This is the Kato Daily Podcast for Friday, June 15, 2018. I'm Kila Brown.

The Contracts Clause in the U.S. Constitution is meant to protect people who sign legally binding

agreements from discovering later that their contracts have been or will be summarily

altered by a new law. A new case recently decided by the Supreme Court has again chipped away at that provision of the Constitution.

Cato's Roger Pallon discusses the case.

What was the Contracts Clause meant to accomplish and more than that what historical evidence

outside of the Constitution itself do we have that this was the intent of the founders

to create a clause in the Constitution to accomplish this thing.

Well, let's start with what the contracts clause says.

It says that no state shall pass any law, any law impairing the obligations of contracts.

And so that means that if you enter into a contract with someone you have a reasonable

expectation that that the terms of that

contract are going to be upheld. So you do you wouldn't have to depend on the

political wins in your state in order to rest assured that a contract you

write today will actually be enforced or enforceable five years, ten years from now?

In fact, that's precisely the reason that we have the contracts clause because under the Articles

of Confederation, states looking at the debts that were incurred during the Revolutionary

War and noticing that there were far more debtors than there were creditors began

passing statutes forgiving debts and that private debts that's correct and the problem there is the same problem that arose

with respect to why we have the Commerce Clause, namely that when you allow legislatures to legislate fast and loose with respect to contractual obligations, just as when you allow

legislatures to impose tariffs and other barriers to the free flow of goods and

services, you will have a breakdown of the free flow of goods and services.

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