(2) the contract forms part of a transaction1 which is unlawful by the law of the country where the transaction is to take place.

This Exception (semble) does not apply to any contract made in violation, or with a view to the violation, of the revenue laws of any foreign 2 country not forming part of the British dominions.

Comment.

This Exception applies to any contract to be performed in England, or forming part of a transaction which is to take place in England. An English Court will not enforce a contract which directly or indirectly violates the law of England.

Exception 3 must, again, in general apply to any contract, wherever made, the performance whereof would directly or indirectly violate the law of a foreign country where the contract is to be performed, or a transaction of which it forms a part is to be carried out; an English Court will not, in general, enforce a contract which violates, or tends to the violation of, the laws of a foreign country within the limits thereof. Hence an agreement made either in England or in Germany for the doing in France of an act (e. g., the founding of a lottery) forbidden by French law would not support an action in England for breach of contract, or, in other words, the contract would be invalid in England.5

1 Biggs v. Lawrence, 1789, 3 T. R. 454; Clugas v. Penaluna, 1791, 4 T. R. 466; Waymell v. Reed, 1794, 5 T. R. 599; 2 R. R. 675; Lightfoot v. Tenant, 1796, 1 B. & P. 552. Compare Leake, Law of Contracts, 3rd ed., pp. 664–667.

24 Foreign" in this Digest means not English (see pp. 64, 68, ante). Hence a country such as Victoria, which forms part of the British dominions, is a foreign country. For meaning of "country," see pp. 64, 66, ante. For meaning of "British dominions," see p. 65, ante.

3 Planche v. Fletcher, 1779, 1 Doug. 238; Boucher v. Lawson, 1735, Cas. Temp. Hardwicke, 85, 89, 195; Simeon v. Bazett, 1813, 2 M. & S. 94; Bazett v. Meyer, 1814, 5 Taunt. 824. Compare Nelson, p. 266, and Bar, 2nd ed., note by Gillespie, pp. 559, 560. See Gelot v. Stewart, 1871, Ct. Sess. Rep., 3rd ser., ix. 1057; Clements v. Macaulay, 1866, Ct. Sess. Rep., 3rd ser., iv. 583.

* See Westlake, p. 259, and compare Exception 1, p. 558, ante. As regards England, a contract falling under Exception 3 must usually fall under Excep

tion 1.

5 Jacobs v. Crédit Lyonnais, 1884, 12 Q. B. D. (C. A.) 589, suggests the conclusion that an English contract to be performed in France, the performance whereof is at the time when the contract is made lawful by French law, may be valid in England, even though at the time for the fulfilment of the contract the performance thereof is forbidden by French law. This inference is suggested by the head-note to the report of Jacobs v. Crédit Lyonnais, and by some expressions in the case, but is, it is submitted, erroneous. Jacobs v. Crédit Lyonnais only decides that a person who enters into an English contract, i. e., a contract governed by the law of England, is not excused for its non-performance in France

Exception 3, however, does not, it would appear, apply to contracts which directly or indirectly violate the revenue laws of countries, such as France or Italy, which do not form part of the British dominions. There is certainly authority for the doctrine that the law of England does not pay any regard to the mere revenue laws of a strictly foreign state.1 The English decisions, however, which support this doctrine are mostly not of a recent date, and its validity may be open to question. It can apparently have no application to the revenue laws of any country, such as Victoria, which forms part of the British dominions.

Illustrations.

It is

1. X contracts with A to smuggle goods into England. X and A are French citizens. The contract is made in France. invalid.2

2. A and B are partners, of whom A lives in Guernsey. A on behalf of the firm sells goods to X in Guernsey. The goods are delivered by A to X, and are packed by A in a particular way for smuggling into England. B, who lives in England, knows nothing of the sale. The contract is invalid.3

3. In 1796 X gives a bond to A for the price of goods agreed to be sold and delivered in London by A to X, and to be by X shipped to Ostend and thence reshipped for India, there to be trafficked with, contrary to the Statute 7 Geo. I. cap. 21, then in force. The bond is invalid.4

4. X and A'make in France a contract relating to litigation in England. The contract is, under English law, bad on the ground of champerty. The contract is invalid.5

5. X contracts in England with A to smuggle goods into Victoria. The contract is invalid.

7. X contracts in England with A to set up a lottery in a foreign country, where the maintenance of a lottery is unlawful. The contract is invalid.

by circumstances which take place after the contract is made, and afford a legal excuse for non-performance under French, though not under English, law.

1 See p. 561, note 3, ante.

2 I. e., in England. Biggs v. Lawrence, 1789, 3 T. R. 454; Clugas v. Penaluna, 1791, 4 T. R. 466.

8 Ibid.

4 Lightfoot v. Tenant, 1796, 1 B. & P. 552. But contrast Pellecat v. Angell, 1835, 2 C. M. & R. 311.

5 Grell v. Levy, 1864, 16 C. B. N. s. 73.

8. X contracts with A in England to smuggle goods into France. The contract (semble) is valid, and an action for the breach thereof can be maintained in England.1

(C) THE INTERPRETATION AND OBLIGATION OF

CONTRACТ.

RULE 149.2- The interpretation of a contract and the rights and obligations under it of the parties thereto are to be determined in accordance with the proper law of the contract.3

Comment.

The laws of different countries differ as to the incidents which they attach to a given contract. The real effect, therefore, of a contract, i. e., what is the true meaning thereof, and what are the rights or obligations of the parties thereto, cannot be determined until we have answered the question, what is the law by reference to which the contract is to be interpreted, explained, or construed?

1 See note 3, p. 561, ante.

2 See Intro., General Principle No. VI., p. 57, ante; Foote, pp. 375-422, 447-458; Story, ss. 263-322; Westlake, pp. 252-258; Savigny, ss. 369-374 (Guthrie's transl., 2nd ed.), pp. 194–252.

Among these authorities, Foote should specially be consulted for the examination of recent English decisions, and Savigny for the elucidation of the general principle that the proper law for determining the incidents of the contract depends upon the intention of the parties. It may be noted that Savigny's views do not at bottom greatly differ from those of Story. Both entirely agree in the principle that the test by which to determine the proper law of a contract is the presumed intention of the parties, and this principle has been now fully adopted by our Courts. Lloyd v. Guibert, 1865, L. R. 1 Q. B. 115; Chamberlain v. Napier, 1880, 15 Ch. D. 614; The Gaetano, 1882, 7 P. D. (C. A.) 137; Chartered Bank of India v. Netherlands Co. 1882, 9 Q. B. D. 118; 1883, 10 Q. B. D. (C. A.) 521; Jacobs v. Crédit Lyonnais, 1884, 12 Q. B. D. (C. A.) 589; In re Missouri Steamship Co. 1889, 42 Ch. D. (C. A.) 321; The August, [1891] P. 328, 340. Compare Chatenay v. Brazilian &c. Telegraph Co. [1891] 1 Q. B. (C. A.) 79. See Gibbs v. Société Industrielle &c. 1890, 25 Q. B. D. (C. A.) 399, especially, pp. 405-407, judgment of Esher, M. R.; Hamlyn v. Talisker Distillery, [1894] A. C. 202. Both in reality determine the intention of the parties mainly by reference to the law of the country where it is to be performed (lex loci solutionis). See especially, Story, s. 280. The difference between them is that, where there is no other ground for determining what is the proper law of a contract, Savigny prefers the lex domicilii of the debtor, whilst Story, following the English decisions, prefers the lex loci celebrationis, or law of the country where the contract is made. See App., Note 2, Preference of English Courts for lex loci contractus.

3 As to meaning of "proper law of a contract," see Rule 143, p. 540, ante.

The one general principle which the law of England supplies for the answer to this inquiry is, "that the rights of the parties "to a contract are to be judged of by that law by which they in"tended [to bind], or rather by which they may justly be presumed "to have bound themselves." 1 "You must have regard to the "law of the contract, by which I mean the law which the con"tract itself imports is to be the law governing the contract; in other words, the meaning and effect of every contract depends upon the law by which the parties intended it to be governed, i. e., upon its "proper law."

This general principle applies both to the interpretation or explanation of a contract and to the obligation of a contract, i. e., the rights and obligations of the parties under it.

Interpretation. -That a contract must be explained in accordance with its proper law, in so far as its meaning depends upon technical legal terms or upon rules of law, is almost self-evident.3 The aim of a Court, when called upon to interpret a contract, must be to give to it the sense which was affixed to the contract by the parties when entering into it. But if the law to which the contracting parties looked (i. e., the proper law of the contract) be disregarded, a sense may be given to the terms of their agreement totally different from the sense which they were intended to bear. Thus, if H and W execute in England a marriage settlement, meant to be carried out in Scotland and to be governed by Scotch law, the very meaning of the terms used, no less than the general effect of the contract, will be misunderstood unless the Court called upon to construe the settlement has regard to the law of Scotland.4

Obligation.

The rights, again, and obligations under a contract, of the parties thereto, no less than the meaning of the terms employed therein, must be determined with reference to the law which the parties had in view when they came to an agreement,

1 Lloyd v. Guibert, 1865, L. R. 1 Q. B. 115, 123, per Willes, J. Compare Chamberlain v. Napier, 1880, 15 Ch. D. 614, 630, judgment of Hall, V. C.; Chartered Bank of India v. Netherlands Co. 1883, 10 Q. B. D. (C. A.) 521, 540, judgment of Lindley, L. J.; The Gaetano, 1882, 7 P. D. (C. A.) 137, 146, judgment of Brett, L. J.; Jacobs v. Crédit Lyonnais, 1884, 12 Q. B. D. (C. A.) 589, 601, per Curiam; In re Missouri Steamship Co. 1889, 42 Ch. D. (C. A.) 321, 340, judgment of Fry, L. J.; The August, [1891] P. 328, 340, judgment of Sir J. Hannen.

2 In re Missouri Steamship Co. 1889, 42 Ch. D. (C. A.) 321, 336, per Halsbury, Ch.

See Intro., pp. 57-59, ante.

• See Chamberlain v. Napier, 1880, 15 Ch. D. 614.

i. l.,

the proper law of the contract. For if a contract made with a view to the law of one country be construed in accordance with the law of some other country, it is all but certain that the end of the contract will not be attained, but that one or each of the parties will acquire rights or incur liabilities different from those which the agreement was intended to confer or impose.1

Rule 149, and the grounds on which it rests, are not hard to understand. The true difficulty lies in answering a question to which, when applied to a given case, the Rule immediately gives rise: On what principles are we to determine what was the intention of the parties to a contract in reference to the law by which it should be governed? The answer to this question may often be hard to find, and this for two reasons. Under the compli

cated transactions of modern life, a contract which contains a foreign element may be so connected with different countries as to suggest not only two, but as many as five or six, different laws as the law by which the parties intended a contract to be governed, or, in other words, as the proper law of the contract. Suppose, for example, that A, an Englishman, charters a French ship from X, its French owner, at a Danish port in the West Indies, for the carriage of the goods of A from Hayti to Genoa, and that the ship, under stress of weather, puts into a Portuguese port, where transactions take place which result in a loss to A, and that A claims damages from X, alleged to be due under the contract between them. In this position of things, which is suggested by a reported case, there are six countries the law of any one of which may, conceivably at any rate, have been intended by the parties to govern the contract, at least in so far as to determine the question at issue between A and X. The Court, therefore, when called upon to decide what are A's rights, has before it six different laws from which to select the law on which his rights depend. The intention of the parties, again, as to the law by which a contract is governed, is not generally expressed in the contract itself. What is more, it has often no real existence. If we could look into their minds, we should find that they had formed no definite purpose as to the law which should govern their rights under circumstances of which they did not anticipate the occurrence. Here, as in other branches of law, an inquiry into the intention of the parties is really an inquiry, not into the actual intention of X and A, for it possibly never had any real existence, but into

1 Rule 149 is nothing else than the most obvious application of General Principle No. VI. (Intro., p. 57, ante), which itself is an immediate result of General Principle No. I. (Intro., p. 22, ante).