Question

Apply the given legal principles to the facts provided in the following of the question and select the most appropriate answer.
Principle : Both parties to a contract are discharged from their respective outstanding obligations in situations where a supervening event significantly changes the nature of contractual rights and/or obligations from what the parties could have reasonably contemplated at the time of executing the contract.
The supervening event must not be a result of default by either party, nor should the contract make a provision for it.
Facts : In the city of Vortoria which is highly susceptible to public health crises, S (a supplier of raw food products) entered into a contract with H (a restaurant owner) for 2 years, whereby S would supply certain raw products to H at pre-determined prices. Their agreement also provided that – “In case of interruption of operations of H on account of epidemics, pandemics or any other public health crisis, the contract will be suspended until the crisis is declared to be over by the government and thereafter pending contractual obligations shall resume.”
Three months were left on the contract when there was a highly contagious virus outbreak in the city, which caused restaurant owners (including H) to suspend operations. Once the outbreak was declared to be over six months later, H refused to purchase raw materials from S arguing that he was discharged from obligations under the contract.

• A. H is discharged from his obligations because the virus outbreak was a supervening event which changed the nature of contractual rights and obligations
• B. H is not discharged from his obligations because the contract contained a provision dealing with outbreaks. Further the parties could have reasonably contemplated the occurrence of an outbreak
• C. H is not discharged from his obligations because the contract had ended by the time the virus was declared to be over
• D. H is discharged from his obligations because the outbreak is likely to have affected his business badly

Answer 1

The Correct Option is B

To determine whether H is discharged from his obligations under the contract with S, we apply the given legal principle concerning supervening events and contractual obligations. Here's the structured solution:

Principle Analysis: The provided principle states that both parties to a contract are discharged from their respective obligations if a supervening event significantly alters the contractual terms beyond what was originally contemplated, provided the event is not due to a default by any party and is not covered by the contractual terms.

Application to Facts: The facts highlight that the contract between S and H includes a specific clause addressing interruptions caused by public health crises such as epidemics and pandemics. It states that the contract will be suspended in such an event until the crisis is officially declared over by the government, upon which obligations will resume.

Supervening Event: The virus outbreak is indeed a supervening event as it is a public health crisis causing an interruption in H's business operations.

Contractual Provisions: However, the contract explicitly mentions that such events will lead to a suspension of the agreement, without discharging the parties from their obligations. Once the crisis ends, contractual duties are to resume.

Conclusion: Since the contract anticipates and provides for the scenario of a health crisis, the occurrence of the virus outbreak does not discharge H from obligations. Additionally, given that Vortoria is known for susceptibility to public health crises, both parties could reasonably have contemplated such an eventuality at the contract's execution.

Correct Answer: H is not discharged from his obligations because the contract contained a provision dealing with outbreaks. Further, the parties could have reasonably contemplated the occurrence of an outbreak.