Central Law Journal.

ST. LOUIS, MO., JUNE 14, 1918

IMPOSSIBILITY OF PERFORMANCE BY REASON OF CHANGE OF CIRCUMSTANCES, NOT PROVIDED FOR, AS A DEFENSE TO AN ACTION FOR BREACH OF CONTRACT.

In 86 Cent. L. J. 349 we noticed the case of Tenants Limited v. Wilson, 116 L. T. Rep. 780, a decision by the House of Lords, in which case it was held. that, where as a result of war there was such a partial destruction of the subjectmatter of contract as to make it practically impossible for delivery of goods contracted for to be made at the times specified, the contract was suspended in its operation.

Since that ruling was made other cases have come before the British courts concerning contracts affected by the outbreak. of war, and the contracts were necessarily affected thereby. In one of such cases lately decided in King's Bench Division, McCardie, Judge, reviews at great length the cases with the result, that he concludes, that where there is no question of trading with the enemy; nor any administrative intervention by the British Government, the mere impossibility of performance does not work dissolution of a contract. Blackburn Robbin Co., Limited, v. Allen, 118 L. T. Rep. 222.

the contracts had been dissolved by the outbreak of war in 1914."

The judge refers to Paradine v. Jane, 1647, Aleyn, 26, in which "the original rule of English law was clear in its insistence, that where a party by his own contract creates a duty or charge upon himself, he is bound to make it good notwithstanding any accident by inevitable necessity, because he might have provided against it by his contract." This rule became part of our common law and whatever fluctuation there from may have occurred in English decision, with regard thereto, occurring since revolutionary days, is to be taken by us more as persuasive than binding. We must look to our own decisions, therefore, to ascertain what modification of the rule in Paradine v. Jane, if any, has been introduced into our law, especially as Judge McCardie says "the first true modification of the original rule was created, I think, by the doctrine of commercial frustration." Jackson v. Union Marine Ins. Co. (1873), 31 L. T. Rep. 789, 8 C. P. 572.

In this case it was said by Brett J., that: "Where a contract is made with reference to certain anticipated circumstances, and where without any default of either party, it becomes wholly impossible of application to any such circumstances, it ceases to have any application, it cannot be applied to other circumstances which could not have been in the contemplation of the parties when the contract was made." The Allen case supra says: "If these words of Brett J. are applied in their widest extent they may well effect a revolution in contract law."

In other English cases the original rule was held modified by holding that a contract is dissolved by destruction of its subject-matter. Taylor v. Caldwell, 8 L. T. Rep. 356, 3 B. & S. 8260. And this doctrine was extended by Krell v. Henry, 1903, 89 L. T. Rep. 328. This case has been frequently cited with approval by House of Lords,

The Krell case held, that a collateral matter may become the basis of the contract and, it ceasing to be, the contract is dissolved.

The collateral matter referred to was the taking place on a certain day of the coronation procession, for the viewing of which a window was rented during daylight of certain days. The coronation was postponed. Parol evidence was held admissible to show its taking place was the foundation of the contract. It was said: "It seems difficult to say, in a case where both parties anticipate the happening of an event, which anticipation is the foundation of the contract, that either

party must be taken to have anticipated and ought to have guarded against the event, which prevented the performance of the contract."

He concludes that the Krell case does not apply to a bare sale of unascertained goods, "even though there has been so grave and unforeseen a change of circumstances as to render it impossible for the vendor to fulfill his bargain." He says: "If I were to hold otherwise I should create a rule the extent of which no man can foresee, and to the operation of which no judge can satisfactorily fix the limits. By stating the above conclusion I maintain the original rule of English law, whereby a man is bound by his contract, whilst I leave a field, as yet undefined, for the operation of the Krell v. Henry principle."

In this country we are bound by the rule in the Parradine case announced in 1647, and so far as sale of unascertained goods

is concerned we perceive there has been no modification thereof in English decision, unless the case discussed by us in 86 Cent. L. J. supra creates a modification. That case, however, only accomplished a suspension of the contract and not an abrogation of its terms. There, too, was a "force majeure" clause in the contract.

American law seems far from settled in a question of this kind, so far, at least, as regards delivery of goods at the time of the contract unascertained. Now it has been said that: "There are many cases holding that the continued existence of the means of performance, or of the subject-matter to which the contract relates, is an implied condition, and the rule seems to rest on the presumption that the parties necessarily intended an exception." Dolan v. Rogers, 149 N. Y. 489, 493, 44 N. E. 167. But there are abundant cases to the contrary. Thus prevention by a foreign law does not excuse performance. Williston on Sales, §661, note 35 citing cases.

This author says, however, that: "It is probable that the tendency of the law is toward an enlargement of the defense of impossibility, and in any case, where it may fairly be said that both parties assumed that the performance of the contract would involve the continued existence of a certain state of affairs, impossibility of performance due to a change in this condition of affairs will be an excuse." But the mere making more onerous performance will not operate as an excuse, especially in commercial contracts for future deliveries, where there is an element of speculation involved, or a fluctuation in prices may come about. A claimed impossibility will be regarded less tolerantly, than in other contracts.

Since the Allen case supra was decided, the Appeals Court has held that the Wilson case did not control the ruling in a case quite similar in its facts to the Allen case. Dixon & Sons Limited v. Henderson Craig & Co., 118 L. T, Rep. 328.

NOTES OF IMPORTANT DECISIONS.

COMMERCE-INTENT BY SHIPPER AS TAKING GOODS FROM UNDER COMMERCE CLAUSE.-In State v. C. C. Taft Co., 167 N. W. 467, decided by a majority of five to two, it is held, that intent of dealer to dispose of goods shipped in interstate commerce to break original packages and sell them to the trade where they are received takes the goods from under the shelter of the commerce clause of the constitution and makes them subject to seizure under law enacted by virtue of a state's police power.

While it is true that it has been held by federal supreme court that when property shipped in interstate commerce comes to "rest" in the state to which it has been shipped, yet it is conceded, that U. S. Supreme Court has never held, that mere intent of consignee to break original packages and distribute their contents to retailers or among consignees' own retail stores, constitutes the "rest" spoken of. There are, however, two cases by Maine Supreme Court to the effect, that there is presumption of continuance of intent, and this intent puts the property in the general mass of property in the state. State v. Blackwell, 65 Me. 556; Wasserfolk v. Boulier, 84 Me. 165, 169, 24 Atl. 808, 30 Am. St. Rep. 344. There also is cited federal authority to the general effect of presumption of the continuance of intent. Cook v. Marshall County, 196 U. S. 261, 271, 25 Sup. Ct. 233. This case, however, is but a principle used arguendo by U. S. Supreme Court. The Maine court held that "a fixed intent that the package shall be broken and sold must place the liquors in the same category," that is of packages actually broken.

The prevailing opinion and the dissent refer to Coe v. Errol, 116 U. S. 517, 6 Sup. Ct. 517. The former says the inquiry "was as to whether the owner's state of mind in relation to the goods that is his intent to export them and his partial preparation to do so-exempt them from taxation." That case concerned taxation in the state where shipment was begun and it was said, in the instant case, that the Coe-Errol case held that "mere intent is not enough, but the intention must concur with an act of transportation to terminate the jurisdiction of the state."

The dissent construes the Coe-Errol case as conclusive against intent alone affecting the status of the property. It was said: "If intent to do what will give property the federal pro. tection does not effect such protection, then

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an intent to do what, if done, will take property out of interstate commerce cannot destroy the protection. * * * The Errol case over and again declares it is dealing with what will create a status. *** It decides nothing except whether intent will create a status."

It seems to us that the dissent is better founded than the ruling by the majority. The natural position of property is, however, subject to local jurisdiction and acts putting it outside of that jurisdiction creates an exceptional situation, and for this reason there may be a difference in the effect of intent. But the general oper ation over the entire country of such exception, especially when that is under a constitution of an independent sovereignty, requires just as conclusive certainty as where property is to be exempted from jurisdiction naturally controlling it. Disputable intent ought never to present ocasion for conflict between federal and state authority.

CONTRACT-CONDITION IN RESTRAINT OF ALIENATION.-Robinson v. Thurston, 248 Fed. 420, decided by Ninth Circuit Court of Appeals, holds, that where for a nominal consideration a daughter executed to her mother a release of indebtedness evidenced by notes and mortgages in a large sum upon condition that if such releasee incurred any indebtedness to the amount of $1,000 at any one time or mortgaged or sold any of her real estate without first obtaining the consent of the daughter, said release and discharge of such notes and mortgages would be null and void and the amounts represented by such notes and mortgages become due and payable, the incurring by the mother of indebtedness in such sum of $1,000 and conveying of a portion of her real estate, revived and made enforcible the said notes and mortgages.

The Court of Appeals goes upon the theory that there was but a suspension of the indebtedness to the daughter and there was no sound reason against its revival and enforceability, as in the condition of revival there was nothing unconscionable nor contrary to public pol icy.

This condition certainly operated against the free right of alienation. And it was said that this restriction upon alienation had no injurious influence over the community at large and no one outside of the parties had any interest in its suppression. But, it is difficult to discern what legal right the daughter had in the observance of the condition. If this was to preserve for the daughter any right in the prop

erty of her mother, it might be seen wherein the daughter could be damaged by non-observance of the condition. But, if the condition merely stood for the daughter's solicitude for her mother or because she was afraid that her extravagance would or might entail a burden on the daughter, we do not think this could stand as a valid reason for reviving the suspended or cancelled indebtedness. There appears lacking the element of necessary mutuality to sustain this agreement for a revival of the indebtedness. While it may be true, that strictly there is no public policy, which would refuse to recognize the validity of the contract for a revival of indebtedness, yet we think there was no mutuality which is necessary for the sustaining of contracts.

We doubt whether any of the cases cited by the court were lacking in the particular of mutuality.

CONFLICT OF LAWS-PRESUMPTION OF LAW OF FOREIGN STATE IN ABSENCE OF EVIDENCE.-In Lillard v. Lierley, 202 S. W. 1057, decided by Springfield (Mo.) Court of Appeals, it was held that, where it was stipulated that defendant in an action on a promissory note left Nebraska shortly after the note matured and ever since lived in Missouri up to the time he was sued and, further stipulated that under the Nebraska law a cause of action on promissory notes is barred by limitation of five years, yet the principle that the law of another state, where there is

no showing to the contrary, will be presumed

to be that the forum of suit, imported into

the case the same exception as to the running

of the statute for absence from the state as was found in Missouri law, and the action was thereby saved.

The court said: "It has been universally held that where a cause of action accrued in a foreign state and the local laws of such state are not shown, and it is such a state in which we could not presume that the common law was in force, we could and would apply the law of Missouri, both statutory and constructive."

In this case it appears, that defendant pleaded that the action was barred under statutory limitation "as under Nebraska law, and there was no reply to this plea. Then there was a stipulation as above stated. In oral argument plaintiff contended that there was an omission by mistake and oversight in the agreed statement of facts to further show an exception during the time defendant lived in Missouri, in which the statute did not run and his counsel

asked that this exception under Nebraska law be given consideration.

The court ruled that Nebraska law outside of what was stipulated about could not be considered, but under the principle above stated, Missouri law could be taken into account.

It seems to us that by both the pleading and the agreed statement of facts the entire applicable law was included. Therefore this was not a case where the law was not shown. It was shown, and presumptively it was shown in its entirety.

In pleading the statute of another state there is no presumption that such statute is the same as that of the forum and exceptions of local statutes cannot be implied where the foreign statute is silent even in the absence of proof of the entire statute law on the subject of inquiry.

DECISIONS OF THE BRITISH COURTS ON THE POSITION OF MORTGAGES DURING WAR.

One of the earliest emergency measures of the war was the Courts (Emergency Powers) Act passed on 31st August, 1914. We are now in 1918, and in the interval several amendment Acts have been passed. But one of the main provisions of the original Act still stands, namely, that affecting mortgages granted prior to the war. The amount of these must be enormous, and there is no doubt that, with the government offering to borrow at five per cent and on the best security, it was a wise financial measure to control the calling up of mortgages; even though this has resulted in certain minor economic effects not wholly without question.

The act in effect as regards mortgages lays it down that no person shall take, resume, or enter into possession of any property, exercise any right of re-entry, foreclose, or realize any security (except by way of sale by a mortgagee in possession) except after an application to the court.

The functions of the court when application is made are defined in the second sub

less permanently borrowed for business purposes at a fixed and moderate rate of in

will the

While therefore it is clear that a mortgagee, before he can take any steps to enforce his security, must apply to the court for leave to enforce his remedies, yet how exercise its discretion towards him: has he a case for suitable application; need he apply at all? The vague terms of the statute created a feeling of uncertainty as to result; and it is on that account that the recent decision of

Mr. Justice Eve in Re Jobson's Application1 should be welcomed not only by lawyers, but by all business men and by mortgagors and mortgagees themselves. He has, in brief, as one commentator puts it, "furnished the profession with a kind of vade mecum on the question of the mortgagees' position."

The learned judge seems to have resolutely addressed himself to the questionwhat lines ought the judicial discretion to follow when application is made by a mortgagee. His Lordship first pointed out the various courses which a mortgagor faced which a demand for payment can pursue. He can realize the property and pay off the mortgagee out of the proceeds; or he can pay off the sum out of his other resources and take a reconveyance; or he can arrange a transfer. "The last of these courses," the learned judge observed, "is the one usually adopted, and, indeed, it is almost inevitable where the advance is of a large amount, which is treated as capital more or

(1) 117 L T. Rep. 786.

ing with an emergency application is to consider how, under ordinary circumstances, the particular security would be dealt with; and since it is unusual for the mortgagor to be in a position at once to find the money himself, and he will require to raise it elsewhere, a reasonable time should be allowed him for this purpose; reasonable, that is, having regard to the special circumstances of the times.

Having thus established a basis--principle, Mr. Justice Eve proceeded to illustrate it by seven special instances as follows: We give the summary of them compiled by The Solicitors' Journal; (1) when the security is sufficient, and the mortgage obligations (other than the covenant for payment of principle) have been performed to date, the mortgagor ought to be given a reasonable time to pay the debt; (2) this time may be extended if he is willing, where the interest is less than five per cent to pay five per cent, and still further, if he will pay to the mortgagee on account of principal any excess of net rents over interest; (3) if the mortgagor is in occupation, he should pay five per cent, interest and account in the same manner for any excess over that sum of a proper occupabut the mortgage obligations have been obtion rent; (4) if the security is insufficient, served, the mortgagor should be allowed an extension, but with liberty for the mortgagee to renew the application in the event of further depreciation; (5) if in such a case there are slight arrears of interest, the mortgagor should be required to clear them off as a condition of extension of time: (6) if in cases (4) and (5) the rent or a proper occupation rent exceeds five per cent, the mortgagee should, if he desires, be allowed to appoint a receiver; and (7) where there are substantial arrears of interest, or where the covenants have been broken, the mortgagor should have no relief except on terms of clearing the arrears