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.
An order of the government which forbids performance of the contract, operates as a discharge thereof, at least in actions in the courts of the government which issued such order.1 A contract for the construction of certain reservoirs, which was to extend over a period of six years, was terminated by order of the Ministry of Munitions, under the Defense of the Rcalm Acts and Regulations. The delay might well have lasted for years. Furthermore, the plant was sold by direction of the Ministry of Munitions. It was held that such acts of the government operated as a discharge of the contract and not merely as a suspension thereof.2 In this case the contractor contended that the contract was discharged, while the public board for which the reservoirs were being constructed claimed that it was merely suspended. It was held that the contractor was not bound to take the chance which would be involved in requiring him to assemble a new plant at the end of the war, and to proceed with the performance of the contract at some indefinite time in the future. Under a provision of the war-time regulations which authorizes the minister of munitions to regulate or restrict or prohibit building work except under license, a builder who proceeds without a license after an order has been made forbidding work for which a license has not been issued, can not recover the agreed compensation therefor.3 A contract between persons who are domiciled in Great Britain for the selling of certain articles to be delivered in another country, is discharged by a regulation made by the government which forbids the sale of such articles as war material, although by the terms of the contract it could have been performed by shipping such articles from any country.4
20 Moore v. Roxford Knitting Co., 250 Fed. 278; Mawhinney v. Milbrook Woolen Mills, 172 N. Y. Supp. 461, 105 Misc. 99.
21. J.C. Lysle Mill Co. v. Sharp, - Mo. App. - , 207 S. V.*. 72.
1 On this subject generally, see Impossibility of Performance of Contracts Due to War-Time Regulations, by E. Merrick Dodd, 32 Harvard Law Review 789.
The war-time prohibition act, 40 Stat, at L. C. 212, pp. 1045, 1040, is valid, is not repealed by the eighteenth amendment and is in force until demobilization is proclaimed by the President. Hamilton v. Kentucky Distilleries & Warehouse Co., 251 U. S 140,
- L. ed. - .
See also Jacob Ruppert (incorp.) v. Caffey, - U. S. - , 0 U. S. Sup. Ct. Adv. Op. [1919-1920], 138; United States v. Standard Brewery, - U. S.
- 6 U. S. Sup. ct. Adv. Op. [1919-1920], 174.
2 Metropolitan Water Board v. Dick , A. C. 119 [affirming, Metropolitan Water Board v. Dick (1917), 2 K. B. 1; distinguishing, Tamplin Steamship Co. v. Anglo-Mexican Petroleum Products Co. (1916), 2 A. C. 397, and disapproving, Hadley v. Clarke, 8 T. R. 259].
"It is admitted that the prosecution of the works became illegal in con-, sequence of the action of the Minister of Munitions. It became illegal on February 21, 1910, and remains illegal at the present time. This is not a case of a short and temporary stoppage, but of a prohibition in consequence of war, which has already been in force for the greater part of two years, and will, according to all appearances, last as long as the war itself, as it was the result of the necessity of preventing the diversion to civil purposes of labor and material required for purposes immediately connected with the war. Condition 32 provides for cases in which the contractor has, in the opinion of the engineer, been unduly delayed or impeded in the completion of his contract by any of the causes therein enumerated or by any other causes, so that. an extension of time was reasonable. Condition 32 does not cover the case in which the interruption is of such a character and duration that it vitally and fundamentally changes the conditions of the contract, and could not possibly have been in the contemplation of the parties to the contract when it was made.
Greater difficulties arise where the order of the government prevents performance of part of the contract, but does not affect performance of the residue. A contract which provides for supplying gas lamps, maintaining them in good condition and furnishing gas, is not discharged by a regulation which forbids the lighting of street lights until further order, since the remaining covenants of such contract may be performed.5 A contract by one who is domiciled in Canada for the sale of certain articles, which does not provide that such articles shall be shipped from Canada, is not discharged by the fact that the Canadian government has forbidden the export of such articles.6
"It was not disputed, as I understand the argument for the appellants, that in the case of a commercial contract, as for the sale of goods or agency, such a prohibition would have brought it to an end. It was sought to distinguish the present case on the ground that the contract was for the construction of works of a permanent character, which would last for a very long time, and that a delay, even of years, might be disregarded. This contention ignores the fact that, though the works when constructed may last for centuries, the process of construction was to last for six years only. It is obvious that the whole character of such a contract for construction may be revolutionized by indefinite delay, such as that which has occurred in the present case, in consequence of the prohibition." Metropolitan Water Board v. Dick , A. C. 110.
3 Brightman & Co., Ltd., v. Tate , 1 K. B. 463.
4 Anglo-Russian Merchant Traders v. Batt , 2 K. B. 679.
5 Leiston Gas Co. v. Leiston-Cum.-Sizewell Urban District Council , 2 K. B. 428.
"Under the contract the plaintiffs undertook to perform various services for the defendants in return for an agreed rate of payment to be made quarterly by the defendants for every quarter in the five years' duration of the contract. These services included the provision and erection and maintenance of the column lamps and other plant for the supply of gas as stipulated, and the defendants agreed to make these payments extending over five years as the remuneration to the plaintiffs, not only for supplying and lighting the gas for the lamps, but also for providing and erecting and maintaining the plant. In fact, the plaintiffs had performed the various services under the contract for nearly three and a half years before the event under discussion happened. The column lamps remain their property under the contract, and the defendants have had the advantage of them throughout the three and a half years. They have used them in the three quarters of 1915, not indeed to the full extent, as the lamps were not lighted except for the twenty-six days of the first quarter, but to the extent that they remained there connected with the main and would be lighted whenever the prohibition by the military authority was relaxed or withdrawn. Upon these facts I can not hold that the performance of the contract had become unlawful, or that the venture was frustrated by the act of the executive in forbidding the lighting of the lamps. Part of the performance of the contract had become unlawful, but another part of the contract, which can not be regarded as a trivial part, was lawful and could be performed. In these circumstances, the defendants are not justified in treating the contract as at an end, or in refusing to make the payments as agreed by them." Leiston Gas Co. v. Leiston-Cum.-Sizewell Urban District Council , 2 K. B. 428.
A contract to export goods which can not be exported at the time without a special license is construed as if there were an express condition that such license should first be obtained; and, accordingly, no liability exists if the party who is unable to perform has used reasonable diligence and care to procure such license.7 If a provision in the charter-party requires the cargo to be consigned to the Netherlands Overseas Trust, and if the cargoes consigned to such trust with the consent of the trust will be permitted by British cruisers to proceed, such provision will be construed as requiring the assent of the Netherlands Overseas Trust as a condition precedent; and if such consent can not be obtained, the contract is discharged.8