Dubocovich had contracted to supply a health-food store with jars of Melatonin, a hormone reported in the media as a miracle potion. After they contracted, but before delivery, the government banned the sale of Melatonin so that it could be properly tested under government auspices. Dubocovich told the owner of the store, Mr. Wei, that he wouldn't be delivering the Melatonin because of the government ban. The demand for the Melatonin was high. Mr. Wei was very upset with Dubocovich for failing to honour his contractual obligations. Furthermore, he had given Dubocovich $5,000 in advance, which Dubocovich needed and used to pay the freight costs in bringing the drug to his warehouse. Wei sued Dubocovich for breach of contract. Which of the following is correct with respect to the legal position of the parties?
A) This is an example of a frustrated contract and Wei will lose, since the loss will remain where it has fallen.
B) When a contract is frustrated in this way, the frustrating party is responsible for any losses incurred by the other party.
C) Wei will be successful in his breach of contract action.
D) The contract is illegal and void.
E) Wei will be able to get back his $5,000 minus a portion of any costs Dubocovich incurred in preparing to perform the contract.

Question

Quizplus · Accepted Answer

This situation does not qualify as frustration of contract because the government ban was in place before the contract was formed. Therefore, Dubocovich had a duty to not make the contract in the first place as it would violate the law. Therefore, the contract is illegal and void. However, Wei will still be able to get back his $5,000 because Dubocovich used it to pay freight costs, which benefited him. Wei would be entitled to receive the money back minus a portion of the costs Dubocovich incurred in preparing to perform the void contract.

Dubocovich Had Contracted to Supply a Health-Food Store with Jars