When the Constitution was written, the Founders wanted to make sure that the states did not mess around with contracts. They understood that the stability of contracts was crucial to a thriving economy. Hence, among other things states were prohibited from doing was to “impair the obligation of contracts.”

But like other parts of the Constitution that were meant to restrain government power, the contract clause has been shunted aside. Today, states can get away with rewriting or dissolving contracts as long as they can come up with some plausible “police power” excuse for doing so.

Vanderbilt law professor James Ely, Jr. has written an illuminating book on the history of the contract clause and I discuss it in this Forbes article.