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contract clause
The Contract Clause appears in the United States Constitution, Article I, section 10, clause 1. It states:
The Contract Clause prohibits states from enacting any law that retroactively impairs contract rights. The Contract Clause applies only to state legislation, not court decisions.
The Framers of the Constitution added this clause in response to the fear that states would continue a practice that had been widespread under the Articles of Confederation—that of granting "private relief." Legislatures would pass bills relieving particular persons (predictably, influential persons) of their obligation to pay their debts. It was this phenomenon that also prompted the framers to make bankruptcy law the province of the federal government.
During and after the Revolution, many states passed laws favoring colonial debtors to the detriment of foreign creditors. Federalists, especially Alexander Hamilton, believed that such a practice would jeopardize the future flow of foreign capital into the fledgling United States. Consequently, the Contract Clause, by ensuring the inviolability of sales and financing contracts, encouraged an inflow of foreign capital by reducing the risk of loss to foreign merchants trading with and investing in the former colonies. (See generally James W. Ely, Jr., ''The Guardian of Every Other Right'' (Oxford Univ. Press 1998).)
==Origins==
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