In state constitutions there is usually a provision that no law shall be passed impairing the obligation of contracts; and in the federal constitution (Art. I, § 10, ¶ 1) this prohibition is expressly imposed on the states. There is nothing in the federal constitution, however, prohibiting the enactment of laws by the federal government impairing the obligation of contracts save that in Article VI is found the provision that " All debts contracted and engagements entered into before the adoption of this constitution shall be as valid against the United States under this constitution as under the Confederation." The object of this provision was undoubtedly to guard against any repudiation by the federal government, organized under the constitution, of treaties made or debts contracted by the government under the Articles of Confederation; but as the United States cannot be sued (see above, § 149) there could be no legal redress for the violation of this provision. As likewise the states cannot be sued by individuals (see above, § 151) there is no direct legal remedy against a state for the impairment of its own obligations. Thus, if a state should provide for the issuance of bonds and direct their payment when due out of the state treasury, a subsequent repeal of the statute authorizing their payment would be an impairment of the obligation of the contract, but the creditor would be without redress as against the state (Hans v. Louisiana). However, if the statute providing for the issuance of the bonds should also provide that such bonds and the interest coupons thereon were receivable in payment of state taxes, no subsequent statute could take away from the bonds or coupons their value or availability for that purpose; and the holder would be entitled to tender them in payment of his taxes, and the officers of the state would be bound to receive them, notwithstanding the repeal. And if a tax payer had tendered such bonds in payment of his taxes he might by proceedings restrain the officers of the state from any attempt to enforce such taxes against his property (McGahey v. Virginia). Likewise if a state charters a bank with the provision that the notes of such bank shall be receivable in payment of debts to the state, it cannot afterwards by legislation deprive such notes of their value for such purpose (Woodruff v. Trapnalt).

It is, however, with reference to private contracts that the constitutional guaranty is usually applied, and the prohibition is construed as preventing the state from passing any law impairing the force or obligation as between individuals of contracts already made. What is prohibited with reference to the impairment of private contracts is a retroactive law having the effect to render any valid contract previously made invalid, or to interfere with the assertion of substantial rights acquired under such contract, or to take away the substantial remedies for their enforcement.