more intrusive effect on the freedom of contract in their retroactive application than they would when applied prospectively, since in the latter circumstance the parties could take the economic effect of the law into account in negotiating the terms of their contract. 147

In summary, then, we believe the enactment history of the contract clause is ambiguous concerning the retrospectivity/prospectivity issue. As previously mentioned, however, we believe the better argument based on the text and context of the contract clause is that the clause applies only to contracts already in existence (retrospective-only).

One of the first issues the Supreme Court faced in applying the contract clause was whether the clause applies to public contracts as well as to private contracts. In Fletcher v. Peck, 148 the Court, per Chief Justice Marshall, held that an act of the Georgia legislature selling a large area of land to four private land companies created a "contract" for purposes of the contract clause. This ruling, which the Supreme Court has consistently reaffirmed, stands for the more general proposition that the contract clause applies not only to private contracts, but also to contracts in which one of the parties is a state.

149

Similarly, Nevins' description of South Carolina's "Pine Barren Act," which authorized the tender of lands to satisfy a debt, does not suggest the Act was only retrospective. Id. at 405, 525-26. The same is true with respect to Nevins' description of a New Hampshire tender law that authorized a debtor to offer real or personal property in satisfaction of his obligation. Id. at 537. Unfortunately, Nevins neglected to provide citations to any of his sources.

Some state laws described by Nevins were clearly retrospective only. For example, South Carolina passed a law in 1782 that suspended suits for all debts antedating the spring of that year until 1786, when one-quarter of the debt would become payable. See Nevins, supra, at 525.

147 This point also tends to undercut, at least to some degree, the force of Professor Epstein's argument that the contract clause should be interpreted as being prospective as well as retrospective because state legislation impairing the obligation of future contracts can present opportunities for legislative "rent-seeking" behavior as well as state legislation impairing the obligation of existing contracts. See Epstein, 51 U. Chi. L. Rev. at 724. As we explain in more detail at pp. 65-66, infra, legislative "rentseeking" is Professor Epstein's description of the relevant evil of the state debtor-relief laws the contract clause was designed principally to prohibit.

Chief Justice Marshall's opinion in Fletcher relied almost exclusively on the text of the contract clause in support of this ruling, arguing that the words of the Clause are "general, and are applicable to contracts of every description" and "contain no ... distinction" between public and private contracts. Marshall's conclusion is consistent with the generally-accepted dictionary definition of the term "contract" at the time of the 1787 Convention. This definition, as we have seen, did not include any explicit distinction between public and private contracts.

150

151

Marshall's argument also finds support in the history of the contract clause. For example, Wilson and Paine argued prior to the Convention that a state legislative act chartering a bank was a contract binding upon the state according to the rules of good faith. Though not directly relevant to the original understanding of the contract clause, Wilson's and Paine's argument does tend to suggest that the founding generation may have considered state repudiations of contracts as a significant evil prevailing at the time of the 1787 Convention, and as a likely subject for remediation in the contract clause.

Wilson and Paine's pre-Convention statements concerning the responsibility of the states to live up to their contractual obligations were later reiterated with respect to the contract clause in particular. Shortly after the ratification of the Constitution, Alexander Hamilton -then a private lawyer practicing in New York -- provided a legal opinion concluding that the Georgia legislature's sale of land to certain private land companies was a contract within the meaning of the contract clause. At approximately the same time, the only contemporaneous

152

150 Fletcher v. Peck, 10 U.S. at 137. Marshall also vaguely analogized to the clauses prohibiting states from passing ex post facto laws and bills of attainder, arguing that since these clauses were applicable against the state governments, so should be the contract clause. See Fletcher v. Peck, 10 U.S. at 138-39.

151

152

See pp. 47-48, supra.

For a more complete description of the events described above and of Wilson's and Paine's arguments, see Wright, supra, at 17-18. The relevant text of Hamilton's opinion is as follows:

[T]he Constitution of the United States, article first, section tenth, declares that no state shall pass a law impairing the obligations of contract. This must be equivalent to saying no state shall pass a law revoking, invalidating, or altering a contract. Every grant from one to another, whether the grantor be state or an individual, is virtually a contract that the grantee shall hold and enjoy the thing granted against the grantor, and his representatives. It, therefore, appears to be that taking the terms of the Constitution in their large sense, and giving them

153

judicial decision on point, Van Horne's Lessee v. Dorrance, also declared the clause applicable to public contracts, ruling that a Pennsylvania statute repealing a prior statute that had confirmed the title of certain Pennsylvania lands in one of the opposing two private litigants violated the contract clause. 154 This evidence tends to confirm that the contract clause was originally understood as applying to public as well as private contracts.

The public/private contracts issue also received some attention in the debates in the state legislatures concerning the ratification of the Constitution. In the Virginia ratification debates, for example, Patrick Henry argued that the contract clause would render the states unable to redeem outstanding currency at less than par value because he thought the clause "includes public contracts as well as private contracts between individuals. 99155 Governor Randolph, however, responded by stating that the contract clause was included in the Constitution because of the "frequent interferences of the state legislatures with private contracts.' Similarly, in the North Carolina ratification debates, Mr. Galloway objected to the contract clause because he thought it would require the state to "make good the nominal value" of a substantial amount of state

156

effect according to the general spirit and policy of the provisions, the revocation of the grant by the act of the legislature of Georgia may justly be considered as contrary to the Constitution of the United States, and therefore null. And that the courts of the United States, in cases within their jurisdiction, will be likely to pronounce it so.

See Wright, supra, at 22.

1532 U.S. (2 Dall.) 304 (1795).

154 See Wright, supra, at 18-20. Justice Patterson, who was an influential member of the Constitutional Convention, explained the Court's holding as follows:

But if the confirming act be a contract between the Legislature of Pennsylvania and the Connecticut settlers, it must be regulated by the rules and principles, which pervade and govern all cases of contracts; and if so, it is clearly void, because it tends, in its operation and consequences, to defraud the Pennsylvania claimants, who are third persons of their just rights; rights ascertained, protected, and secured by the Constitution and known laws of the land. The plaintiff's title to the land in question, is legally derived from Pennsylvania; how then on the principles of contract could Pennsylvania lawfully dispose of it to another? As a contract, it could convey no right, without the owner's consent; without that, it was fraudulent and void.

1553 Elliot's Debates at 474. 1563 Elliot's Debates at 477-78.

99157

Mr.

issued securities that had been "sadly depreciated for years. Davie immediately replied that "the clause refers merely to contracts between individuals.” 158

Wright argues that because Randolph and Davie had been members of the Convention and Henry and Galloway had not, and because the arguments of the former were not subsequently challenged, the Virginia and North Carolina legislatures probably deferred to the understanding of the clause articulated by Randolph and Davie, respectively. This conclusion is subject to serious question, however, because neither of the inferences relied upon by Wright is persuasive and because the more obvious conclusion based on these debates is that there was a general and unresolved disagreement in the Virginia and North Carolina legislatures concerning the meaning of the contract clause in this respect. Thus, in our view, the references to the public/private contract issue in the Virginia and North Carolina ratification debates are not very helpful in determining the original understanding with respect to the public/private contracts issue.

That the Northwest Ordinance contract clause was expressly applicable only to private contracts also does not necessarily mean the Article I contract clause is so limited. 160 Since the Framers drafted the Article I contract clause in wholly different terms than the Northwest Ordinance clause, and since there is no historical evidence to suggest that the Framers meant either to reproduce or to change the meaning of the Northwest Ordinance clause in this respect, it would be improper to draw any conclusion about the meaning of the Article I clause from this historical evidence.

As a practical matter, we should note that the effect of holding the contract clause applicable to public contracts, which would be to create a federal constitutional cause of action for every breach of contract by a state legislature, may be somewhat inconsistent with the Framers' general concern for protecting the interests and functions of state governments. Holding the contract clause applicable to public contracts also would have the effect of giving the prevailing party against a state in

160 The text of the Northwest Ordinance's contract clause is reproduced at n. 139, supra.

a contract clause suit a right to specific enforcement of his claim under the same, albeit limited, circumstances as when he would be entitled to specific performance in a suit against a private party.

Nevertheless, we believe that the text and history of the contract clause require that the clause be interpreted as applying to public contracts as well as to private contracts.

3. Agreements between States

If the contract clause applies to contracts between a state and a private party, does it also apply to agreements between states? The plain meaning of the language of the clause seems to require an answer in the affirmative, since the historical definition of the term "contract" does not exclude agreements between states, and since there is no such exclusion implicit in the other words of the contract clause. 161

This conclusion appears to find additional support in the context of the contract clause. The third clause of Article I, Section 10 of the Constitution provides that "[n]o state shall, without the consent of Congress, . . . enter into any agreement or compact with another state." 162 Since a "contract" is only one type of an agreement, and since the words "contract" and "compact" were used more or less synonymously at the time of the 1787 Convention, the compact clause seems to confirm that states would be able to enter into "contracts" within the meaning of the contract clause: if states can enter into "compacts," and if "contracts" and "compacts" are synonymous, it follows that states also are able to enter into "contracts."

163

On the other hand, Wright argues that the compact clause suggests something entirely different -- namely, that agreements between states are not subject to the contract clause because the framers addressed agreements between states under the compact clause. Wright's argu

164

161

The Supreme Court held an agreement between Kentucky and Virginia subject to the contract clause in Green v. Biddle, 21 U.S. (8 Wheat.) 1 (1823).

162 This clause allows an exception from the requirement of Congressional consent to agreements among states only when states are "actually invaded, or in such imminent danger as will not admit of delay." U.S. Const. art. I, §10, cl. 3.

163 For example, Johnson's 1755 dictionary lists "compact" as an accepted definition of the term "contract."

164 See Wright, supra, at 47.