No specific inhibition is laid upon the Federal Government by the Constitution with reference to the impairment of the obligation of contracts. That government is, however, forbidden by the Fifth Amendment to deprive persons of property without due process of law or to take private property for a public use without just compensation. In so far, then, as contract rights may be treated as property they are protected from direct impairment by federal action. This was definitely declared, as we have earlier seen in the first legal tender decision of Hepburn v. Griswold.48

46 For other similar declarations, see those quoted by McGehee, Due Process of Law, p. 61.

47 169 U. S. 466; 18 Sup. Ct. Rep. 418; 42 L. ed. 819.

Contracts are not, however, protected from an indirect impairment of their obligation when this incidentally results from the exercise by Congress of a legislative power constitutionally given to it. Thus in Knox v. Lee49 in which, reversing the opinion in Hepburn v. Griswold, it wa3 held that, under its power to carry on war and to maintain its own existence, the Federal Government might authorize the issuance of legal tender notes valid in payment of debts previously contracted,50 the court deny that the obligation of contracts is thereby impaired; but they go on to say, even if it be held that the obligation of contracts is thereby impaired, this is no constitutional objection.

"Nor can it be truly asserted," the opinion declares, " that Congress may not, by its action, indirectly impair the obligation of contracts if by the expression be meant rendering contracts fruitless, or partially fruitless. Directly it may, confessedly by passing a Bankrupt Act, embracing past as well as future transactions. ... So it may relieve parties from their apparent obligations indirectly in a multitude of ways. It may declare war, or even in peace pass non-intercourse acts, or direct an embargo."

With reference to the due process of law requirement of the Fifth Amendment, the court say: "That provision has always been understood as referring only to a direct appropriation and not to consequential injuries resulting from the exercise of lawful power. It has not been supposed to have any bearing upon or to inhibit laws that indirectly work harm and loss to individuals. A new tariff, an embargo, a draft or a war, may inevitably bring upon individuals great losses, may indeed render valuable property almost valueless. They may destroy the worth of contracts." But such laws, of course, are not, therefore, void.

48 Wall. 603; 19 L. ed. 513.

49 12 Wall. 457; 20 L. ed. 287.

50 In a still later case, Juilliard v. Greenman (110 U. S. 421; 4 Sup. Ct. Rep. 122; 28 L. ed. 204) it was held that the power to issue legal tender notes is implied in the power to borrow money, as well as from other express power, and, therefore, may be exercised in times of peace as well as of war.

In the Sinking Fund Cases,51 it is declared : "The United States cannot any more than a State interfere with private rights except for legitimate governmental purposes. They are not included within the constitutional prohibition which prevents States from passing laws impairing the obligation of contracts, but equally with the States they are prohibited from depriving persons or corporations of property without due process of law."

51 99 U. S. 700; 25 L. ed. 496.