The Constitution, the Legislature, and Unfair Surprise: Toward a Reliance-Based Approach to the Contract Clause

This Note argues that the Court should return to a reliance-based approach to Contract Clause challenges, fashioned loosely along the same lines as the HRID. Although it does not advocate that the Court revivify the rules created by the early decisions, the Note proposes that the Court look to the private parties’ expectations and, more specifically, to the reasonableness of those expectations in deciding the clause’s applicability to a particular case. Part I provides a brief history of the Contract Clause and its development. This Part follows the clause from the Constitutional Convention through the 1980s to illustrate the Court’s departure over time from the original meaning of the clause. Part II discusses the heavily regulated industry doctrine and demonstrates how it represents a return to a focus on party expectations. Having set forth the theoretical underpinnings of the heavily regulated industry doctrine, this Note in Part III extends the doctrine’s logic to create a modified reliance model for applying the Contract Clause. The Part argues that the reasonableness of a party’s expectations as to the validity or enforceability of her contracts varies according to the amount of previous legislation in an area, as well as the “publicness” of the party’s transactions. This Note concludes that this modified reliance approach has several advantages over the Court’s current test, including greater continuity with early Court precedent and better guidance both for private parties and legislatures.