No Impairing of Contracts

                    The topic of discussion for this Constitution Monday comes from Article I, Section 10, Clause 1:  "No State shall … pass any … Law impairing the Obligation of Contracts…."  This clause guarantees to Americans that no act of the legislature will alter or make illegal any existing contract. 

                    "The violation of existing contracts by both the states and the federal government is more commonplace than might be supposed.  Here are some examples which violate the ex post facto clause as well as the impairing-of-contracts clause:  1) Suspending payments on mortgages or debts during a depression.  2) Compelling creditors to take paper money in payment for debts in spite of contracts specifically providing that payment must be in gold or silver.  3) Imposing an embargo on foreclosures against homes or farms during a depression.

                    "Usually these have been justified on the argument that the ex post facto provision was intended only for criminal cases and that the impairing of contracts is done as a matter of `social justice' in an emergency…."  (See W. Cleon Skousen in The Making of America - The Substance and Meaning of the Constitution, pp 499-500.)

                    We have been witnesses over the past few years of contracts being changed by Executive Orders (taking over of General Motors to take citizens' investments there and give it to the unions, forcing the big banks to make mortgage loans to people who did not have the ability to repay them, etc.).  We have also witnessed Congress trying to force national health care on us and impair our contracts with insurance companies.  Everything that this Administration does is done in the name of "social justice."

                     "The Obligation of Contract Clause thus had its origins in previous national policy by extending to the states a prohibition that was already in effect in the Northwest Territory.  In the brief debate that followed, George Mason feared the prohibition would prevent the states from establishing time limits on when actions could be brought on state-issued bonds.  James Wilson responded that the clause would prevent `retrospective interferences only,' that is, impairment of contracts already made.  These comments suggest that the Framers may well have intended to limit states in their impairment of private contracts already made.  But the issue is not free from doubt.  The words `previously formed' were not carried over to the Obligation of Contract Clause, so that the text reads as though it has some prospective application of uncertain extent.  It is therefore conceivable to apply the Obligation of Contract Clause prospectively to allow the passage of statutes of limitations, by thinking of it as a rule that protects against both retroactive and selective impairments of future contracts that would have the effect of shifting the balance of advantage from one contracting party to another."  (See Richard A. Epstein in The Heritage Guide to the Constitution, pp 171-172.)