Effect upon Contract for Outbreak of War

Effect upon Contract for Outbreak of War

What effect does the outbreak of war between nations have upon contracts between citizens of such nations? Here is a question which merchants and manufacturers in most of the commercial centers of the world have been asking their legal advisers since the summer of 1914. It is also a question which is asked many times in the future, and especially after the war, for with the return of peace the court’s of the belligerent nations will be opened to litigants who are now barred from such courts as alien enemies.

It may be safely predicted that a majority of the numerous cases which will arise out of problems created by the war, will involve commercial contracts entered into by residents of the United States and residents of Germany or Austria.

A casual search through digests and the reading of case headnotes may leave the searcher with the vague impression that the outbreak of war has some peculiar effect upon contracts, not to be accounted for by any of the well-established principles of contract law. Thus, it is frequently said that war suspends contracts and that the cessation of war revives the same.

On the other hand, it is stated elsewhere in no less positive terms that war dissolves and abrogates all contracts between subjects of belligerent nations.

An attempt will here be made to .show that cases -arising upon contracts affected by war may, in fact, be classified by an application of the broad principles of the common law relating to contracts.

Contracts made between subjects of belligerent nations after the outbreak of war are usually declared void.

“War, when duly declared or recognized as such by the war-making power, imports a prohibition to subjects, or citizens, of all commercial intercourse and correspondence with citizens or persons domiciled in the enemy country”, unless such intercourse is permitted by express license from the sovereign.

This is universally declared to be a principle of “public law”, sanctioned by international custom and usage. The belligerent governments, however, upon the outbreak of war, are usually prompt in giving detailed expression to this rule of international law in the form of “non-intercourse acts,” or “trading with the enemy acts.”