Say the ratio out loud before you open Reasoning — recalling it unprompted is exactly what the exam pays for.
Why it matters
It is the case on supervening illegality at the place of performance, and — more importantly — it shows how foreign illegality enters an English case. Reading it correctly resolves the one genuinely unsettled question in the law of illegality.
Facts
Spanish shippers contracted in London with English charterers to carry goods from Calcutta to Barcelona at £50 a ton, freight payable in Barcelona. After the voyage began, Spanish law capped freight at £10.
Held
English law was the proper law, and it treated the Spanish legislation as a frustrating event. The action for the balance failed.
Reasoning
Step one — note what the court did not do. It did not apply Spanish law as the lex loci solutionis.
Step two — note what it did. It applied English law, the proper law, which itself treated supervening foreign illegality at the place of performance as frustration.
Step three — see the consequence for the doctrine. The lex loci solutionis entered the case as a fact which the proper law then evaluated. That is exactly the analysis this course gives of foreign law generally — the only law the judge applies is the law of the forum, and foreign law enters as a fact to be taken into account.
Exam use
It opens: What is the effect of illegality by the law of the place of performance? — and it supplies both the illustration and the reconciliation.
Set out the five principles of illegality, because they are examined as a numbered list. (1) A contract illegal by its proper law cannot be enforced, even where the illegality rests on that system's revenue laws. (2) A contract valid by its proper law will not be enforced if it violates a fundamental public policy of the forum — champerty, collusive or corrupt arrangements for divorce, trading with the enemy, contracts for breaking the law of a friendly country — though the modern tendency is to confine public policy within narrow limits; and note the boundary, that a contract merely void by the lex fori without being illegal is still enforceable if valid by its proper law, so money won at play or lent for play is recoverable here if recoverable where it was won or lost. (3) Illegality by the lex loci contractus: the authorities conflict, and this course prefers Cheshire's view that validity by the proper law is not destroyed by illegality where the contract was made, on the practical ground that the place of contracting is frequently accidental. (4) Illegality by the lex loci solutionis: genuinely unsettled — Dicey and Lord Wright support invalidity so far as performance is unlawful where it must be performed; Cheshire repudiates this as an unjustifiable disregard of the proper law. Say that the question is open; do not manufacture an answer. (5) Illegality by the lex domicilii or lex patriae is irrelevant.
Then deploy this case on principle (4). It looks like a victory for the lex loci solutionis and is not: it is Cheshire's position dressed as a result.
It does not decide what happens where the proper law does not treat supervening foreign illegality as frustration; that is the open question.