Article I, Section 10, Clause 1 of the United States Constitution, known as the Contract Clause, imposes certain prohibitions on the states. These prohibitions are meant to protect individuals from intrusion by state governments and to keep the states from intruding on the enumerated powers of the U.S. federal government.
Among other things, this clause prohibits states from issuing their own money and from enacting legislation relieving particular persons of their contractual obligations. Although the clause recognizes people's right to form contracts, it allows the government to create laws barring contracts offending public policy, such as contracts for sex or for child labor. Likewise, though prohibited from creating a state currency, states are not barred from making "gold and silver coin a tender in payment of debts".
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Treaties, alliances, or confederations
At the time of the Civil War, this clause was one of the provisions upon which the Supreme Court relied in holding that the Confederation formed by the seceding States (the States that withdrew from membership in a federal union) could not be recognized as having any legal existence. Today, its practical significance lies in the limitations which it implies upon the power of the States to deal with matters having a bearing upon international relations. In the early case of Holmes v. Jennison, Chief Justice Taney, referencing the Contract Clause, wrote an opinion which found that states had no power under it to honor an extradition request from a foreign government. More recently, the kindred idea that the responsibility for the conduct of foreign relations rests exclusively with the Federal Government prompted the Court to hold that, since the oil under the three mile marginal belt along the California coast might well become the subject of international dispute and since the ocean, including this three mile belt, is of vital consequence to the nation in its desire to engage in commerce and to live in peace with the world, the Federal Government has paramount rights in and power over that belt, including full dominion over the resources of the soil under the water area. In Skiriotes v. Florida, (1941) the Court, on the other hand, ruled that this clause did not disable Florida from regulating the manner in which its own citizens may engage in sponge fishing outside its territorial waters. Speaking for a unanimous Court, Chief Justice Hughes declared: “When its action does not conflict with federal legislation, the sovereign authority of the State over the conduct of its citizens upon the high seas is analogous to the sovereign authority of the United States over its citizens in like circumstances.”
Bills of credit
In constitutional context, "bills of credit" mean paper medium of exchange intended to circulate between individuals, and between the Government and individuals, for the ordinary social purposes. Such papers do not need to be legal tender. Interest-bearing certificates in denominations up to ten dollars that were issued by loan offices established by the State of Missouri and made receivable in payment of taxes or other moneys due to the State, and in payment of the fees and salaries of state officers, were held to be bills of credit whose issuance was banned by this section. The States are not forbidden, however, to issue coupons receivable for taxes, nor to execute instruments binding themselves to pay money at a future day for services rendered or money borrowed. Bills issued by state banks are not bills of credit; it is immaterial that the State is the sole stockholder of the bank, that the officers of the bank were elected by the state legislature, or that the capital of the bank was raised by the sale of state bonds.
Legal tender
Relying on this clause, the Supreme Court has held that the creditors should be paid in gold or silver, when the marshal of a state court seizes the property (bank notes) of the debtor within (a discharge of) an execution. However courts ruled valid the state laws providing that checks be drawn on local banks, as the Constitution does not prohibit a bank depositor from consenting when he draws a check that payment may be made by draft.
Bills of attainder
Statutes enacted after the Civil War with the intent and result of excluding persons who had aided the Confederacy from following certain callings, by the device of requiring them to take an oath that they had never given such aid, were held invalid as being bills of attainder, as well as ex post facto laws.