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General Abridgment

OF

AMERICAN LAW.

CHAPTER I.

CONTRACTS AND CONSIDERATIONS.

$1 Continued. See Art. 54, this chapter. This subject, ART. 1. as to impairing the obligation of contracts, continued on new Continued. and late authorities, in which eminent judges have differed as to what constitutes the binding force or obligation of contracts made in society; hence, when do State legislatures impair them or not. The latest decision is this, a State legislature impairs a contract when it enacts a law affecting it after it is made; otherwise, if the contract is made after the law is enacted, for then the parties know the law, and make their contract subject to it. See a. 2, s. 5 con.

2 Con. The legality or illegality, as well as construction ART. 2. of contracts, must depend on the lex loci where executed, Con. unless it appears from the contract itself, that it was the under-1 Nott and standing of the parties that it was to be executed elsewhere, 177 M'Cord, 173page 142, a sound price requires a sound commodity. This is the rule of the civil law adopted in South Carolina and some other States, but not in a majority of these.

§ 5. A. D. 1828. Impairing contracts. It will be observed that the article in the territorial ordinance, makes provision that no law shall be passed that shall affect private contracts previously made; that is, contracts made before the passage of the law, not those made after. This provision does not contain the distinction between a contract and its obligation. It is a matter of history, that pernicious tender laws had been made in most

177.

I. CH. 1. of the thirteen States before July, 1787, empowering the debtor Art. 2. to tender depreciated paper money, pine barren lands, and Continued. other property of little value, in discharge of his debt and contract. These gave rise to this provision. This enormous evil was in each of these laws, in general; so discharging debts and contracts made before it was enacted, as well as those made after. As this was a new provision of the kind, it was thought best not to extend it further than that evil required.

It will also be observed, a similar provision in principle, in the 1st article and 10th section of the federal constitution, is very general, which is, that 'No law shall be passed impairing the obligation of contracts.' This differs from the ordinance in two material points; one, this section makes the distinction between the contract and its obligation; the other, it does not nake the distinction between contracts made before and after the passage of the law. Every day this provision in this 10th section is becoming very important; already discussions and opinions have grown out of it, that fill hundreds of pages. It is desirable to learn, if possible, why the Federal convention distinguished between the contract and its obligation, and why it did not distinguish between contracts made before, and those made after, the enactment of the law, meant to be inhibited. It is believed the public records can throw some light on this interesting subject. The Federal convention sat in Philadelphia from May to September 17th, 1787, and was in session there when this ordinance was passed in New York, and made public in July that year. The members of the convention saw it, no 12 Wheat.218. doubt, in that month. It is stated, that the first draft of this 10th section omitted this provision as to impairing the obligation of contracts, and that in an after draft it was inserted. Is it not the fair inference that the provision in the ordinance gave rise to that in the constitution? Might not the Federal convention well think it was best to look to the obligation of contracts rather than to the contracts? as this obligation and binding force of contracts, in its true and broad sense, is founded in reason and conscience, in moral principle, in men's intuitive perceptions, and in natural law, as well as in the municipal, of course universal; and because the obligation exists only in valid contracts, is a single universal principle in all valid contracts; hence expressed in the singular number, though properly the binding force of contracts in the plural; whereas numerous contracts exist de facto, which are void in law and even in equity, so in which there is no binding force or obligation, natural, civil, or municipal, in conscience or on moral principles; as usurious contracts, and thousands in fact made, but obtained by fraud or deception, or of persons incapable of contracting, or without consideration, &c. Might not the convention well think many

contracts are made in society, the performance whereof is never enforced in courts of law or of equity, on municipal obligation merely; as when a contract is made in one nation and its performance enforced in another. For instance, A of London and B of Boston meet in China, do business there, and A, getting fairly in debt to B in $1000, gives him a note for that sum, to pay on demand; no place of payment is named; they meet in New York; B there sues A; the contract appears a fair one, for value received; what court in law or equity in that State, or any other, would ever think of even attempting to compel performance on the municipal law of China, as constituting its binding force or obligation, or even to inquire after that municipal law? When, too, it is probable that neither China or any other nation ever enacted a law to give binding force to such a contract, or thought to distrust its natural, inherent, intrinsic obligation, far more permanent, universal, and invariable than human legislation or law enacted. In fact the civil or municipal obligation is a human work; the natural one is a divine work. Might not the convention well mean so to establish this constitutionally, as that it should never be impaired by State enacted law, which had done but little for several years, but wrong creditors and favor debtors, men whose habits or management too often make them embarrassed debtors, defending themselves, and defended, under the compassionate plea of the unfortunate, not often a plea for the creditor.

As to the other distinction, might not the convention well think the restraint too limited, if confined to contracts previously made, that is, to those only made before the passage of the insolvent or other impairing law, as it was clear such contracts would soon be very few; for instance, a State passed an insolvent act before or when the convention was sitting, as some States did, to restrain such act to the contracts made before it was passed, these obviously in a few years would be performed, outlawed, or otherwise cease to exist in any number deserving notice, much less such a solemn constitutional provision. Therefore the convention omitted the distinction, previously, made in the ordinance; and provided the whole American people might establish forever the natural obligation of contracts founded in the correct moral law of mankind, not merely the municipal or enacted obligation, that could so easily and almost entirely be modified by State legislatures. Admit the correct legislation of the State generally, still, if there be but one bad legislation. in fifty, such a constitutional restraint on that is necessary and proper.

6.All contracts must be good, or valid, at their original creation, and must not depend on subsequent contingencies. The law will not suffer a gratuitous act of kindness or benevo

I. CH. 1.
Art. 2.
Con.

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