Kawasaki Kisen Kabushiki Kaisha of Kobe v. Bantham Steamship Company, Limited

On June 2, 1936, Kawasaki Kisen Kabushiki Kaisha (Kawasaki) (plaintiff) leased a steamship from Bantham Steamship Company (Bantham) (defendant) under a charterparty agreement (the contract). The contract provided that either party could cancel it “if war broke out with Japan.” On September 18, 1937, Bantham notified Kawasaki that it was invoking this provision and cancelling the contract because war had broken out between Japan and China. Kawasaki disputed that the conflict involving Japan qualified as a war and sought damages for breach of the contract. The dispute went to arbitration under the provisions of the contract. At arbitration, letters from the British Foreign Office from September 1937 and January 1938 were admitted into evidence. The September letter indicated that Prime Minister Neville Chamberlain had personally instructed the parties that the situation between China and Japan was indeterminate and that the government did not recognize it as a war at that time. The letter also suggested that the issue was one of contract interpretation that did not need an opinion from the government to resolve. The arbitration umpire ultimately found that Japan was at war on the date the contract cancellation provision was invoked and made a conditional award to Bantham, dependent on the court’s construction of the war provision. The lower court affirmed the arbitration umpire’s findings, and Kawasaki appealed to the court of appeal.