Contracts Clause

Question 1

Home Building & Loan Ass’n v. Blaisdell: Minnesota Moratorium law enacted during the Depression granted temp relief from foreclosures and permitted local courts to extend the period of redemption from foreclosure sales as the court may deem just and equitable but not beyond May 1st, 1935. No action for a deficiency judgment could be brought during the period of redemption. The Blaisdells got a court order under the act to extend their period of redemption if they pay $40 a month, which modified the lender’s contractual right to foreclose.

Answer 1

Held: The Minnesota Moratorium does not violate the Contracts Clause

Hughes for the Majority:
To determine if this violates the contracts clause we must consider the relation of emergency to constitutional power, historical setting of the clause, development of jurisprudence of the construction of the clause and the principles of construction
Emergency does not create power nor increase granted power or diminish restrictions on power. But it may furnish the occasion for the exercise of power
Historical setting: widespread distress following the revolutionary period and plight of debtors resulted in a lot of legislative schemes that invaded contractual obligations such that the confidence essential to trade was undermined and the utter destruction of credit was threatened
Judicial decisions make it clear that the prohibition is not an absolute one and is not to be read with literal exactness - the state continues to possess authority to safeguard the vital interests of its people. The protective power of its police power may be exercised in directly preventing the immediate and literal enforcement of contractual obligations where vital public interest would otherwise suffer
Here; the conditions upon which the redemption period was extended do not appear to be unreasonable. The integrity of the mortgage indebtedness is not impaired because interest continues to run, the right to obtain a deficient judgment is still there if they fail to redeem within the extended period. The legislation is temporary in operation. It cannot outlast the emergency or be extended to virtually destroy the contracts. T/f it does not violate the contracts clause.

Question 2

Contracts Clause

Answer 2

The Contracts Clause limits on state gov’t in Art I., Sec. 10: No state shall pass any bill of attainder, ex post facto law, or any obligation of contracts

States cannot retroactively change the enforceability of existing contracts and make it less enforceable than it was before the law/regulation was enacted

Question 3

NOTE → Contracts Clause will be at Issue this Summer

Structural Steel Co v. Spannus

Answer 3

Pension issues
Gov’t putting burden on someone for being a party to a contract
Majority and Dissent disagree about whether contract clause applies or not