B. Contracts between Allied and Enemy Residents.

C. Contracts between Neutral and Enemy Residents. D. Contracts between British Residents (or persons resident in British, Allied, or Neutral Territory).

(The expression 'resident' is not a very happy one but at least has the merit of avoiding a longer one and of emphasising that we are now using the territorial rather than the personal test of British, allied, neutral, or enemy character.)

A. CONTRACTS BETWEEN BRITISH AND ENEMY RESIDENTS.

(1) In existence upon the outbreak of war.

(a) Now if a right of action has already accrued to either party, the question of its enforcement will turn upon the procedural capacity of the 'enemy resident' under the rules we have discussed in the two preceding chapters. If it is he who committed the breach, he can be sued during the war if he can be served; if it is the 'British resident' who has committed the breach, then we have seen that apart from very exceptional circumstances the 'enemy resident' will be unable to sue during the war. In that event it is clear, it is submitted, from Ex parte Boussmaker1 and Janson's case that his right of action will revive upon the declaration of peace.

Thereupon, two subsidiary questions of importance arise. Firstly, have the statutes of limitation been running against him during the war? Secondly, assuming the right of action to result in a debt which normally carries interest, has interest been accruing during the war?

Dealing with the first of these questions, there is on the one hand a decision of the U.S.A. Supreme Court in 18673 which says No; the statutes do not run.

'Peace,' it is said in that case, 'restores the right and the remedy, and as that can not be if the limitation continues to run during hand, 'executed consideration' and 'executory consideration' (the former an act, the latter a promise-Anson, Law of Contracts (14th ed.), p. 21, n.)— are useful expressions, and the misfortune is that the epithets should have been transferred from 'consideration' to 'contract.'

1 (1806) 13 Ves. 71.

2 [1902] A. C. 484.

3 Hanger v. Abbott (1867) 6 Wallace 532; Scott's International Law Cases, 500.

the period the creditor is rendered incapable to sue, it necessarily follows that the operation of the statute is suspended during the same period.'

To the contrary, there is a dictum by Lord Bramwell in De Wahl v. Braune1, where in the year 1856 the wife (apparently within the realm) of an alien enemy resident in Russia sought to sue in her own name upon a contract, urging that her husband was civiliter mortuus and not allowed to sue; Bramwell B. said: 'It may be that the effect of our judgment would ultimately be to bar the action by reason of the Statute of Limitations, but the inconvenient operation of that statute is no answer and does not take the case out of the general rule.'

Judgment was given for the defendant. The case is not however an express decision on the point under discussion.

In the dearth of precedent, it is submitted that the American view is right and should be followed in this country. Otherwise it seems a mockery to talk of suspension as was done in Janson's case. There is no express English authority, but the editor of Lord Lindley's Law of Companies2 follows Lord Bramwell's dictum and considers that the enemy resident's right of action may be barred by the Statute of Limitations during the war. There appears to be no reason why the operation of this statute should not apply equally mutatis mutandis to a right of action on contract and to a right of action in tort.

To come to the second point, assuming the right of action to result in a debt which normally carries interest, will interest run during the war and be recoverable on its conclusion? This subject was very fully considered in the year 1909 in an article in the Law Quarterly Reviews by Mr C. N. Gregory entitled 'Interest on Debts during War,' wherein, after an examination of both English and American decisions, the conclusion arrived at is that where debtor and creditor are separated by the line of war, interest ceases to run during the

1 25 L. J. (N.S.) Ex. 343; see also Derry v. Duchess of Mazarine (1697), I Ld. Raym. 147.

2 6th ed., Vol. I. p. 53 n. See also Pollock, Principles of Contract, 8th ed., p. 86, n. and L. Q. R. (1904) XX. 168.

3 (1909) XXV. 297.

war whether the obligation to pay interest is express or implied by law1. But the Trading with the Enemy Amendment Act, 1914, s. 2, provides that any interest which would have been paid to an enemy but for the state of war shall be paid to the Custodian to be preserved a provision which might be thought to contemplate the accrual of interest on pre-war debts but could receive an interpretation which would fall short of that.

So far there is no direct English authority, and the question cannot be regarded as settled. On the one hand English law protects the principal sum due to the enemy and helps a British or neutral subject to recover a principal sum due from the enemy, and 'it is difficult to see on what principle the interest is to be forfeited if private property is to be respected2.' Indirectly the matter has been discussed in two English cases during the war. In the first3 Younger J. directed that the Custodian of the British assets of an enemy company should pay interest upon debts upon which by contract interest should be allowed, and, the contract falling to be interpreted by German law and being certainly one which apart from war would carry interest, he declined to disallow interest upon the ground of a German war proclamation purporting to cancel interest during the war on debts due to enemies of the German Empire. In the seconda partnership case discussed in Chapter VII --it was not necessary to give a direct answer to the question of interest under discussion, but the decision that an enemy partner is entitled to some allowance (which presumably may take the form either of interest or a share of the profits) in respect of the use by the non-enemy partner of the assets of the firm during the war, would seem to show that there is nothing in the English law repugnant to the idea of an enemy creditor receiving interest when he ultimately receives his debt. Several of their lordships appear to take the view that no difference in principle exists between the payment of interest 1 See also L. Q. R. (1904) XX. 167.

2 Per Lord Finlay L.C., at [1918] A. C. p. 245.

3 In re Fried Krupp Actien-Gesellschaft [1917] 2 Ch. 188.

• Hugh Stevenson & Sons v. Actien-Gesellschaft für Cartonnagen Industrie [1918] A. C. 239.

and the payment of a capital sum. The two earlier English cases, Wolff v. Oxholm1 and Du Belloix v. Lord Waterpark2, are not of much help, although in the latter case there are some remarks by Abbott C.J. (as he then was) which, though not necessary to the decision, are worth quoting:

'But there is another objection to the plaintiff's recovering interest on the debt, for during the greatest part of that time he was an alien enemy, and could not have recovered even the principal in this country, and at all events during that portion of the time the interest could not have run, and it would even have been illegal to pay the bill whilst the plaintiff was an alien enemy.'

It should be noted that where there has been before the outbreak of war a breach of contract which is adequate to effect a discharge, no question arises of abrogation or discharge of contract as the result of war. The contract is already discharged by breach, and the question for us is the fate of the right of action which arose upon the occurrence of the breach.

(b) We now come to the more difficult case; viz. where no right of action has accrued, that is where there had been at the date of the outbreak of war no breach of contract by either party adequate to effect a discharge. There is considerable obscurity on this point. Theoretically one of two things might happen: (1) the performance of the contract might be suspended3 until the declaration of peace: (2) performance or further performance of the contract might be completely abrogated as from the outbreak of war. Such was the general view prevailing amongst lawyers in 1914, but the experience of the past five years shows that, however true it may be in theory that there are some contracts crossing the line of war which can survive the outbreak of war, performance being meantime suspended, the courts have not succeeded in finding many of that character. Indeed, as we shall see, even where the parties by their contracts have aimed at producing this very effect, the

1 (1817) 6 M. and S. 92.

2 (1822) I Dow. and Ry. 16, 19.

3 On the use of the word 'suspend' in this connexion, see The Effect of War on Contract by F. D. Mackinnon, K.C., Clarendon Press (1917), PP. 17, 18.

courts have been astute to find reasons for its impracticability and illegality. The suspension theory rests mainly upon an obiter dictum by Lord Halsbury in Janson's case1, which is explained by Lord Dunedin in the recent case about to be considered2. Lord Halsbury was assuredly referring to contracts upon which a right of action had already accrued before the outbreak of war, and which we have referred to above.

We shall however be safer in assuming that discharge is the rule, although we shall find that there are one or two classes of contract where this is not so3. Probably these exceptions will be found to be cases as much of property as of contract, if not more, and private enemy property on land is not confiscable by the law of England according to modern usage.

Let us now turn to the abrogation theory and endeavour to derive it and then to state its modern application. In the first place, it seems clear that the rules against trading or other intercourse with the enemy, although ample justification has now been discovered for them as self-contained and selfsupporting principles of public policy, are largely the consequence of the procedural disability of the alien enemy1. Another source is indicated by Dr Baty who concludes a review of the authorities by stating that

'the rule as to the invalidity of contracts with the enemy, and the suspension or dissolution made prior to the event of war, is derived mainly, if not entirely, from the danger and impossibility of permitting intimate intercourse between the subjects of enemy States; that it is not derived from any abstract theory of individual hostility, nor (as mistakenly supposed in recent cases) on any imagined benefits of suppressing the enemy's trade, even when conducted with ourselves.'

However that may have been, we shall find that modern views of war have placed the rules regulating intercourse with the enemy on an entirely different footing. The landmarks in 1 [1902] A. C. at p. 493.

2 Ertel Bieber & Co. v. Rio Tinto Co. [1918] A. C. at p. 269.

3 See, for instance [1918] A. C. at p. 269, where Lord Dunedin speaks of 'the concomitants of rights of property.'

4 (1799) I C. Rob. at p. 201.

L. Q. R. XXXI. at p. 49 (January 1915).