Business Law 9th Edition by Henry Cheeseman

Exercise 1

FEDERALCOURT CASE Illegal Contract
Ford Motor Company v. Ghreiwati Auto
2013 U.S. Dist. Lexis 159470 (2013)
United States District Court for the Eastern District of Michigan
"A contract that violates an executive order or law is unlawful and discharges performance of the contract."
-Edmunds, District Judge
Facts
Ford Motor Company manufactures automobiles, trucks, and other vehicles. In 2004, Ford entered into a dealership agreement with Ghreiwati Auto (Auto), a Syrian corporation, whereby Auto would sell and service Ford vehicles in Syria. Auto invested more than $20 million creating a dealer network and brand representation and sold and serviced Ford vehicles in Syria. In 2011, after civil and military hostilities developed in Syria, the president of the United States issued an executive order that imposed widespread sanctions against Syria, including prohibiting American companies from selling products and services in Syria. Violation of the executive order carries both civil and criminal penalties. Pursuant to the executive order, Ford immediately terminated its dealership agreement with Auto. Ford filed an action in U.S. district court, requesting a declaratory judgment that it did not terminate the dealership agreement improperly because the executive order made Ford's performance of the contract illegal. Auto alleged that Ford breached the dealer agreement and was liable for damages.
Issue
Did the presidential executive order make the dealership contract illegal for Ford to perform?
Language of the Court
Ford argues that the executive order renders performance of the agreement illegal, thereby permitting Ford to immediately terminate Auto's dealership agreement and discharges Ford from any duties under the agreement. The Court agrees with Ford and its arguments. A contract that violates an executive order or law is unlawful and discharges performance of the contract.
Decision
The U.S. district court held that the executive order rendered the Ford-Auto dealership agreement illegal and that Ford had therefore terminated the agreement properly.
Did Ford have any other course of action in this case? Did Ford have an ethical duty to reimburse Auto for its losses? Would such reimbursement have been legal?