Guess who wiped out a key clause?

Americans who have read our Constitution might recall the words saying that state governments may not “impair the obligation of contracts.” Yet they frequently rewrite or dissolve contracts when doing so is “good politics” – demanding that employers pay current workers more money or face punishment, for example.

Once a star in the Constitution’s plan for liberty and limited state power, the Contract Clause is now almost completely forgotten. Vanderbilt Law School professor James W. Ely, Jr. tells that unhappy story in his book The Contract Clause: A Constitutional History.

“Inserted into the Constitution without extensive debate,” Ely writes, “the Contract Clause was clearly prompted by the sour experience with state debt relief laws during the Post-Revolution Era. It was grounded in the premise that honoring contractual commitments served the public interest by encouraging commerce.”

Unfortunately, like several other key constitutional provisions, the Contract Clause eventually fell victim to judicial interpretations that, by the latter stages of the New Deal, rendered it almost a dead letter. Ely’s book gives the reader a fascinating account of the “roller-coaster ride” of this clause.

The young American nation developed a commercial economy in which the enforceability of contracts for land, goods, and services was crucial. But, as John Marshall observed, the state legislatures were inclined to “break in upon the ordinary intercourse of society, and destroy all confidence between man and man.” In an attempt to stop that, the Constitution’s drafters wrote Article I, Section 10 to read, “No state shall pass any law impairing the obligation of contracts.” 

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