Legal Definitions - Contracts Clause

The Contracts Clause is a part of the United States Constitution that prevents states from passing laws that would interfere with private contractual obligations. This means that states cannot make laws that would break or change contracts that have already been agreed upon by two parties.

For example, if two people sign a contract agreeing to sell a car for a certain price, the state cannot pass a law that would change the price or make the contract invalid.

However, the Supreme Court has ruled that states can regulate private contracts if it is necessary to serve an important public purpose. For instance, if a contract is found to be harmful to the public, the state may pass a law to regulate or even invalidate the contract.

The Contracts Clause is important because it protects the rights of individuals and businesses to enter into agreements with each other without fear of interference from the government.