Facto Clause applied to retroactive civil legis-lation, then the impairment of contracts clausewould have been superfluous. As ProfessorRobert Natelson has pointed out, the resultingprohibitions in the Constitution form a coher-ent pattern. The Ex Post Facto Clause prohib-ited retroactive criminal legislation, whereasthe prohibition on the states from issuingpaper money and from impairing the obliga-tion of contracts covered the most objection-able forms of retroactive civil laws. Finally, thepattern was completed in the Fifth Amend-ment by the Takings Clause and the DueProcess Clause, each of which limited the fed-eral government’s ability to enact certain kindsof retroactive civil laws.

The substantive legal content of the Bill ofAttainder and the Ex Post Facto Clauses in Sec-tions 9 and 10 of Article I are fundamentally thesame. Consult the entries on Article I, Section9, Clause 3.

David F. Forte

See AlsoArticle I, Section 9, Clause 3 (Bill of Attainder)

Article I, Section 9, Clause 3 (Ex Post Facto)

Article I, Section 10, Clause 1 (State Coinage)

Article I, Section 10, Clause 1 (Obligation of Con-

tract)

Amendment V (Due Process Clause)

Amendment V (Takings Clause)

Suggestions for Further ResearchWayne A. Logan, “Democratic Despotism” and Con-

stitutional Constraint: An Empirical Analysis of Ex

Post Facto Claims in State Courts, 12 Wm. & Mary

Bill Rts. J. 439 (2004)

Robert G. Natelson, Statutory Retroactivity: The

Founders’ View, 39 Idaho L. Rev. 439 (2003)

Daniel E. Troy, When Does Retroactivity Cross the

Line? Winstar, Eastern Enterprises and Beyond:

Toward a Definition and Critique of Retroactivity,

51 Ala. L. Rev. 1329 (2000)

Significant CasesCalder v. Bull, 3 U.S. (3 Dall.) 386 (1798)

Eastern Enterprises v. Apfel, 524 U.S. 498 (1998)

Obligation of Contract

No State shall. . . pass any. . . Lawimpairing the Obligation of Con-tracts . . . .(Article I, Section 10, Clause 1)

u

Article I, Section 10, contains a list of prohi-bitions concerning the role of the states in polit-ical, monetary, and economic affairs. As theConstitutional Convention was completing itswork on prohibiting states from issuing papermoney as legal tender, Rufus King of Massachu-setts rose to propose “a prohibition on the Statesto interfere in private contracts.” King relied ona central provision of the Northwest Ordinance:

[I]n the just preservation of rights andproperty, it is understood and declared,that no law ought ever to be made, or haveforce in the said territory, that shall, in anymanner whatever, interfere with or affectprivate contracts or engagements, bonafide, and without fraud, previously formed.

The Obligation of Contract Clause thus hadits origins in previous national policy by extend-ing to the states a prohibition that was alreadyin effect in the Northwest Territory. In the briefdebate that followed, George Mason feared theprohibition would prevent the states from estab-lishing time limits on when actions could bebrought on state-issued bonds. James Wilsonresponded that the clause would prevent “retro-spective interferences only,” that is, impairmentof contracts already made. These comments sug-gest that the Framers may well have intended tolimit states in their impairment of private con-tracts already made. But the issue is not freefrom doubt. The words “previously formed”were not carried over to the Obligation of Con-tract Clause, so that the text reads as though ithas some prospective application of uncertainextent. It is therefore conceivable to apply theObligation of Contract Clause prospectively toallow the passage of statutes of limitations, bythinking of it as a rule that protects against bothretroactive and selective impairments of future

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contracts that would have the effect of shiftingthe balance of advantage from one contractingparty to another.

The twin protections found in Article I, Sec-tion 10, prohibited the state from issuing papermoney and, to some extent at least, from regu-lating economic affairs. That one-two combi-nation troubled the Anti-Federalists, who fearedthat the two clauses operating in tandem wouldprevent the states from assisting the debtorclasses. The states could no longer debase thecurrency with new issues of paper tender;Luther Martin asserted that the states would nolonger be able “to prevent the wealthy creditorand the monied man from totally destroying thepoor though even industrious debtor.” Inresponse to the Anti-Federalists, James Madi-son declared in The Federalist No. 44 that theObligation of Contract Clause was essential to“banish speculations on public measures,inspire a general prudence and industry, andgive a regular course to the business of society.”Debtor relief was regarded as undermining thelong-term stability of commercial expectations.

Support for the Obligation of ContractClause was found in other quarters. In the SouthCarolina ratifying convention, Charles Pinckneyargued that these two limitations on the stateswould help cement the union by barring thestates from discriminating against out-of-statecommercial interests. Edmund Randolph, in theVirginia ratifying convention, declared that theObligation of Contract Clause was essential toenforcing the provision in the peace treaty withGreat Britain guaranteeing private British debts.The Obligation of Contract Clause, therefore,served a double duty: it afforded both a protec-tion to individuals against their states and a lim-itation on the states that prevented them fromintruding on essential federal interests.

The language of the clause reflects these his-torical concerns and ambiguities. In tone, theclause reads as a stern imperative. Unlike Section10, Clauses 2 and 3 (which relate to such mattersas the imposition of duties on imports andexports), Congress cannot override the prohibi-tion by giving its consent to any state action thatviolates this provision. The brief terms of theclause, however, cover more than the endless

round of debtor-relief statutes the Framers hadin mind, for the clause covers all types of con-tracts, not just debt instruments. The Framersalso sought to insulate commercial exchangesfrom the regulatory power of the state in orderto reduce the burdens on interstate commerce,and thus to contribute to the formation of theUnited States as an extended commercial Repub-lic. But again the correspondence is not perfect,because the Obligation of Contract Clauseapplies not only to those contracts with interstateconnections, but also to all local contracts.

What is clear, however, is that in the antebel-lum period the Obligation of Contract Clausewas the only open-ended federal constitutionalguarantee that applied to the states. As such, theObligation of Contract Clause came by defaultto be the focal point of litigation for those whosought to protect economic liberties againststate intervention. The Supreme Court’s inter-pretation of the clause, both before and after theCivil War, has been filled with odd turns andstrange surprises.

Everyone conceded that the clause applied toordinary contracts between private persons,including partnerships and corporations. Thatseemed to be the understanding at the Constitu-tional Convention. But did the Obligation ofContract Clause also reach actions by the state soas to prevent it from repudiating its own con-tracts, including those that granted legal title ofstate owned lands to private persons, Fletcher v.Peck (1810), or which sought to revoke state char-ters for private colleges, Trustees of DartmouthCollege v. Woodward (1819)? In both of thesecases, Chief Justice John Marshall opted stronglyfor the broader reading of the clause in order torestrain conduct by government—reneging ongrants—that would be regarded as unacceptableif done by any private individual. In this instance,moreover, the broad reach of the Obligation ofContract Clause uneasily coexisted with the prin-ciple of sovereign immunity, which AlexanderHamilton had strongly defended in The Federal-ist Nos. 81 and 82. That principle prevented thestate from being sued for breach of its own ordi-nary commercial contracts. But that immunitydid not allow the state to undo its own contractsonce their performance was completed. This

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reading fits so well with the general purpose oflimited government that to this day no one hasrejected the view that the Obligation of ContractClause applies to state contracts. But there hasbeen a spirited debate as to how much protec-tion it supplies in light of the doctrine of sover-eign immunity. Certainly much is to be said onbehalf of the stability of titles to propertyobtained in grants from the states. But we can-not ignore the reciprocal problem: if the Obliga-tion of Contract Clause is read so broadly so asto invite groups to lobby for sweetheart agree-ments, reformist governments would not be ableto set such agreements aside.

Most of the interpretive questions regardingthe clause, however, deal with the impact of theObligation of Contract Clause on the state reg-ulation of private agreements, where of coursethe issue of sovereign immunity does not arise.That issue, in turn, is divided into two parts. Thefirst asks whether the Obligation of ContractClause protects the rights that are vested in con-tracts that are in existence at the time the regu-lation is passed. The second asks whether theObligation of Contract Clause imposes limita-tions on the power of the state to regulate con-tracts not yet established. The answer to the firstquestion is relatively uncontroversial. Theclause must apply to preexisting contracts, forotherwise it would be a dead letter. Hence, earlydecisions held that state insolvency laws couldnot order the discharge of contracts that wereformed before the state statute was passed.Sturges v. Crowninshield (1819). The legislaturecould not flip the background rules of the legalsystem to the prejudice of individuals who hadadvanced money on the faith of earlier arrange-ments. The clause also applied to a wide rangeof debtor-relief laws, wherein individualssought to escape or defer the payment of inter-est, or to avoid foreclosure of their mortgagesin hard economic times. It was, however, onething to say that the Obligation of ContractClause applied, and quite another to say that allforms of debtor relief were regarded as beyondthe power of the state. Many cases adopted theslippery distinction that the Obligation of Con-tract Clause preserved the obligation under con-tract, but did not prevent the state from limiting

one or another remedy otherwise available.Small erosions of contract rights were regardedas permissible, but large deviations were not,even though the clause speaks of all impair-ments (large or small) in the same breath. Butin general, the prohibition against state inter-vention into existing contracts holds unless (aswill be discussed later) the state offers somepolice-power justification for its actions.

The Court reached a much more definitiveconclusion on the second question in 1827, byholding in Ogden v Saunders (4–3, with JohnMarshall and Joseph Story dissenting) that theObligation of Contract Clause did not apply tothose contracts that had not been formed as ofthe date of the passage of the legislation. In onesense, the decision is surely unexceptionable, forit would be odd if a revision of, say, the parol evi-dence rule in 2000 could not apply to any con-tracts signed before that date. The rule itself doesnot bias the case one way or another, but it isintended to improve the overall administrationof justice. Individuals typically do not rely onthese rules at formation, either. It would be con-trary to its original design to read the Obligationof Contract Clause as blocking any improvementsin the administration of commercial justice.

By the same token, the broad refusal to applythe Obligation of Contract Clause prospectivelycould go too far. For example, suppose a state justannounced that from this day forward it reservedthe right to nullify at will any contracts that werethereafter formed. At that point, it would takeonly a short generation after passage of thisstatute to gut the Obligation of Contract Clause.But if that stratagem is forbidden, then the clausemust have some prospective application, notwith-standing intimations in the Convention that itonly had retroactive application. At this point,one way to read the clause is to hold that its pro-hibitions are prospective but not absolute. Thestate may alter the rules governing future con-tracts only in ways that offer just compensationto all contracting parties in the form of greatersecurity and stability in their contractual obliga-tions. The three legislative reforms that arosemost frequently in the early debates—a statute offrauds, a statute of limitations, and recordingacts—are all measures that meet this standard.

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By refusing to give the clause any prospectiverole, Ogden opened the gateway to partisan legis-lation that limited the ability of some parties tocontract without imposing similar restrictions ontheir economic competitors. In practice, Ogdenmeant that all general state economic regulationlay outside the scope of constitutional limitation.That gap in the system of constitutional regula-tion remained until after the Civil War, at whichtime some protection against state interferencewith future contracts was supplied under the so-called dormant Commerce Clause (with respectto interstate agreements only) and under the doc-trine of liberty of contract as it developed underthe Due Process Clause, and, in certain limitedcases, under the equal protection clauses. Butsince Ogden, the Obligation of Contract Clausehas been an observer, not a central player, in theconstitutional struggle to limit prospective stateeconomic regulation.

The Obligation of Contract Clause does con-tinue to have some traction with respect to con-tracts previously formed, but even in this context,two types of implied limitations on its use havebeen introduced: the just-compensation excep-tion and the police-power exception. In princi-ple, the initial question is why any implied termsshould be read into any constitutional provision,when no mention of them is made by theFramers. Here the simplest answer is that the logicof individual rights and liberties requires thatadjustment. The Constitution thus creates pre-sumptions and leaves it open to interpretation asto how these should be qualified in ways that donot gut the original guarantee.

Consider first the question of property takingswith just compensation. Suppose that A buys landfrom B, which the government then wishes tocondemn with payment of just compensation.Surely the government’s right to condemn is notblocked by A’s declaration that he receivedabsolute title to the property from B. The stan-dard rule is that the power to take property forpublic use is “inherent in government,”so that thecondemnation can go forward. Should there beany difference when A buys the land from thegovernment, instead of B, and now claims thatthe government cannot go back on its grant? Asearly as 1848, in West River Bridge Co. v. Dix, the

Supreme Court allowed the condemnation to goforward. The Obligation of Contract Clause hasto be read subject to a just-compensation excep-tion, for the condemnation does “impair” thecontract right by denying the owner’s right tohold out for an above-market price. Reading thejust-compensation exception into the Obligationof Contract Clause does not do violence to astructure that already allows other private prop-erty to be taken for public use upon payment ofjust compensation.

The second set of exceptions to the Obligationof Contract Clause involves the police power.Again, this power is nowhere mentioned explicit-ly in the Constitution, but it is read in connectionwith every substantive guarantee that it suppliesagainst federal or state power. The customary for-mulation allows the state to override (withoutcompensation) private rights of property. Itshould, therefore, do so with ordinary contractsas well. Nonetheless, because no compensation isprovided, logically, the class of justificationsshould be more stringent than the public-userequirement that allows the impairment of con-tracts with compensation. The canonical formu-lation defines the state police power as regulationin the name of safety, health, morals, and the gen-eral welfare. Stopping contracts to pollute, tobribe, or to fix prices has always been held to fallwithin the police-power exception. The New Dealconstitutional transformation of 1937, however,greatly expanded the scope of the police powerbeyond these broadly libertarian objectives, sothat it no longer was possible to distinguishbetween general welfare and special interests.

The great transitional case of Home Building& Loan Ass’n v. Blaisdell (1934) is notable forushering in an era that allowed courts to multi-ply the police-power exceptions to the contrac-tual guarantees offered by the Obligation ofContract Clause, even when no compensationwas supplied. The actual decision, dealing witha state-imposed mortgage moratorium, couldbe explained in part as an effort to counter theruinous effects of deflationary policies (whichin effect increased, in constant dollars, theamount of the debts), but the decision itself wascast in broader terms and unleashed many otherlegislative initiatives that sought to neutralize the

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protections secured by individual contracts.Most notably, in Exxon Corp. v. Eagerton (1983),the Court found that a “broad societal interest”was sufficient to justify a decision to prevent acompany from asserting its explicit contractualright to pass on any increased severance tax toits consumers.

At present, therefore, it is doubtful whetherthe Supreme Court will find a police-power jus-tification for any piece of special legislation withinterest-group support, thereby gutting theclause insofar as it applies to broad classes ofexisting contracts. Ironically, however, the Courthas remained more suspicious of government’sefforts to use legislation to extricate itself fromits own covenants, noting the obvious risk ofself-dealing that this behavior represents. It thusstruck down efforts of the Port Authority of NewYork and New Jersey to nullify bond covenantsthat prohibited it from using bond proceeds tosupport mass transit. United States Trust Co. v.New Jersey (1977). And in Allied Structural SteelCo. v. Spannaus (1978), the Court refused toallow Minnesota to impose retroactively more-stringent financial obligations on an employerin the winding up of its pension plan. These lim-itations on state power notwithstanding, themodern age often finds little intellectual respectfor freedom of contract or for the sanctity ofcontracts validly formed. More than any finepoint of the law, that initial intellectual predilec-tion explains the lukewarm reception thatObligation of Contract Clause claims receive inthe current legal environment.

Richard A. Epstein

See AlsoAmendment V (Takings Clause)

Suggestions for Further ResearchWilliam Winslow Crosskey, Politics and the

Constitution in the History of the United

States (1953)

Richard A. Epstein, Toward the Revitalization of the

Contract Clause, 51 U. Chi. L. Rev. 703 (1984)

Robert L. Hale, The Supreme Court and the Contract

Clause: I, II, III, 57 Harv.L.Rev.512,621,852 (1944)

Stanley I. Kutler, Privilege and Creative

Destruction: The Charles River Bridge

Case (1971)

Michael W. McConnell, Contract Rights and Property

Rights: A Case Study in the Relationship Between

Individual Liberties and Constitutional Structure,

76 Cal. L. Rev. 267 (1988)

Samuel R. Olken, Charles Evans Hughes and the Blais-

dell Decision: A Historical Study of Contract Clause

Jurisprudence, 72 Or. L. Rev. 513 (1993)

Stuart Sterk, The Continuity of Legislatures: Of Con-

tracts and the Contract Clause, 88 Colum. L. Rev.

647 (1988)

Benjamin Fletcher Wright, Jr., The Contract

Clause of the Constitution (1938)

Significant CasesFletcher v. Peck, 10 U.S. (6 Cranch) 87 (1810)

Sturges v. Crowninshield,17 U.S. (4 Wheat.) 122 (1819)

Trustees of Dartmouth College v. Woodward, 17 U.S.

(4 Wheat.) 518 (1819)

Ogden v. Saunders, 25 U.S. (12 Wheat.) 213 (1827)

Charles River Bridge v. Warren Bridge, 36 U.S. (11

Pet.) 420 (1837)

West River Bridge Co. v. Dix, 47 U.S. (6 How.) 507

(1848)

Home Building & Loan Ass’n v. Blaisdell, 290 U.S.

398 (1934)

United States Trust Co. v. New Jersey, 431 U.S. 1 (1977)

Allied Structural Steel Co. v. Spannaus, 438 U.S. 234

(1978)

Energy Reserves Group v. Kansas Power & Light Co.,

459 U.S. 400 (1983)

Exxon Corp. v. Eagerton, 462 U.S. 176 (1983)

State Title of Nobility

No State shall . . . grant any Title ofNobility.(Article I, Section 10, Clause 1)

u

Like the corresponding prohibition on federaltitles of nobility in Article I, Section 9, Clause 8,the prohibition on state titles of nobility wasdesigned to affirm and protect the republican

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