Holzer v. Deutsche Reichsbahn-Gesellschaft et al.

Brief Fact Summary.

Schenker & Co. (Defendant) raised as a defense to a breach of contract action a law passed by the German government prohibiting the employment of Jews.

Synopsis of Rule of Law

The employer in an action based on breach of an employment contract may raise as a defense that the breach was mandated by law.

Facts

Holzer (Plaintiff), a Jewish German, contracted with Schenker & Co. (Defendant), a German corporation, for a term of employment.  Before the contract expired, the German government adopted a law prohibiting the employment of Jews in certain occupations, including that held by Holzer (Plaintiff).  Schenker (Defendant) released Holzer (Plaintiff), who sued for breach of contract.  The trial court, on motion, struck Defendant’s defense based on the law promulgated by the German government.  Schenker (Defendant) appealed.

Issue

May the employer in an action based on breach of an employment contract raise as a defense that the breach was mandated by law?

Held

(Per curiam)  Yes.  The employer in an action based on breach of an employment contract may raise as a defense that the breach was mandated by law.  The courts of a forum state must respect the law of the country where a contract was made.  When the law of the state of contract provides a defense to a breach of contract action, that law must be followed by the forum state.  In this case, the law of Germany went beyond permitting the breach to actually mandating the breach.  Therefore, as a matter of law, the contract could not have been breached.  Reversed.  [The court remanded for a determination of whether the terms of the contract called for payment to Holzer (Plaintiff) even if he did not perform the services he was contracted for.]

Discussion

Courts today are less likely to accept a foreign law they find repugnant.  When foreign law is contrary to public policy, courts are not likely to enforce them.  A court today would almost certainly not apply any law like the one of issue here, although it might excuse a contractual performance under a force majeure theory, even though the effect of excuse would be similar to recognition of the repugnant foreign law.  It is therefore more probable that damages would be awarded.