Opinion ID: 2823849
Heading Depth: 2
Heading Rank: 2

Heading: Contract Clause Jurisprudence

Text: Â¶18Â Â Â Â Â Â The Contract Clauses of the U.S. and Colorado Constitutions are virtually identical and prevent legislatures from passing laws that impair contractual obligations. See U.S. Const. art. I, Â§ 10, cl. 1 (âNo state shall . . . pass any . . . law impairing the obligation of contracts . . . .â); Colo. Const. art. II, Â§ 11 (âNo . . . law impairing the obligation of contracts . . . shall be passed by the general assembly.â). Â¶19Â Â Â Â Â Â In the 1970s and 1980s, the U.S. Supreme Court articulated the contract clause balancing test that we, and courts across the nation, have since adopted. See U.S. Trust Co. of N.Y. v. New Jersey, 431 U.S. 1 (1977); Allied Structural Steel v. Spannaus, 438 U.S. 234 (1978); Energy Reserves Grp. v. Kan. Power & Light Co., 459 U.S. 400 (1983). Contract clause analysis involves three inquiries: (1) does a contractual relationship exist; (2) does the change in the law impair that contractual relationship; and if so, (3) is the impairment substantial? Gen. Motors Corp. v. Romein, 503 U.S. 181, 186 (1992); see also DeWitt, 54 P.3d at 858 (adopting the Gen. Motors test). If each of these three component questions is answered affirmatively, the court must then determine whether the impairment is nonetheless justified as âreasonable and necessary to serve an important public purpose.â U.S. Trust Co. of N.Y., 431 U.S. at 25. Thus, while designed to protect vested contract rights from legislative invasion, the U.S. and Colorado Contract Clauses are ânot to be interpreted as absolute.â DeWitt, 54 P.3d at 858.Â Â¶20Â Â Â Â Â Â A plaintiff bringing a contract clause claim must first prove the existence of a contractual relationship establishing a vested contract right. In the first part of the inquiry, where a court finds no contract, there is no need to complete the following two steps of the General Motors or DeWitt, analysis. See id. When analyzing whether the government contracted by statute, it is presumed that the legislature did not intend to bind itself contractually and that the legislation was not intended to create a contractual right unless there is a clear indication of the legislatureâs intent to be bound. Natâl R.R. Passenger Corp. v. Atchison, Topeka & Santa Fe Ry. Co., 470 U.S. 451, 465â66 (1985). This well-established presumption is grounded in the elementary proposition that the principal function of a legislature is not to make contracts, but to make laws that establish the policy of the state. Policies, unlike contracts, are inherently subject to revision and repeal, and to construe laws as contracts when the obligation is not clearly and unequivocally expressed would be to limit drastically the essential powers of the legislative body. Id. at 466 (citations omitted). The party asserting the existence of a contract right must overcome this presumption, and courts should proceed cautiously in analyzing the existence and extent of any contractual obligations. See id. Â¶21Â Â Â Â Â Â State statutory enactments do not of their own force create a contract relationship with those whom the statute benefits because the potential constraint on subsequent legislatures is significant. Parella v. Ret. Bd. of the R.I. Empsâ Ret. Sys., 173 F.3d 46, 60 (1st Cir. 1999). To determine whether the legislature intended to bind itself contractually, we examine both the language of the statute itself and the circumstances surrounding its enactment or amendment. U.S. Trust Co. of N.Y., 431 U.S. at 17 n.14; Colo. Springs Fire Fighters Assân, Local 5 v. City of Colo. Springs, 784 P.2d 766, 773Â (Colo. 1989). If the language of the statute itself contains âwords of contract,â the legislature may have intended to create an enforceable contract right. Colo. Springs Fire Fighters Assân, Local 5, 784 P.2d at 773; see also Parker v. Wakelin, 123 F.3d 1, 7â9 (1st Cir. 1997) (holding that the Maine statute had not unmistakably given current workers a contractual right to avoid any increased contributions or any other future changes to their pensions).