Opinion — Texas Co. v. Hogarth Shipping Co.

OCTOBER TERM, 1920.

Argument for Petitioner. 256 U. 8.

2. Error in permitting the British Ambassador to intervene, as amicus

curie@, and to present a certificate avowing the requisition of the

ship here in question as an act of his government, held not prej-

udicial. P. 629.

3. A British ship, owned by a British corporation, was subject to

requisition by the British Government for war purposes while in

British waters preparing for service under a voyage charterparty

made in this country with an American corporation. Pp. 628, 631.

4. A telegraphic requisition treated as binding in the practice of the

British Government, and followed by use of the ship as a government

transport and compensation of the owner therefor, held valid.

P. 628.

5. Where a ship is rendered unavailable for the performance of a char-

terparty by a valid requisition of government, not invited by the

owner or provided for in the contract, for a service likely to extend

(which in this case did extend) beyond the time for the projected

charter voyage, the owner is excused from performance. P. 629.

6. The contract must be deemed to have been entered into subject

to an implied condition that, in such an event, it should be at an

end and the parties absolved from further liability under it. P. 631.

267 Fed. Rep. 1023, affirmed.

CERTIORARI to review a decree of the Circuit Court of

Appeals affirming a decree of the District Court in admir-

alty. The facts are stated in the opinion, post, 625.

Mr. John W. Griffin for petitioner:

In the absence of a restraints-of-princes clause, the

shipowner’s obligation under the charterparty was abso-

lute, and prevention by foreign law was not a defense.

Where a shipowner enters into an absolute covenant

to carry a cargo, without protecting himself by exceptions,

he is bound to perform it or to pay damages. An examin-

ation-of the charter in suit shows that it contains no

exception whatever applicable to the situation. Spence

v. Chodwick, 10 Q. B. 517; Jacobs v. Credit Lyonnais, 12

Q. B. D. 589; Howland v. Greenway, 22 How. 491; The

Harriman, 9 Wall. 161; Blight v. Page, 3 Bos. & P. 295;

Barker v. Hodgson, 3 Maule & S. 267; Northern Pacific

TEXAS CO. v. HOGARTH SHIPPING Co. 621

619. Argument for Petitioner.

Ry. Co. v. American Trading Co., 195 U. 8, 439; Ashmore

v. Cox, L, R. [1899] 1 Q. B. D. 436; Blackburn Bobbin Co.

v. Allen, [1918] 1 K. B. 540; Sun Printing Association v.

Moore, 183 U. S. 642; Carnegie Steel Co. v. United States,

240 U. S. 156; Chicago, Milwaukee & St. Paul Ry. Co. v.

Hoyt, 149 U.S. 1, 14; Columbus Ry. Co. v. Columbus, 249

U_S. 399, 412; Dermott v. Jones, 2 Wall. 1; United States

v. Gleason, 175 U. 8. 588, 602; Jones v. United States, 96

U. S. 24; Berg v. Erickson, 234 Fed. Rep. 817; Rederiak-

tiebolaget Amie v. Universal Transportation Co., 250 Fed.

Rep. 400; Richards v. Wreschner, 174 App. Div. 484;

Aktieselskabet Frank vy. Namqua Copper Co., 36 T. L. R.

438. Furness, Withy & Co. v. Rederi Banco [1917] 2 K. B.

873, distinguished.

The law has long been settled to the effect that, where

there is an absolute obligation, difficulty or even impos-

sibility of performance is no defense, except in cases of

personal disability preventing performance of a contract

for personal service, destruction of the subject-matter

upon the continued existence of which the contract

depends, and prohibition by domestic law.

The ship did not cease to exist, any more than if she had

been delayed by stranding or by collision, or by any other

obstacle. She was merely subjected to a restraint (assum-

ing that the requisition was valid) of a kind not excepted

in the charter and not permanent in its nature. Such a

situation cannot be treated as an instance of destruction

of the subject-matter of the contract. It is simply a

case where performance has been rendered impossible

for the moment by foreign law.

The case presents merely another instance of prevention

by foreign law of the performance of an American con-

tract—the same situation which has been so often and so

uniformly dealt with by the courts both of this country

and of England. 8 Elliott on Contracts, par. 1891; 2

Parsons, Contracts, 9th ed., p. 828; Leake, Contracts,

OCTOBER TERM, 1920.

Argument for Petitioner. 256 U. 8.

6th ed., p. 510; Wald’s Pollock on Contracts, 3d ed., p.

530; Williston, Sales, § 661; Scrutton on Charter-Parties,

9th ed., p. 11; Richards v. Wreschner, 174 App. Div. 484;

Kirk v. Gibbs, 1 H. & N. 810; Barker v. Hodgson, 3 M. & 8.

267; Gates v. Goodloe, 101 U. 8. 612; Benson v. Atwood,

13 Maryland, 20; Clifford v. Watts, L. R. 5 C. P. 577, 586;

Hore v. Whitmore, 2 Cowp. 784; Atkinson v. Ritchie, 10

East, 530; Blight v. Page, 3 B. & P. 295; Sjoerds v. Lus-

combe, 16 East, 201; Jacobs v. Credit Lyonnais, 12 Q. B. D.

589; Blackburn Bobbin Co. v. Allen, [1918] 1 K. B. 540;

Trinidad Shipping Co. v. Alston & Co., [1920] A. C. 888;

Duff v. Lawrence, 3 Johns. Cas. 162; Holyoke v. Depew, 2

Ben. 334; Beebe v. Johnson, 19 Wend. 500; Ye Seng Co. v.

Corbitt, 9 Fed. Rep. 423; Tweedie Trading Co. v. McDonald

Co., 114 Fed. Rep. 985; Spence v. Chodwick, 10 Q. B. 517;

Swayne & Hoyt v. Everett, 255 Fed. Rep. 71; Taylor v.

Taintor, 16 Wall. 366.

The foregoing authorities indicate what has always been

considered clear law—that, in the absence of an exception in

the contract, the interference of a foreign government pre-

venting the performance of the contract is not a legal excuse.

This is well settled both in England and in this country.

The District Court sought to bring the present case

within the authorities by calling it a case where the vessel

had become non-existent. This is a mere figure of speech.

It might equally well be said that, whenever the act of a

foreign government prevents the loading of a cargo, that

cargo is non-existent, and yet in case after case it has been

held that liability exists under such circumstances. In-

deed, any case of impossibility might be stated in the same

sort of figurative language. Where there is truly destruc-

tion of the subject-matter, a peculiar situation is created,

with which the law usually deals by declaring, as the

fairest solution, that the contract is annulled. But where,

the subject-matter being intact, an obstacle arises to

performance by one party, the question is: Is the nature

TEXAS CO. v. HOGARTH SHIPPING CO. 623

619. Argument for Petitioner.

of the obstacle such that, under the law or according to

the provisions of the contract, the default is excused?

There was no frustration of the charter. If the doctrine

of frustration is applied to cases where performance is

prevented by foreign law, then either the general rule

must be overturned (which is inconceivable) or else such

justice of enforcing a contract under circumstances funda-

mentally different from those which the parties foresaw

or could reasonably have been expected to foresee. The

court in effect makes for the parties a new contract; or,

perhaps more accurately, declines to enforce, for equitable

reasons, the contract which the parties themselves have

made.

Only in a case of the plainest need should such a remedy

be applied, and it should never be applied to a case where

the parties must have had the contingency in contem-

plation and simply failed to provide for it. Under those

circumstances, it is submitted, no court can annul this

or any other contract.

The so-called doctrine of frustration is really new in

name rather than in nature. Nearly all the cases are

simply instances of the well recognized types of impos-

sibility. No court has held a contract frustrated unless

the obstacle clearly appeared to be such as necessarily to

postpone the performance of the contract beyond the

time when it would be fair or reasonable to require the

parties to perform it. Citing and applying or distinguish-

ing the following: Allanwilde Transport Corporation v. Vac-

uum Oil Co., 248 U. 8. 377; The Kronprinzessin Cecilie, 244

U.S. 12; Columbus Railway Co. v. Columbus, 249 U. 8. 399;

The Claveresk, 264 Fed. Rep. 276; The Isle of Mull, 257 Fed.

Rep. 798; Lewis v. Mowinckel, 215 Fed. Rep. 710; Admiral

OCTOBER TERM, 1920.

Argument for Petitioner. 256 U.S.

Shipping Co. v. Weidner & Co., [1916] 1 K. B. 429; Jack-

son v. Union Marine Ins. Co., L. R. 8 C. P. 572; L. R.

10 C. P. 125; Bank Line v. Capel & Co., [1919] A. C. 435;

Tamplin S. S. Co. v. Anglo-Mexican Co., [1916] 2 A. C.

397 ; Geipel v. Smith, L. R. 7 Q. B. 404; Scottish Navigation

Co. v. Stouter & Co., [1917] 1 K. B. 222; Countess of War-

wick S. 8. Co. v. Nickel Societe Anonyme, [1918] 1 K. B.

372; Modern Transp. Co. v. Duneric S. S. Co., [1917]

1 K. B. 370; Chinese Mining Co. v. Sale, [1917] 2 K. B.

599; Millar & Co. v. Taylor & Co., 32 T. L. R. 161;

L. R. [1916] 1 K. B. 402; Austin Baldwin & Co. v. Turner

& Co., 36 T. L. R. 769; Lloyd Royal Belge v. Stathatos, 33

T. L. R. 390; 34 T. L. R. 70; Blackburn Bobbin Co. v.

Allen Co., [1918] 1 K. B. 540; 2 K. B. 467; Hudson v. Hill,

2 Asp. M. C. 278; Jones v. Holm, 2 Ex. 335; The Progreso,

50 Fed. Rep. 835; The Star of Hope, 1 Hask. 36; Hadley v.

Clarke, 8 Term. Rep. 259; The Patria, L. R., 3 A. & E. 436;

Hurst v. Usborn, 25 L. J. C. P. 208; Assicurozioni Generali

& Co. v. Bessie Morris S. S. Co., [1892] 2 Q. B. 652; Clark

v. Massachusetis Fire Insurance Co., 2 Pick. 104; In re

Shipton, Anderson & Co., [1915] 3 K. B. 676; Nickoll &

Knight v. Ashton, Edridge & Co., [1901] 2 K. B. 126;

Taylor v. Caldwell, 3 B. & S. 826; Metropolitan Water

Board v. Dick, Kerr & Co., [1918] A. C. 128.

In order to succeed under the facts of this case, the

owners must establish that the mere fact of requisition,

ipso facto and without more, as matter of law, terminated

the charter. Without an exception, without proof of the

probable length of the requisition, without any facts in

the record from which the court can reach a conclusion

about its probable length, there is nothing here but the

mere fact that the vessel was requisitioned. No case has

ever held that this alone is enough to accomplish frustra-

tion; numerous cases have held the contrary.

The alleged requisition was not a legally valid requisition.

The diplomatic officers of a foreign government cannot, by

TEXAS CO. ». HOGARTH SHIPPING CO. 625

619. Opinion of the Court.

ex parte statements, preclude the courts of the United

States from ascertaining the true facts with regard to it;

nor should the courts of the United States receive or act

on such statements, at least unless made through and

with the sanction of the Department of State.

Whether or not the requisition was valid, the employ-

ment of the Baron Ogilvy from April to October, 1915, was

not under any requisition but under a voluntary charter,

and the certificate of the British Embassy should not be

construed as contradicting this undisputed fact.

The respondents, after the happening of the alleged

requisition, did not make efforts to secure the release of

the vessel or to substitute other tonnage.

Mr. John M. Woolsey for respondents.

Mr. Frederic R. Coudert and Mr. Howard Thayer Kings-

bury, by leave of court, filed a brief on behalf of the British

Embassy as amicus curiae.

Mr. Justice Van Devanrer delivered the opinion of

the court.

This is a suit in admiralty to recover damages for an

alleged breach of a voyage charterparty entered into in

New York, February 6, 1915, between a British corpo-

ration, which owned the Baron Ogilvy and other freight

ships, and a Texas corporation, which was engaged in

shipping and marketing petroleum products. The charter-

party did not name a particular ship as the subject of the

hiring, but required that one of a certain type be desig-

nated from among the ships of the British company, on

or before March 15. In due time that company named

the Baron Ogilvy and the Texas company assented. The

intended voyage was from a port in Texas to another in

South Africa with a full cargo of refined petroleum in cases.

The ship was to be tendered at the initial port ready to

load between April 15 and May 15, 1915, and in case of

THE TEXAS COMPANY »v. HOGARTH SHIPPING

COMPANY, LTD., OWNER OF THE STEAMSHIP

BARON OGILVY, ET AL.

CERTIORARI TO THE CIRCUIT COURT OF APPEALS FOR THE

SECOND CIRCUIT.

No. 555. Argued January 26, 27, 1921.—Decided June 6, 1921.

1, A voyage charterparty for a vessel to be named, wil 10 provision

for a substitution, under which a vessel has been » »cted, is to be

treated thenceforth as a contract for that particular vessel. P. 627.

OCTOBER TERM, 1920.

Opinion of the Court. 256 U. S.

default the Texas company was given the option of can-

celing or maintaining the charterparty. If the vessel

was then at that port, the option was to be exercised at

once and if she was not then there, it was to be exercised

within twenty-four hours after her arrival. There was

no clause expressly excepting restraints of princes, etc.

April 10, 1915, the Baron Ogilvy, while in British waters

and being provisioned for the intended voyage, was

requisitioned by the British Government and pressed

into its war service, in which she continuously was re-

tained until October 20, following. On April 12 the

British company notified the Texas company that the

vessel had been requisitioned and therefore would not be

available to carry out the charterparty. The Texas

company thereupon procvred another vessel to make

the voyage at the time intended, but at an increased

freight rate, and subsequently brought this suit against

the British company on ie wiecry that the latter had

broken the charterparty a:.. was liable in damages for

the difference between the rate which it was to receive

and that actually paid to the other vessel. On the final

hearing the District Court rendered a decree for the

respondent, the principal grounds of the decision being

(a) that when in accordance with the terms of the charter-

party the Baron Ogilvy was named as the ship to make

the voyage the contract became an ordinary voyage

charterparty for that ship, and none other, and (b) that

that ship, before the time for the voyage, was taken in

invitum by the owner’s government for war use for a

period likely to extend beyond the time for the intended

voyage and that this dissolved the charterparty and

excused the owner from furnishing the ship. 265 Fed.

Rep. 375. The decree was affirmed by the Circuit Court

of Appeals, 267 Fed. Rep. 1023; and a writ of certiorari

brings the case here. 254 U. S. 625.

We agree that after the designation of the Baron Ogilvy,

TEXAS CO. v. HOGARTH SHIPPING CO, 627

619, Opinion of the Court.

conformably to a provision in the charterparty, every

element of an ordinary voyage charterparty for a par-

ticular ship was present. It was then as if that vessel

had been named at the outset. And, as there was no pro-

vision for substituting another ship, there was no obli-

gation on the part of the owner to furnish, nor on the

part of the charterer to accept, another. N ickoll & Knight

v. Ashton, Edridge & Co., [1901] 2 K. B. 126, 131. The

contract related to a particular ship just as it related to

a particular voyage. Neither could be changed without

departing from the contract, which could not be done

without the consent of both parties.

The libelant challenges the good faith of the owner and

seeks by taking mere fragments of the evidence here and

there to show that the owner invited the requisition,

welcomed it as promising a better return than the charter-

party, and in effect voluntarily turned the vessel over to

the government. But the fragments to which attention

is invited must be read with the context and all the evi-

dence must be considered. When this is done it becomes

very plain that there is no basis for the challenge. The

owner made the usual preparations for complying with

the charterparty, earnestly sought to prevent the req-

uisitioning of the vessel, urged the existence of the

charterparty as a reason for leaving her free, and respected

the requisition, when made, because no other course was

reasonably open. It may not be material, but in fact the

charterparty gave promise of a better return and called

for a service which would be less hazardous. The vessel

was taken by the government for the use to which she

was subjected and after the taking the owner agreed to

furnish certain additional facilities by reason of which a

higher compensation was obtained than otherwise would

have been allowed. Beyond this the owner was accorded

no voice in the matter.

As the ship was British and in British waters and the

pon tale Me:

SOS ORR EMAL RE! SENDA ARE YF NI I OS NP AED ie MAY HS AY MP HBL NN ace od

OCTOBER TERM, 1920.

Opinion of the Court. 256 U. 8.

owner was a British corporation the power of the British

Government to requisition the ship is beyond question.

But the libelant insists that those who assumed to exert

this power did not proceed in the mode prescribed and

therefore that the requisition was invalid. The facts

adequately proved are as follows: A Royal Proclama-

tion of August 3, 1914, authorized and empowered the

Lords Commissioners of the Admiralty ‘“‘by warrant under

the hand of their Secretary ” ‘‘to requisition and take

up ” British vessels within British waters for use as trans-

ports and auxiliaries. The Baron Ogilvy was requisitioned

by an order of the Lords Commissioners and the order

was communicated to the owner by a telegram signed

“Transports ” and saying: ‘‘SS. Baron Ogilvy is requisi-

tioned under Royal Proclamation for government service.”

The telegram was sent by the Assistant Director of Mili-

tary Sea Transports, the officer through whom requisi-

tioning orders were executed. This was the usual mode

of communicating such orders. Formal warrants never

were issued. Generally, the telegraphic communication

was followed, after a time, by a letter of like import bear-

ing a block (printed) signature of the Secretary; but in

this instance, through an error in office routine, no letter

was sent. These letters were intended to be corroborative,

but were not deemed essential; and in actual practice the

Lords Commissioners and those who executed their orders

proceeded on the theory that the ship was taken when

the order was received by the owner, however the order

was communicated, and that a telegraphic communication

of it was effective and must be obeyed. Indeed, the evi-

dence is that if the telegraphic order was not obeyed the

vessel would be taken by force. The owner here—six

of whose ships had been requisitioned theretofore—so

understood the practice and respected the order. It does

not appear that the government at any time or in any

way disapproved of the practice, but does appear that in

TEXAS CO. », HOGARTH SHIPPING CO. 629

619. Opinion of the Court,

this instance the government treated the telegraphic order

as effective by using the ship as a transport for more than

six months and compensating the owner accordingly.

In these circumstances, the contention that the requisition

was invalid is quite untenable. Whether in different

circumstances it could and should be pronounced invalid

here we need not consider. See Underhill v. Hernandez,

168 U. S. 250; American Banana Co. v. United Fruit Co.,

213 U. S. 347; Oetjen v. Central Leather Co., 246 U. S. 297,

303, 304; Ricaud v. American Metal Co., 246 U. 8. 304,

309; Northern Pacific Ry. Co. v. American Trading Co.,

195 U. S. 439, 467468.

In the District Court the British Ambassador was per-

mitted to intervene as amicus curi@, object to the adjudi-

cation of the libelant’s claim and present a certificate

avowing that the requisition was a governmental act.

Complaint is made of this. The permission was improy-

idently granted, as was afterwards indicated by this

court in other cases. Ex parte Muir, 254 U.S. 522; The

Pesaro, 255 U. 8. 216. But the libelant was not prej-

udiced, for the intervention and certificate ultimately

were not considered and the decree was rested on the evi-

dence otherwise presented.

Finally, the libelant insists that the requisition, even if

valid and not invited by the owner, did not operate to

dissolve the charterparty or to excuse the owner from

performing it. The courts below held otherwise, and we

think rightly so.

It long has been settled in the English courts and in

those of this country, federal and state, that where parties

enter into a contract on the assumption that some par-

ticular thing essential to its performance will continue to

exist and be available for the purpose and neither agrees

to be responsible for its continued existence and avail-

ability, the contract must be regarded as subject to an

implied condition that, if before the time for performance

OCTOBER TERM, 1920.

Opinion of the Court. 256 U.S.

and without the default of either party the particular

thing ceases to exist or be available for the purpose, the

contract shall be dissolved and the parties excused from

performing it. Taylor v. Caldwell, 3 Best & Smith, 826,

839; In re Shipton, Anderson & Co. [1915] 3 K. B. 676;

Horlock v. Beal [1916] 1 A. C. 486, 494, 496, 512; Bank

Line, Ltd., v. Arthur Capel and Co. [1919] A. C. 435, 445;

The Tornado, 108 U. 8. 342, 349-351; Chicago, Milwaukee,

& St. Paul Ry. Co. v. Hoyt, 149 U.S. 1, 14-15; Wells v.

Calnan, 107 Massachusetts, 514; Butterfield v. Byron, 153

Massachusetts, 517; Dexter v. Norton, 47 N. Y. 62; Clarks-

ville Land Co. v. Harriman, 68 N. H. 374; Emerich Co. v.

Siegel, Cooper & Co., 237 Illinois, 610. The principle

underlying the rule is widely recognized and applied to

various classes of contracts. The Kronprinzessin Cecilie,

244 U.S. 12, 22-24. But, of course, it does not apply where

the risk is fully covered by a term of the contract, nor

where performance is not practically cut off but only

rendered more difficult or costly. Columbus Railway,

Power & Light Co. v. Columbus, 249 U.S. 399, 410, et seq.

Perhaps the oldest and most familiar application of the

principle is to contracts for personal service, where per-

formance is prevented by death or illness. Robinson v.

Davison, (1871) L. R. 6 Exch. 269; Spalding v. Rosa, 71

N. Y. 40. Another application widely recognized is where

a ship chartered for a voyage, after the date of the charter-

party and before the time for the voyage, is accidentally

destroyed by fire, lost at sea, or injured in such degree as

not to be available for the service. The Tornado, supra,

was a suit on a contract of affreightment where the ship,

before beginning the voyage, was accidentally burned

and thereby prevented from undertaking it. This court

held that the contract was dissolved, saying, p. 349:

“We are of opinion that by the disaster which occurred

before the ship had broken ground or commenced to earn

freight, the circumstances with reference to which the

A OS RE = §

TEXAS CO. v. HOGARTH SHIPPING Co. 631

619. Opinion of the Court.

contract of affreightment was entered into were so altered

by the supervening of occurrences which it cannot be

intended were within the contemplation of the parties

in entering into the contract, that the shipper and the

underwriters were absolved from all liability under the

contract of affreightment. The contract had reference to

a particular ship, to be in existence as a seaworthy vessel

and capable of carrying cargo and earning freight and of

entering on the voyage. All the fundamental conditions

forming part of the contract of the ship-owner were wanting

at the time when the earning of freight could commence.”

Here the ship, although still in existence and entirely

seaworthy, was rendered unavailable for the performance

of the charterparty by the requisition. By that super-

vening act she was impressed into the war service of the

British Government for a period likely to extend—and

which as it turned out did extend—long beyond the time

for the charter voyage. In other words, compliance with

the charterparty was made impossible by an act of state,

the charterer was prevented from having the service of

the ship and the owner from earning the stipulated freight.

The event apparently was not anticipated and there was no

provision casting the risk on either party. Both assumed

that the ship would remain available and that was the

basis of their mutual engagements. These, we think,

must be regarded as entered into on an implied condition

that, if before the time for the voyage the ship was ren-

dered unavailable by such a supervening act as the

requisition, the contract should be at an end and the par-

ties absolved from liability under it.

That the charterparty was entered into in this country

is not material. The important consideration is that it

became impossible of performance through a supervening

act of state which operated directly on the ship and the

parties could not avoid.

Decree affirmed.

et Ne a er A te os eae FETIP LEN