Chapter § 8.3

• Jurisdiction: Oregon

§ 8.3 ANALYSIS OF THE CONTRACT CLAUSE

§ 8.3-1 Interpretation of the Contract Clause

The Oregon Supreme Court has inferred "that the framers of the Oregon Constitution intended to incorporate the substance of the federal provision, as it was then interpreted by the Supreme Court of the United States, into the Oregon Constitution, though not necessarily every case decided under the federal provision." Eckles v. State, 306 Or 380, 390, 760 P2d 846 (1988). The court also may look to post-1859 authorities when they reveal the scope of the limitations on state power before 1859. See, e.g., Hughes v. State, 314 Or 1, 16 n 19, 838 P2d 1018 (1992) (looking to post-1859 authorities regarding a state's ability to contract away its power to tax).

§ 8.3-2 General Process for Analyzing a Claim under the Contract Clause

The Oregon Supreme Court uses a two-step process for analyzing claims under the Contract Clause. "First, it must be determined whether a contract exists to which the person asserting an impairment is a party; and, second, it must be determined whether a law of this state has impaired an obligation of that contract." Hughes, 314 Or at 13-14.

NOTE: The analysis of a claim under the federal Contract Clause involves four inquiries: (1) whether there is a contractual relationship; (2) the nature of the contractual promises allegedly impaired; (3) whether a state law impairs a contractual promise and, if so, whether the impairment is "substantial"; and (4) if so, whether the state law creating the substantial impairment is "justified by a significant and legitimate public purpose and whether the method used by the state to advance that public purpose constitutes an unnecessarily broad repudiation" of contract rights. Oregon State Police Officers' Ass'n v. State, 323 Or 356, 365, 918 P2d 765 (1996) (summarizing United States Supreme Court cases on the federal Contract Clause), disavowed on other grounds by Moro v. State, 357 Or 167, 225, 351 P3d 1 (2015). The Oregon Supreme Court has not adopted the balancing test applied in cases decided under the federal Contract Clause. Cf. Eckles, 306 Or at 399 ("[T]he state cannot avoid a constitutional command by 'balancing' it against another of the state's interests or obligations, such as protection of the 'vital interests' of the people.").

§ 8.3-2(a) Is There a Contract?

General principles of contract law normally govern the inquiry of whether a contract exists to which the person asserting an impairment is a party. Hughes, 314 Or at 14. But see § 8.3-3 to § 8.3-5 for additional rules when the state is alleged to be a party to the contract.

§ 8.3-2(b) Is There an Impairment of an Obligation of the Contract?

The obligation of a contract is different from the agreement stated in a contract. The United States Supreme Court has described the obligation of a contract as "the law which binds the parties to perform their agreement." Ogden v. Saunders, 25 US 213, 257, 6 L Ed 606 (1827). Such a law "must govern and control the contract in every shape in which it is intended to bear upon it, whether it affect its validity, construction, or discharge." Ogden, 25 US at 257. The Oregon Supreme Court observed that the court's definition of obligation in Ogden "is probably too broad in that perhaps every law would have the potential for impairing a...