Facts of the Case

Saunders, a Kentucky citizen, sued Ogden, a Louisiana citizen, on a contract which Odgen, then a citizen of New York, had accepted in 1806. Saunders claimed that Odgen had not made payment on his obligation. Odgen claimed bankruptcy as his defense under the New York bankruptcy law enacted in 1801.

Question

Does a state bankruptcy law applying to contracts made after the law's passage violate the Obligation of Contracts Clause of the Constitution?

Conclusion

No. This is not a violation of the Contracts Clause. The state law remainscontrolling. The obligation of a contract made after the enactment of a bankruptcy statute is subject to the bankruptcy statute provisions. In effect, the bankruptcy statute becomes part of all subsequent contracts, limiting their obligation but not impairing them.