Your Supplier Added a Tariff Surcharge or Raised Prices Mid-Contract: What California Law Allows

Last updated: November 2026. Reviewed by Pavel Kolmogorov, California business litigation attorney (State Bar No. 321018).

Under California law, you usually do not have to pay a tariff surcharge unless your contract passes that cost to you or you agree to the change. On a fixed-price purchase order, the seller ordinarily bears the risk of rising costs. A price change is a modification that needs your agreement, though for goods no new consideration is required. (Com. Code, § 2209, subd. (1).) If you cannot risk a stoppage, pay under a written reservation of rights. Kolmogorov Law, P.C. handles these disputes in Orange County and Los Angeles.

Call (909) 235-6116 or contact us online to discuss a surcharge, a mid-contract price increase, or a supplier threatening to stop shipping.

The situation: a surcharge appears on a fixed-price order

It tends to arrive one of three ways. An invoice shows a new line called "tariff surcharge" that was not on the purchase order. An email announces that all open orders are repriced, effective immediately. Or a sales representative calls to say the next release will not ship unless the buyer signs a revised price sheet.

The buyer has its own fixed-price commitments downstream and cannot absorb the difference. One side is contractually stuck with the cost, and the documents say which.

What your contract says about price

Start by finding the contract. In many supply relationships it is a quote, a purchase order, an acknowledgment, and a set of terms and conditions that nobody reconciled. Which document controls is its own question, covered on our page about the battle of the forms.

Then read for four things.

A fixed unit price for a stated quantity or period, with no adjustment language.
A price adjustment or escalation clause tied to materials, freight, or an index.
A clause allocating taxes, duties, and tariffs to one side.
Language in the seller's quote that prices are "subject to change," and whether the purchase order accepted or replaced it.

If the price was left for the seller to set, the Commercial Code requires the seller to set it in good faith. (Com. Code, § 2305, subd. (2).) If the price is fixed and nothing shifts duties to the buyer, the surcharge has no contractual footing.

A price change is a modification, and it needs your agreement

One party cannot rewrite the price alone. For goods, an agreement modifying a contract needs no consideration to be binding, so a buyer who agrees can be bound even though it received nothing new in return. (Com. Code, § 2209, subd. (1).) That makes a casual "okay, understood" email more dangerous than people expect.

Two limits help buyers. First, a signed contract that requires modifications to be in a signed writing or other signed record generally cannot be modified any other way. (Com. Code, § 2209, subd. (2).) Our page on integration clauses and contract modification explains how waiver can still creep in. Second, every contract under the Code carries an obligation of good faith in its performance and enforcement. (Com. Code, § 1304.) Good faith means honesty in fact and the observance of reasonable commercial standards of fair dealing. (Com. Code, § 1201, subd. (b)(20).) A modification extracted by a supplier with no real cost pressure, simply because the buyer is cornered, is open to attack.

Service contracts follow the Civil Code instead, where an oral change to a written contract generally binds only if new consideration supports it or to the extent it has been carried out. (Civ. Code, § 1698.)

"Pay or we stop shipping": repudiation, duress, and paying under protest

A supplier that refuses to deliver contracted goods unless the buyer pays more than the contract price is, in many cases, repudiating the contract. Our page on anticipatory breach explains the buyer's options at that point. One is to buy substitute goods elsewhere and recover the difference between the cost of cover and the contract price. (Com. Code, § 2712.)

Often there is no substitute. The part is custom, the tooling is at the supplier, and a line shutdown would cost far more than the surcharge. California's economic duress doctrine addresses that position. It applies to a wrongful act coercive enough that a reasonably prudent person has no reasonable alternative but to give in, and a bad faith threat to breach a contract can qualify. (Rich & Whillock, Inc. v. Ashton Development, Inc. (1984) 157 Cal.App.3d 1154, 1158-1159.) Courts treat it as a last resort, so the record matters.

Build that record when you pay. A party that performs with an explicit reservation of rights does not give up the rights reserved, and words like "under protest" are sufficient. (Com. Code, § 1308, subd. (a).) Put the protest in writing with each payment. Be careful with any document labeled a settlement or release, because the reservation rule does not apply to an accord and satisfaction.

Can the supplier claim impracticability?

Suppliers often answer that tariffs made performance impracticable. The Code excuses a seller's non-delivery when performance has been made impracticable by a contingency whose non-occurrence was a basic assumption of the contract, except where the seller assumed a greater obligation. (Com. Code, § 2615, subd. (a).)

That excuse is narrow, and look at what it excuses: delay or non-delivery. Nothing in the section lets a seller keep the contract and charge more. A tariff usually makes performance more expensive, not impossible, and a fixed price is itself evidence that the seller took the cost risk. Our page on force majeure, impossibility, and frustration covers the doctrine, including how force majeure clauses are read.

If you are the supplier facing a cost spike

Read your own paper first. If your quote or terms reserved the right to adjust for duties and those terms became part of the contract, say so and cite the clause. If they did not, the realistic path is negotiation.

Ask for a signed amendment and explain the numbers. Offer options: a split of the added cost, a shorter commitment, a redesign, or a different country of origin.

Avoid the ultimatum. Stopping shipment without a contractual right hands the buyer a breach claim, cover damages, and a duress argument against whatever it signs.

What to bring to the first meeting

The quote, purchase order, acknowledgment, and each side's terms and conditions.
Every invoice showing the surcharge, and proof of what was paid.
Emails, texts, and call notes about the price change, including any protest you sent.
Your downstream contracts, if the surcharge affects prices you promised others.

Frequently asked questions

My supplier added a 15 percent tariff surcharge to a fixed-price purchase order. Do I have to pay it under California law?

Generally no, unless the contract allocates tariffs or duties to you, contains a price adjustment clause, or you agreed to the increase. In California a price change on a goods contract is a modification that requires both parties' assent. If refusing would stop your supply, pay in writing under protest and with a reservation of rights so the overcharge can be pursued later.

Can a vendor raise prices in the middle of a contract?

Only if the contract permits it or the customer agrees. A fixed price binds the vendor for the term in California, even when the vendor's own costs rise. Contracts that let the vendor set or adjust the price require the vendor to act in good faith. Watch for adjustment clauses in the vendor's quote or standard terms.

Is a tariff a force majeure event?

Not automatically. In California it depends on the wording of the force majeure clause, and many clauses do not list tariffs or changes in law that only raise cost. Even a clause that applies usually suspends or ends performance. It does not by itself authorize a surcharge, so a seller that wants a higher price still needs the buyer's agreement or a price adjustment term.

We paid the surcharge because we needed the parts to keep our production line running. Can we get that money back later?

Possibly. If you paid with an explicit written reservation of rights, California's Commercial Code preserves your claim for the overcharge. If you paid without protest, the supplier will argue you agreed to a modification. Economic duress can undo an agreement made under a bad faith threat with no reasonable alternative, but courts apply it sparingly.

Does a price increase have to be in writing?

Sometimes. If the signed contract requires signed, written modifications, an oral increase is generally ineffective for goods in California, though conduct can amount to a waiver and an email can count as a signed record. If the contract is silent, a buyer's emailed assent may be enough. Oral assent is weaker when the modified contract is for $500 or more, because the statute of frauds then generally requires a signed record. Respond to a price notice deliberately.

Talk to a California breach of contract attorney

If a supplier has repriced your open orders, or your own costs have made a fixed-price contract unworkable, call (909) 235-6116 or contact us online. Kolmogorov Law, P.C. is located at 327 Magnet, Irvine, CA 92618, and represents buyers and suppliers in Orange County, Los Angeles, and throughout California.

This page provides general information about California law and is not legal advice. Outcomes depend on the contract documents, the facts, and the court.