A and B enter into a contract whereby A agrees to supply B with 10,000 tins of tuna at the rate of 1000 tins per month from his tuna factory in Bayport, Nova Scotia, and B agrees to pay A $2 per tin. A supplies 1000 tins of tuna and before he can collect, his factory is destroyed by fire. If the contract is discharged by frustration, which of the following statements is correct?
A) All obligations under the contract are discharged, A and B's obligations are both discharged, and B does not have to pay A the sum of $2,000.
B) B will not have to pay A the sum of $2,000 because there is no longer a contract.
C) Only future obligations are discharged and B must pay A the sum of $2,000.
D) A must obtain the tuna from another source to satisfy the contract.
E) B will have to pay A the sum of $2,000 because there was no deposit.

Question

Quizplus · Accepted Answer

Frustration occurs when an unforeseen event occurs that makes it impossible to perform the contract. In this case, the destruction of A's tuna factory makes it impossible for him to perform the contract. Frustration only discharges future obligations, not past ones. Therefore, B is still obligated to pay A the $2 per tin for the 1000 tins that were already supplied before the fire. However, since A is unable to supply the remaining 9000 tins, those future obligations are discharged. Therefore, choice C is correct: only future obligations are discharged and B must pay A the sum of $2,000 for the 1000 tins that were already supplied.

A and B Enter into a Contract Whereby a Agrees