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.
As is natural, the earlier cases illustrate more frequently than the later ones, undisguised attempts to impair the obligation of contracts, while the later cases are more likely to illustrate attempts of the legislature to impair the obligation of contracts by statutes not avowedly passed for that purpose. Whether the intention is open or concealed, the statute is invalid if its effect is to impair the obligation of contracts. Contracts valid when made cannot be made invalid by a subsequent statute declaring that they are unenforceable.1 Thus bonds, valid when issued,2 or contracts between a railroad company and its employes whereby the latter waive their rights to damages for personal injuries, if valid when made,3 or contracts for removing logs belonging to one party which have floated upon the lands of the other party in high water, without paying damages,4 or a contract by a city for a heating plant,5 cannot be made invalid by subsequent statute. So if one has obtained a permit from proper municipal authority to erect a frame building with fire limits, and incurs liabilities on contracts for the erection thereof, the city cannot thereafter rescind such permit.6 So an act providing that in case of a division of a religious society a majority of each congregation shall determine to which branch the congregation shall belong, which determination is to be conclusive as to the rights in the property held in trust for such congregation, is invalid.7 So an act requiring pre-existing warrants to be registered in a certain time, making them invalid if not so registered, is unconstitutional:8
13 Knights' Templars', etc., Indemnity Co. v. Jarman, 187 U. S. 197. (The statute provided that suicide should be no defense to a policy of life insurance. The policy contained a provision that the insurance company should not be liable in case of suicide, which provision was void by reason of such statute.)
14 Yates v. People, 207 111. 316; 69 N. E. 775.
15 Chicago Union Traction Co. v. Chicago, 199 111. 484; 59 L. P.. A. 631; 65 N. E. 451. (The lessor's charge gave it the right to charge a fixed rate of fare not subject to involuntary reduction. The lessee was subject to the right of the city to fix the rate of fare. After the lease the city was allowed to change the rate of fare, below that allowed to the lessor.)
1 Louisiana v. Taylor, 105 U. S. 454; White v. Hart, 13 Wall. (U. S.) 646; Bates v. Gregory (Cal.), 22 Pac. 6S3; Bates v. Gregory, 89 Cal. 387; 26 Pac. 891.
2 Red Rock v. Henry. 106 U. S. Pac. 683; Bates v. Gregory, 89 Cal. 387; 26 Pac. 891. 596; Bates v. Gregory (Cal.), 22
3 Shaver v. Pennsylvania Co., 71 Fed. 931.
If a public official has, without any fault of his own, lost public money for which he is personally liable, a release of such liability is held valid in some states,9 on the theory that it is not a gift or a purely gratuitous release, but is a " release of a claim which though legally due, the legislature found that it would be unjust and oppressive to collect," and is supported by the consideration of "the moral obligation to release it."10 The chief point of interest in this holding is that it revives the by-gone theory of a moral obligation. Other courts hold that such release impairs the obligation of the contract between the public official and the public corporation.11 In this connection and in support of the last proposition, the analogous case In re Greene12 might be referred to. In that case, a county treasurer who was also a bank cashier overdrew his account at the bank to pay his obligations to the county. Subsequently the bank sued the county to recover this money. Judgment was rendered in favor of the county. The bank then applied to the legislature and a special act was passed requiring the county to pay such debt. This act was held invalid.
4 Bradley v. Boom Co., 82 Mich. 9; 46 N. W. 24.
5 (City of) Ludlow v. Ventilating Co., - Ky. - ; 76 S. W. 377.
6 Buffalo v. Chadeayne, 134 N. Y. 163; 31 N. E. 443.
7 Finley v. Brent, 87 Va. 103; 11 L. R. A. 214; 12 S. E. 228.
8 Robinson v. Magee, 9 Cal. 81; 70 Am. Dee. 638.
9 Pearson v. State. 56 Ark. 148; 35 Am. St. Rep. 91; 19 S. W. 499;
Board of Education v. McLands-borough, 36 O. S. 227; 38 Am. Rep. 582; Mount v. State, 90 Ind. 29; 40 Am. Rep. 192.
10 Pearson v. State, 56 Ark. 148, 35 Am. St. Rep. 91; 19 S. W. 499.
11 Johnson v. Randolph County, 140 Ind. 152; 39 N. E. 311; McClelland v. State, 138 Ind. 321; 37 N. E. 1089.
12 166 IS. Y. 485; 60 N. E. 183.
A new defense, not permitted by law when the contract was entered into, cannot be created by subsequent statute. Thus a state bankrupt act which provides for giving a discharge from liabilities to such debtors as comply therewith is invalid as to past debts.13 A state insolvent act may be modified as to preexisting debts so as to withdraw the protection of the discharge granted after the act was passed from certain classes of debts, as where by statute the discharge of the principal debtor did not release another liable for the same debt, as guarantor, surety or otherwise.14 So a loan made by a foreign corporation before a statute requiring the charter to be filed in that state is not affected by such subsequent act.15