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The Contract Clause appears in the United States Constitution, Article I, section 10, clause 1. It states: The United States Constitution is the supreme law of the United States of America. ...
- No State shall ... pass any ... Law impairing the Obligation of Contracts.
The framers of the Constitution added this clause due to 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. The Articles of Confederation The Articles of Confederation and Perpetual Union, commonly known as the Articles of Confederation, was the first governing document of the United States of America. ...
The examples and perspective in this article or section may not represent a worldwide view. ...
Obverse of the Great Seal of the United States. ...
During and after the Revolution, many states passed laws favoring colonial debtors (ie discharging their debts) 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 insuring 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).) Alexander Hamilton (January 11, 1755 or 1757 â July 12, 1804) was an American politician, leading statesman, financier, intellectual, military officer, and founder of the Federalist party. ...
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