This section is from the book "The Law Of Contracts", by William Herbert Page. Also available from Amazon: Commercial Contracts: A Practical Guide to Deals, Contracts, Agreements and Promises.
If the contract is one which is affected by war, the question whether the contract is dissolved or whether its performance is merely suspended, is one which has caused much difficulty, especially when it has been attempted to lay down general principles for determining which effect is reached. It has been said that there is a strong presumption against the dissolution of such contract, and that it will be regarded as dissolved only if it is inconsistent with the successful prosecution of the war by the government in whose courts it is sought to enforce the contract.1 The result which was actually reached by applying this general principle, is, however, different from that which was reached by other courts upon the same general question, including the supreme court of the United States.2 It has been said that the test for determining whether war dissolves or suspends the contract, is whether the contract is one which will give aid to the enemy, or involve commercial intercourse across the lines of war, in which case it will be dissolved, but in other cases it will merely be suspended.3 The result which was reached by the application of this theory was, however, the opposite of that which was reached by the supreme court of the United States, in a case growing out of the same transaction and presenting most of the same facts.4 It has also been said that the contract will be merely suspended and that it will be revived when the war terminates, unless the effect of revivor is to make a new contract for the parties.5 Since the effect of treating the contract as suspended is to defeat the right of one of the other of the parties to demand part performance,6 a literal application of this principle would apparently require dissolution in all cases.
3 Daimler Co. v. Continental Tyre and Rubber Co. , 2 A. C. 307.
4 Daimler Co. v. Continental Tyre and Rubber Co. [19161, 2 A. C. 307.
On this subject, see Companies with Enemy Shareholders, by James Edward Hogg, 31 Law Quarterly Review, 170, and Alien Enemy Persons, Firms and Corporations in English Law, by Cyril M. Picciotto, 27 Yale Law Journal, 167.
5CIapham Steamship Co. v. Naam-looze Vennootschap Handels-en Transport -Maatschappij Vulcaan , 2 K. B. 639.
1 Mutual Benefit Life Ins. Co. v. Hillyard, 37 N. J. L. 444, 18 Am. Rep. 741.
2 See Sec. 2745.
3 Statham v. New York Life Ins. Co., 45 Miss. 581, 7 Am. Rep. 737.
The change in the mutual obligations of the parties, which will be caused by holding them bound by a contract the performance of which is suspended for an indefinite time by war, has been regarded as a sufficient reason for treating such contract as dissolved.7 Even if an executory contract runs over a long period of time, the courts are inclined to treat such contract as dissolved by the war,8 "the end of which can not be foreseen."9
It has been said that war will always operate as a dissolution unless a just result can be reached as between the parties, by treating the contract as suspended rather than as dissolved.10 While this principle is probably the most fair and equitable as between the parties, it is so vague as to give little help in solving questions in advance; and the courts which have endeavored to follow it have reached widely different results in applying so vague a rule to concurrent cases.11
The fact that the allegiance of the respective subjects of the belligerent governments renders them mutually hostile, has been suggested as the reason for holding that war terminates or suspends prior contracts;12 but if this reason were correct, it would, on the one hand, make it necessary to hold that war discharged all contracts the parties to which were respectively citizens of the belligerent governments, which is a result which is by no means in accordance with the weight of authority;,13 and, on the other hand, it would possibly make it necessary to hold that contracts between persons who are domiciled in the territories of the respective belligerent powers, were not affected by the war unless the parties thereto were subjects of the respective belligerent powers as well as property domiciled in their territory; and this is not the view which is actually taken by the courts.
4 New York Life Ins. Co. v. Statham, 93 U. S. 24, 23 L. ed. 789.
See also Sec. 2745.
5Distinjrton Hematite Iron Co. v. Possehl , 1 K. B. 811 (obiter).
6 See Grinnan v. Edwards, 21 W. Va. 347.
7Bieber v. Rio Tinto Co. , A C. 260.
8 Esposito v. Bowden, 7 El. & Bl. 792 [quoted in Zinc Corporation v. Hirsch (1916), 1 K. B. 641, L. R. A. 1917C, 650]; Bieber v. Rio Tinto Co. , A. C. 260; Zinc Corporation v. Hirsch , 1 K. B. 541, L. R. A. 1917C, 650; Naylor v. Kramische Industrie
Gesellschaft , 2 K. B. 486 [affirming (1918), 1 K. B. 331, and citing, Bieber v. Rio Tinto Co. (1918), A. C. 260]; Clapham Steamship Co. v. Naamlooze Vennootschap Handels-en Transport-Maatschappij Vulcaan , 2 K. B. 639.
9 Esposito v. Bowden, 7 El. & Bl. 792 [quoted in zinc Corporation v. Hirsch (1916), 1 K. B. 541, L. R. A. 1917C, 650],
1 0 New York Life Ins. Co. v. Statham, 93 U. S. 24, 23 L. ed. 789; Abell v. Penn. Mutual Life Ins. Co., 18 W. Va. 400.
1 1 See Sec. 2735 et seq.
If the performance of the contract involves a violation of the duty of a citizen to the government in whose courts it is sought to enforce the contract, such contract is undoubtedly discharged by war.14
If the effect of holding that the contract is suspended rather than discharged would be in any way to augment the resources of the enemy after the war, or to lessen production in the country in whose courts the effect of the war on such contract is presented for adjudication, it will ordinarily be held that such contract is dissolved rather than suspended.15 Contracts by which English miners had agreed to sell ore to German corporations were held to be discharged by the war between England and Germany.16 A contract by which a vessel is chartered for a period of years to a corporation which is regarded as an alien enemy, will be dissolved by the war, and not merely suspended, sinee the effect of treating such contract as merely suspended will be to strengthen the position of the enemy at the end of the war, and to restrict the use to which the owner of such vessel might put it during the war, and the contracts into which he might enter with reference thereto.17
12Griswold v. Waddington, 16 Johns. (N. Y.) 438.
13 See Sec. 2735 et seq.
14Esposito v. Bowden, 7 El. & Bl. 766; Avery v. Bowden, 5 El. & Bl. 714; Karberg v. Blythe , 1 K. B. 495.
See also, Griswold v. Waddington, 16 Johns. (N. Y.) 438.
15Bieber v. Rio Tinto Co. , A. C. 260; Naylor v. Krainische Industrie Gesellschaft , 2 K. B. 486 [affirming (1918), 1 K. B. 331, and citing, Bieber v. Rio Tinto Co. (1918), A. C. 260]; Zinc Corporation v. Hirsch , 1 K. B. 541, L. R. A. 1917C, 650; Clapham Steamship Co. v. Naamlooze Vennootschap Handels-en Transport-Maatschappij Vulcaan  2 K. B. 639.
"There remains, however, another point of view from which the matter must be considered. The contract of 1910 not only provides that the defendants shall purchase the plaintiffs' whole production, but it also stipulates that the plaintiffs shall not sell their concentrates to any other person. This negative stipulation remains in force, according to the tenor of the agreement, as well during a war as during a temporary strike or accident or breakdown of machinery. Again, by clause 5 the defendants have the right to leave as much as 2,200 tons of concentrates on the plaintiffs' floors and 800 tons in their vats at plaintiffs' risk for an indefinite period. Thus the position is that the defendants can not take delivery, and yet, according to the contract, the plaintiffs can not sell their production elsewhere, and must keep their floors and vats and other promises encumbered with concentrates which they are not permitted to dispose of, and thus the whole of this great industry must be brought to an entire standstill. I have in my mind and am fully aware of the letter of the defendants* solicitors of July 20. 101.1, but the rights of the parties must be considered with reference to their position under the agreement at the outbreak of war. Moreover, even if the plaintiffs were entitled to sell elsewhere any concentrates produced during the war, it might be a matter of extreme difficulty to the plaintiffs to do so to the best advantage if they are unable to enter into forward contracts for definite periods, and can only dispose of such concentrates as at the moment they have on hand, and with the risk of being called upon, possibly at short notice, to resume deliveries to the defendants. The effect of such an agreement as the present one, dealing with an important commercial product on a very large scale, is to prevent the resources of the country from being developed and labor from being employed, and the value of the mineral from being realized and the proceeds utilized in the best interest of the country. Moreover, the result of preserving intact for the defendants (as the agreement purports to do) all concentrates on the floors, in the vats or otherwise made ready by the plaintiffs, would be to protect the defendants' trade during the war, and enable the defendants, upon the conclusion of peace, to resume their trade as speedily and in as great volume as possible, and so to diminish the effect of war on the commercial prosperity of the enemy country, which it is the object of this country during the war to destroy. To recognize such a contract during war and to give effect to it by holding that it remained legally binding upon the contracting parties would be to defeat the object of this country in crippling the commerce of the enemy. It would be to undo by means of British tribunals the work done for the British nation by its naval or military forces,' per Lord Lindley in Janson v. Drie-fontein Consol. Mines [19021, A. C. 507. Such an agreement is, in my opinion, void as tending to assist the king's enemies. To carry out Such an agreement during the war, and to withdraw goods from commerce and preserve them for the enemy after the war, is little removed from actually trading with the enemy. In Furtado v. Rogers, 3 Bos. & P. 191, 198, 127 Eng. Reprint, 105, 14 Eng. Rul. Cas. 125, Lord Alvanley, in delivering the judgment of the court of common pleas, said: We are all of opinion that, on the principles of the English law, it is not competent to any subject to enter into a contract to do anything which may be detrimental to the interests of his own country; and that such a contract is as much prohibited as if it had been expressly forbidden by act of parliament.'" Zinc Corporation v. Hirsch , 1 K. B. 541, L. R. A. 1917C, 650.
16 Richer v. Rio Tinto Co. , A. C. 200; Zinc Corporation v. Hirsch [19101, 1 K. B. 541, L. R. A. 1917C, 650; Naylor v. Krainische Industrie Gesellsehaft , 2 K. B. 486 [affirming (1918), 1 K. B. 331, and citing, Bieber v. Rio Tinto Co. (1918), A. C. 260],