§5. Let us pass to consider the obligations arising out of the contracts of a State with foreign States or individuals. As regards the latter there is not much to be said; when an individual incurs damage through violation of contract by a State, he has, generally speaking, a clear right to adequate compensation---similar to what he would have if a fellow-citizen had broken faith with him---which it is the strict duty of the offending State to satisfy; provided always the contract has not been vitiated by fraud. How far it is expedient that his claim should be enforced, if necessary, by violence on the part of the community of which he is a member, must depend on circumstances. It is noteworthy, however, that failure to pay debts to private persons on the part of a State is not usually treated as an international offence, probably on account of the laxity of bankruptcy law in modern States generally; though it might reasonably be so treated in particular cases, if the failure could not be justified by the financial necessities of the defaulting State.
It is more important to note the different conditions under which contracts have to be held valid between State and State, as compared with contracts between citizens. In either case it is manifest that a contract cannot be binding which has been obtained by fraud; and personal violence exercised on a government or its agents, to obtain their consent by terror, must be held to invalidate an international compact as it would a compact between individuals. But violence exercised on a State by war cannot be held to have this effect; since war, as we have seen, is, in the last resort, the only normal means to which a State can have recourse to obtain reparation for wrong and adequate security against its repetition. Hence the fulfilment of onerous conditions enforced by a victor who had just cause for war, so far as they are not manifestly in excess of due reparation or the requirements of future security, must be held to be as clearly binding as any other international duty. The case is no doubt theoretically different I where the conqueror was in the wrong; and even where he is in the right, if the terms offered by him to the vanquished are immoderate in their rigour. But even here expediency forbids us to lay down broadly that a treaty made under unjust coercion is simply invalid; since the universal adoption of this principle would greatly aggravate the evils of unjust victory: it would be the interest of the conqueror to crush his enemy completely and relentlessly, as he would no longer be able to trust his engagements. In this difficulty international morality seems practically to be forced to a rough compromise, which will be considered in the next chapter, after we have discussed generally the regulation of war and its effects.