XIII.

THE EFFECT OF WAR ON CONTRACT.

On the outbreak of hostilities, all peaceful relations between the subjects of the states at enmity come immediately to an end. As a consequence, all contracts in opposition to this principle entered into during, or, as it may be supposed, in contemplation of hostilities, are absolutely void and incapable of enforcement at any time. Contracts existing prior to, and not made in contemplation of, the outbreak of war, are not extinguished absolutely, but are held in suspense until the resumption of friendly relations, when they revive (a). The only exceptions to this general principle are (1) contracts in support of trade with the enemy authorized by special licence or by proclamation-as to which ride p. 289, supra; and (2) contracts of necessity, such as ransom contracts, when not prohibited by the state, as to which ride p. 296, supra.

Under the head Prohibition of Trade with the Enemy (6). the illegality of contracts designed to support such a trade has already been considered. The effect of Embargo and Blockade will be reviewed below, but further reference may also be made to the remarks already suggested under these heads (c). The subject Prohibition of Export may likewise be referred to in this connexion (d).

Partnerships between the subjects of the adverse states are, on occurrence of hostilities, absolutely extinguished, on the reasoning that it is impossible for the partnership relations to be

(a) Ex parte Boussmaker, 13 Ves. 71.

(b) P. 258, supra.

(c) Pp. 36, 104, supra.

(d) P. 306, supra.

resumed, on the return of peace, at the point at which they were broken off on the outbreak of war (e).

But the law of nations, which prohibits all intercourse between subjects of belligerent states, does not apply to transactions taking place entirely in the territory of one belligerent-as where a creditor, residing in one of the states at war, has an agent in the other state to whom the debtor could pay the money, such agent having been appointed before the war broke out. In such a case the payment by the debtor to this agent is lawful, and it does not follow that the latter will violate the law by remitting the amount to his alien principal (f). So, at least, it was declared by the United States Court in Ward v. Smith (g); but as this dictum, if accepted literally, would seem to sanction the existence of business relations with the national foe, it may doubted whether such a wide meaning should be accorded to it. It has recently been held in America that a statute of limitations does not run against the creditor, who has become an enemy of the debtor, while the war lasts (h).

be

As regards public loans, the contract to pay interest to all holders of the national stock or securities should, in strictness, on the above principles, be held in abeyance, so far as alien enemies are concerned, until the resumption of peace. As a matter affecting the national honour, however, even if the bonds themselves contain no express stipulation (i) as to the payment of interest during hostilities, nothing should be allowed to interfere with the prompt and regular discharge of an obligation founded on the national good faith (k).

Any agreement which contemplates action hostile to a friendly state is unlawful and incapable of enforcement. Consequently, no assistance will be afforded by the Courts to persons who set about to raise loans for subjects of a friendly state, to enable them to prosecute war against their sovereign (7).

(e) Griswold v. Waddington, 15 Johns. Rep. 57. And vide 4th ed. Pollock on Contracts, 279, and note.

(ƒ) Wheat. Int. Law, 2 Eng. ed. p. 378.

(g) 7 Wall. 452.

(h) Wheat. Int. Law, 2 Eng. ed. p. 378.

(i) Vide p. 51, supra, note.

(k) Vide on this subject Twiss's Law of Nations, pp. 110-114.

(1) De Wutz v. Hendricks, 2 Bing. 316. Vide also Pitt Cobbett's Leading Cases, pp. 167-171; also p. 384, supra.

All mercantile transactions contrary to the national war policy are bad in law. Consequently, all contracts founded on or designed to support such transactions are also void. (ide sub Void Insurances, p. 405, supra.)

Contracts of affreightment and ocean carriage being sometimes entered into at a considerable period before their actual performance can be commenced, such contracts are especially liable to be interfered with by the outbreak of hostilities. Instances of this will appear below.

The Contract of Affreightment.-The effect of war or hostilities on the contract of carriage must obviously depend largely on the terms and conditions of the contract itself. Without discussing the various and varying conditions of bills of lading and charterparties, it will suffice for present purposes to state generally the main features of the contract of affreightment as represented by the form of charterparty in common use, namely:

The shipowner on the one side, and the charterer on the other, mutually contract-The shipowner to carry a cargo to or from a certain port, at an agreed remuneration by way of freight: The charterer to provide a cargo, and, subject to its right delivery, to pay the freight for its carriage. Penalty for default on the part of either contractor to be the estimated amount of freight; Except: If the reason for the shipowner's non-performance be the operation of certain causes or perils beyond his control, then he shall not be liable for the breach. Whether this stipulation shall equally avail to protect the charterer in respect of a breach caused by one of the same perils will depend upon the wording of the agreement (m). The perils enumerated are ordinarily, The Act of God: The Queen's Enemies: Fire and other Perils of the Seas. Following the exception "The

(m) See as to this, and as to the contract of carriage generally, Carver's "Carriage by Sea," which has been especially valuable for reference in the present connexion. Foard's "Law of Merchant Shipping" (sub Dissolution of Charter-parties, &c.), may also be usefully referred to for cases cited other than the leading decisions here mentioned.

Queen's Enemies," there also very frequently occurs the exception "The Restraint of Princes and Rulers."

The contract is conditional on the shipowner (or charterer) not being prevented from performing it by one of the enumerated contingencies; but it is otherwise absolute: there is no provision for part payment or part performance. The charterer must provide the whole amount of the cargo which he undertook to supply (n): the shipowner must transport such cargo the whole of the distance which he undertook to carry it. The Courts of this country will not award freight pro ratâ itineris, though, as will appear presently, this general principle can scarcely be regarded as a certainty beyond the reach of exception.

If the contract cannot be fulfilled without trading with the Queen's enemies, it is ipso facto dissolved. In Reid v. Hoskins (0), defendant had chartered a vessel to proceed to a Black Sea port, there to receive a cargo of tallow. Before the time when he should have begun to put the cargo on board, war was declared between Great Britain and Russia. On this he refused to fulfil his contract, on the ground that he could not do so without trading with the enemy. The same reason, he averred, would have prevented the plaintiff shipowner from receiving such a cargo. Judgment for the defendant, but plaintiff to be entitled to a verdict if he could prove that by any previous default of the defendant the contract had been in any respect broken before it was dissolved by war.

In Avery v. Bowden (The Lebanon) (p), a vessel was chartered to load at Odessa. On her arrival there, war was imminent between England and Russia. The charterer provided no cargo during the first twenty of the forty-five lay-days, although called upon to do so, and the vessel ultimately left empty, before the running days were expired, but after declaration of war. The Court held that prior to the declaration of war no cause of action had accrued to the shipowner: the language in which a cargo was refused was not such an absolute renunciation of the con tract as would have warranted the master in sailing; and when

(n) For decisions in this connexion, vide Carver's Carriage by Sea, Cap. IX.

(0) 25 L. T. 161; 26 L. J. Q. B. D. 5.

(p) 25 L. J. Q. B. 49; 26 ibid. 3.

war was declared the contract was dissolved, as it could not have been fulfilled without trading with the Queen's enemies.

Esposito v. Bowden (q) is an important case arising in very similar circumstances. Defendant had chartered a vessel to receive a cargo of grain at Odessa, to be carried to Falmouth for orders. While the vessel was on her way to the loading port war was declared against Russia, and on her arrival defendant refused to provide a cargo, on the ground that he could not do so without trading with the Queen's enemies. The plaintiff shipowner contended on the other hand that defendant might have bought a cargo from British subjects, and that it would have been meritorious to have brought such a cargo away; and that grace had been specially allowed by British proclamation during a period within which a cargo so purchased might have been shipped and brought away. Judgment was, in the Court of Queen's Bench, given for the plaintiff, and against this verdict defendant appealed. The Exchequer Chamber reversed the judgment appealed against, the Court indicating the view that all goods in the country of an enemy must be deemed enemy goods, and as such incapable of exportation except under special licence; and holding that even if plaintiff's contention to the contrary could be maintained, the passing of the (so-called British) goods through the Russian custom-house, and paying export duties, would have constituted a trading with the enemy and so have rendered the transaction illegal; and that with respect to the period of grace allowed by the British Order in Council, the contract had been previously dissolved by the declaration of war, and was not revived by the Order in Council.

If a shipowner carries a cargo in circumstances which convict him of the offence of trading with the enemy, the Courts will not assist him in a claim for freight so earned. Freight is "the reward which the law entitles a plaintiff to recover for bringing goods lawfully into this country upon a legal voyage" (r).

A contracting party must not abandon the contract on any mere apprehension that the place of loading is about to become

(2) 27 L. J. Q. B. 217; 24 ibid. 10; 7 E. & B. 763.

(r) Muller v. Gernon, 3 Taunt. 394.