The principles emerging from the above discussion are that the money or currency of payment is a matter affecting the mode of performance that is determined by the law of place of performance. All other matters being matters of substance are governed by the proper law of the transaction. Discussion of principles for determining the proper law is beyond the scope of this article. Broadly stated, determination of proper law requires examination of three possible situations. If the parties have made an express choice, then, subject to certainlimitations, that choice will govern. If there is no express choice, all facts concerning the contract have to be examined to determine whether there is an inferred choice of the proper law by the parties. In the absence of any choice, express or inferred, the issue is to be determined objectively by applying the system of law with which the transaction has the closet and the most real connection. Once it is determined that a particular law governs the contract, it must exclusively govern that contract in respect of all matters of substance.

It is now necessary to consider the issue of discharge from the contractual obligation. As stated above, performance is a matter of substance, and is governed by the proper law. This includes discharge by non-performance on legally excusable grounds. One of the grounds recognised by almost all legal systems is that of supervening impossibility. This is technically known as "doctrine of frustration". This doctrine is relevant when it is alleged that a change ofcircumstances after the conclusion of the contract has rendered it impossible to fulfil the contract or has transformed the performance into a radically different obligation from that undertaken in the contract. In National Carriers Ltd. Vs Panalpina (Northern) Ltd., the test was stated by the House of Lords as follows: "Frustration of a contract takes place when there supervenes an event (without default of either party and for which the contract makes no sufficient provision) which so significantly changes the nature (not merely the expense or onerousness) of the outstanding contractual rights and/or obligations from what the parties could reasonably have contemplated at the time of its execution that it would be unjust to hold them to the literal sense of its stipulations in the new circumstances; in such case the law declares both parties to be discharged from further performance." The question is whether the debtor can successfully contend that by the change in the currency law, the performance has beentransformed into a radically different obligation. Mere imposition of additional financial burden is not sufficient. Impossibility to be able to excuse the performance has to be more than a mere commercial impossibility. Change effected in the currency law of the member state cannot be said to be generally of such a nature. Despite the change in the currency law, the contract still remains capable of performance. If in a given case, it imposes an additional pecuniary burden on the debtor, it may not be sufficient to excuse the performance.

Various steps have been taken to enable tackling the problem that may arise on introduction of euro. Some non-members states have enacted a new legislation in this regard. Euro Conversion Act enacted by the state of Illinois is one such legislation. This Act will evidently apply to such contracts for which the law of the state of Illinois will be the proper law. It may also apply in those cases where the debtor is contractually bound to make payment in the state ofIllinois. It is interesting to note that the said Act contains a provision making the Act subject to anything that the parties to the contract agree. In Hong Kong too, a similar legislation is proposed with a view to provide that the introduction of euro and the changes consequential thereto shall not discharge or excuse any performance under a legal obligation, nor give the party to the obligation the right to unilaterally alter or terminate the obligation.

It is a matter for consideration if enactment of similar legislation in India would be necessary. So far as receipt or payment in euro is concerned, the existing provisions of Foreign Exchange Regulation Act may need no amendment. As per the definitions contained therein, "Currency" includes all coins, currency notes, bank notes, postal notes, postal orders, money orders, cheques, drafts, traveller's cheques, letters of credit, bills of exchange and promissory notes; "Foreign Currency" means any currency other than Indian currency; "Indian Currency"means currency which is expressed or drawn in Indian rupees. Thus, euro will be "foreign currency" as defined for the purpose of Fera. Similar definitions have been incorporated in the Foreign Exchange Management Bill, which when enacted will replace Fera. In a case where the proper law governing the transaction happens to be the Indian Law, there appears no legal hitch under the Indian law to the Indian debtor discharging the payment obligation in the currency of contract, where it is the currency of the member state or the euro when substituted. In another case, where the Indian party's payment obligation is dischargeable in a currency of the member state and the place of payment is a country other than the member state, the matter will be governed by the law of the place of payment. In view of an element of uncertainty involved in the situation, intention of the parties as expressly incorporated in the contract documents, will play a crucial role in deciding the issue more satisfactorily. From that angleand in order to put the matters beyond doubt, it may be advisable for individual contracting parties to incorporate a suitable clause in the various agreements and contract documents.

The author is the joint legal advisor of RBI and the views expressed are his own