This section is from the book "The Law Of Contracts", by William Herbert Page. Also available from Amazon: Commercial Contracts: A Practical Guide to Deals, Contracts, Agreements and Promises.
"No state shall pass any law impairing the obligation of contracts."1 This provision was inserted in the Constitution with but little debate, and undoubtedly for the purpose of preventing the states from passing laws repudiating private debts - a form of legislation which had proved popular in some of the states in the period of quasi-anarchy that followed the Revolution. Its effects have been very wide reaching and many questions of contract law have thus been brought within the jurisdiction of the federal courts. In such cases it is the duty of the Supreme Court of the United States "to determine for itself the existence, construction and validity of the alleged contract and also to determine whether as construed by this court, it has been impaired by any subsequent state legislation to which effect has been given by the court below."2 Even the construction of the state constitution by the state courts is not binding on the federal courts in such questions.3 This provision, it may be added, does not forbid retroactive laws in general, but only such as impair the obligation of contracts.4 Similar clauses have been inserted in state constitutions. They, of course, can bind only the state legislature and public corporations created by the state. From their identity with the clause in the Constitution of the United States, cases decided under one of these clauses are precedents for determining the scope and meaning of the other clauses, and will be cited accordingly.
1 Constitution of the United States, Article I., Sec. 10.
2 Houston, etc., Ry. v. Texas, 177 U. S. 66, 77; MeCullough v. Virginia, 172 U. S. 102; Bacon v. Texns, 163 U. S. 207; New Orleans Water Works Co. v. Refining Co., 125 U. S. 18.
3 Stearns v. Minnesota, 179 U. S. 223.
4 Callahan v. Callahan, 36 S. C. 454; 15 S. E. 727.