Steven Brice is a manufacturing manager for a mid-size pharmaceutical company, S

Question

Steven Brice is a manufacturing manager for a mid-size pharmaceutical company, Stellar Health, with

offices throughout the United States. Steven manages the manufacturing process for Stellar Health’s

health supplement products. His team is also responsible for the proper packaging and shipment of

the health supplements they produce. Stellar Health has a very good reputation for timeliness,

quality, and honesty with its customers.

Over the last several weeks, Steven’s group has been extremely busy completing a significant order

of Stellar Health vitamins and supplements for Strong-n-Healthy, a very large health care store chain

on the West Coast. The order will bring Stellar $7,000,000 in revenues and $3,000,000 in profit. This

batch alone represents the company's profits for half of the year.

Two days prior to completing the manufacture and packaging of the last part of the order, Steven

decides to inspect the final batches to insure everything is perfect. While reviewing one of the health

supplement containers, Steven notices that the nutritional information on the label is incorrect; it

overstates the quality and quantity of minerals and vitamins content inside the bottle. Luckily only 4

of the 20 different minerals and vitamins content is different. Upon further investigation, Steven

realizes what happened. It appears that the wording from the label belonging to the deluxe (and

more expensive) version of the nutritional supplement has been incorrectly printed on the standard

version of the supplement. The labels for a third of the order now state “Deluxe” but the nutritional

content included in the containers is the “Standard” version.

Steven knows that the FDA does not regulate the kind of nutritional supplements that Stellar Health

sells. The slight discrepancy between the contents of the bottles and the detailed information on the

label do not break any regulatory laws or rules and are not harmful to the consumers.

Steven is concerned that if the client or any of the client’s customers discover the mistake, the

reputation of Stellar Health might be negatively affected. However, stopping the shipment to Strongn-

Healthy might endanger the relationship with the client (they might go somewhere else), lead to

serious financial losses for Stellar Health, and force them to lay off several employees (who did

nothing wrong) in order to continue operating. Also, if the company does not ship the order on time, it

would be in breach of the contract with Strong-n-Healthy and subject to litigation. Steven faces a very

tough decision.

What contractual or other legal issues does Stellar Health face? What legal remedies or

alternatives could Steven consider?

I don't know what legal issues is he going to face if he choose to go ahead and ship them. And, I don't understand why does the FDA not regulate the kind of supplements that he sells.

Explanation / Answer

The contractual and legal health issue Stellar Health faces is that of breach of contract which may directly lead to termination of the contract due to unfulfilment and in some cases penalty also. Some contracts are drawn in a way which necessitate the company to fulfil the contract and if not done on time then pay the price of penalty as written in the contract.

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