A recent Forbes article by Alison Coleman highlights how startups are being forced to adapt — or risk failure — as global supply chains remain unstable. (Forbes, April 2026) Small businesses are squeezed between rising costs, unreliable suppliers, and contracts that were never built for volatility.

The real question isn't just operational. It's also legal. Your contract usually determines who absorbs the pain when things go wrong.

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Fixed vs. Flexible Pricing: Who Bears the Risk?

When you lock in a fixed price, you're making a bet. If costs rise, the supplier absorbs the hit. If costs drop, the buyer does.

Suppliers are now pushing for price escalation clauses — provisions that allow them to adjust pricing based on material costs, tariffs, or freight rates. Buyers resist them. Sellers demand them. That tension ends up in disputes.

Sometimes, there are “hidden” price tags. Who is responsible for transportation, loading and unloading, insurance, currency fluctuations, sample and testing, quality control, customs and duties, and similar things?

From the buyer's perspective: fixed pricing provides budget certainty. It protects against market volatility you can't control.

From the seller's perspective: fixed pricing can make performance commercially devastating when input costs spike 30–40% overnight.

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Force Majeure and Exit Planning: It Only Works If It's Written Correctly

Most contracts include a force majeure clause. Many of those clauses are generic boilerplate. Good contracts include other ways to exit it.

For force majeure clause, general catch-all language — "events outside the parties' control" — is interpreted narrowly. Courts have consistently held that performance must be truly impossible (or commercially impracticable), not merely more expensive. (Baker McKenzie, 2025). It may help in extreme situations, but it is not a panacea.

Real case:

A petroleum distributor agreed to sell petroleum for a fixed price. Suddenly, the crude oil prices collapsed as a result of Saudi Arabian attempts to regain its share of the world oil market. The buyer refused to purchase the fuel from the Seller, saying this was force majeure.

Outcome: the court found no force majeure because a “force majeure clause is not intended to buffer a party against the normal risks of a contract.” Langham-Hill Petroleum, Inc. v. Southern Fuels Co., 813 F.2d 1327 (4th Cir. 1987).

The takeaway? Claiming that market conditions made performance difficult is not enough. Courts apply force majeure clauses narrowly. Economic hardship, standing alone, rarely excuses non-performance. (Baker McKenzie, 2025).

Aside from force majeure, there are other exit tools to protect you from disruptions. When crafting them, supply chain companies should consider:

• What are the common risks that it will create a need to terminate a contract?
• If force majeure cannot cover those risks, then what are other options?
• Should there be a required level of performance?
• Should there be a notice to cure and grace period?
• What if the other party is insolvent or in bankruptcy?
• Should this be a term contract with automatic renewal or at will termination?
• What are the post-exit obligations?

Please consult with your attorney to understand the best options for your specific situation.

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Shifting the Burden of Uncertainty

Every supply contract shifts risk to one side or the other. The question is: which side are you on, and is that intentional?

Practical contract tools to consider:

• Price adjustment mechanisms — tie pricing to an index (e.g., PPI, shipping cost indices). Both sides share the upside and downside.

• Material adverse change (MAC) clauses — allow renegotiation if costs exceed a defined threshold .

• Tariff pass-through provisions — explicitly state who absorbs new tariffs and when. Silence here is costly. (Baker McKenzie, 2025)

• Performance windows — define acceptable delivery timeframes. Specify what happens when a supplier misses them.

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Supplier Diversification: The Strategic AND Legal Play

Many small businesses are locked into a single supplier — often for cost or convenience reasons. This creates a single point of failure risks.

A better structure: maintain a primary supplier relationship while contractually preserving your right to engage a backup. Here's how to do it without burning the primary relationship:

Include a performance threshold clause. If your primary supplier cannot perform within [X] days or [Y] volume, you retain the right to source from an alternate supplier. This is commonly called a "step-in right" or "alternative sourcing right."

Negotiate the backup supplier in advance. Pre-qualify a backup and have them ready.

Document supplier failures in real time. If a dispute arises, business records of missed deliveries, quality failures, or communication breakdowns are your most valuable evidence.

A McKinsey study found that companies implementing multisourcing across multiple regions experienced 30% fewer stockouts and 20% lower emergency logistics costs. (McKinsey, 2026) The legal structure should mirror the operational strategy.

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The Bottom Line

Supply chain disruption isn't going away. As experts noted at Davos, disruption in 2026 is "constant and structural" — geopolitical fragmentation, shifting trade rules, and labor shortages are redefining how value is created and moved.

If you're a buyer: push for price certainty, but insist on realistic MAC and clear performance threshold clauses. Know what your force majeure clause actually says. Pre-qualify backup suppliers. Build step-in rights into your agreements.

If you're a seller: push for price flexibility mechanisms and clear and thorough force majeure language. Limit the default definition and clarify the termination process..

Disputes are preventable. The time to address them is before a disruption.

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