The prevailing doctrine has been established by the Supreme Court of the United States: it is the permanent right of that court that the prohibition of laws that interfere with the obligation of contracts does not prevent the State from exercising the powers conferred on it to promote the common good or necessary for the common good of the public. although contracts previously concluded between individuals may be affected. In other words, in entering into contracts, the parties must not prevent Parliament from enacting laws that serve the common good.44FootnoteManigault v. Springs, 199 U.S. 473, 480 (1905). The second of the above-mentioned doctrines, according to which the principle of the subordination of all persons, enterprises and individuals, to the legislative power of the State has been consolidated, is the doctrine that certain powers of the State are inalienable and that any attempt by a State to alienate them, in any capacity whatsoever, is ipso facto null and void and therefore inappropriate, to draw up a “contract” within the meaning of Article I § 10. One of the first cases in which this principle was invoked was decided in New York in 1826. The Corporation of the City of New York, which had transferred some land for the purposes of a church and cemetery and a silent enjoyment pact, later adopted a charter prohibiting their use as a cemetery. In dismissing a lawsuit against the city for breach of contract, the state court said the defendants “as a party [to the alliance] did not have the power to enter into a contract that would control or embarrass their legislative powers and duties.” 2167 The law also left the hypothecary creditor in possession during the extension period, subject to the obligation to pay reasonable rent for the immovable property as determined by the court. At the same time, however, less carefully drafted laws of Missouri and Arkansas, actions that were not as respectful of creditors` rights, were repealed as a violation of the contractual clause.59FootnoteW.
B. Worthen Co.c. Thomas, 292 U.S. 426 (1934); W.B. Worthen Co.c. Kavanaugh, 295 U.S. 56 (1935). A state is free to regulate the procedure in its courts also with reference to contracts already concluded, Judge Cardozo said for the court, and moderate extensions of time for the written procedure or for the trial usually fall under the power if reserved.
A different situation is presented when the extensions are stacked in such a way that the remedy becomes a shadow…. What controls our judgment in these times is the underlying reality, not the form or the label. The modifications to the remedy, which are now challenged as invalid, must be considered in combination with the cumulative meaning that each confers on everyone. Seen in this way, they are seen as a depressing and unnecessary destruction of almost every incident that adds appeal and value to the security of safeguards.60Footnote295 U.S. to 62. On the other hand, in the most recent of these categories of cases, the Court accepted an extension of its moratorium legislation by the State of New York. While recognizing that the terms and conditions had improved, the Court found reason to believe that the sudden termination of the legislation that hindered the normal liquidation of these mortgages for more than eight years may well lead to a more acute urgency than the original legislation was intended to mitigate.61Note East New York Bank v. Hahn, 326 U.S.
230, 235 (1945), cites New York Legislative Document (1942), No. 45, p. 25. Contracts with municipal bonds are particularly noteworthy. While from a certain point of view, a city is only an emanation of the sovereignty of the government and an agent of the government, it is believed that when it borrows money, it acts in a corporate or private capacity and is therefore liable to prosecution on the basis of its contracts. Incidentally, the United States ex rel. Von Hoffman v. Quincy,38Foot71 U.S. (4 Wall.) 535, 554–55 (1867). Where a State has authorized a local authority to conclude contracts and to exercise the power of local taxes to the extent necessary for the performance of its obligations, the power thus granted may be withdrawn only after the performance of the contract. In that case, the court issued a mandamus requiring city officials to levy taxes for the enforcement of a judgment on its obligations in accordance with the law, as it stood at the time the bonds were issued.39Note also Nelson v. St.
Martin`s Parish, 111 U.S. 716 (1884). Even a state that divides a municipality in debt, among others, cannot allow it to evade its obligations. Debt follows territory and the obligation to estimate and collect taxes to meet them rests with subsequent corporations and their officers.40FootnoteMobile v. Watson, 116 U.S. 289 (1886); Graham vs. Folsom, 200 U.S. 248 (1906). But when a municipal organization has virtually ceased to exist by putting its offices on vacation and the function of government is again exercised directly by the state, the Court has so far found itself powerless to thwart a rejection program.41FootnoteHeine v.
Deichkommissare, 86 U.S. (19 Wall.) 655 (1874). See Virginia v. West Virginia, 246 U.S. 565 (1918). However, there is no reason for the state to assume the role of particeps criminis to relieve its municipalities of the obligation to pay their honest debts. Thus, in 1931, during the Great Depression, New Jersey created a municipal finance commission with the power to take control of its insolvent communities. In response to the complaint by some duty holders that this legislation infringes the contractual obligations of their debtors, the Court emphasized in a speech by Frankfurter J. that the practical value of an unsecured claim against a city was the effectiveness of the city`s fiscal sovereignty, which had to be preserved by the revised legislation.42Footnote Faitoute Co.c. Stadt Asbury Park, 316 U.S. 502, 510 (1942).
Alluding to the ineffectiveness of purely judicial remedies against failing municipalities, Judge Frankfurter said: Because there is no recourse if one has to resort to “devices and inventions” in order to abolish fiscal sovereignty, which can only be exercised by authorized officials. See Rees v. City of Watertown, 86 U.S. (19 Wall.) 107, 124 (1874). And so we had the spectacle of tax officials resigning from their functions to thwart Mandamus` tax levies, and civil servants showing up on a platform of willingness to go to jail instead of applying a tax levy (see Raymond, State and Municipal Bonds, 342-343), and evasion of service by tax collectors, rendering the mandate of a court powerless. Yost v. Dallas County, 236 U.S. 50, 57 (1915). Id.
at p. 511. At the time of the Civil War, this clause was one of the provisions on which the Supreme Court relied when it concluded that the confederation formed from the secessionist states (the states that had withdrawn from a federal union) could not be recognized as legally existing.  Today, its practical significance lies in the limits it implies for the power of states to deal with issues of international relations. In the first case of Holmes v. Jennison, Chief Justice Taney, referring to the contractual clause, wrote a statement stating that states that under it did not have the power to comply with an extradition request from a foreign government. More recently, the concurring idea that responsibility for the conduct of foreign relations rests solely with the federal government has led the Court to conclude that, since oil under the three-mile-long belt along the California coast may well be the subject of international disputes, and since the ocean, including this three-mile-long belt, Is of vital importance to the nation in its desire to trade and live in peace with the world, the federal government has paramount rights and power over this belt, including total dominion over the resources of the soil under the water area.  However, in Skiriotes v Florida (1941), the Court held that this clause did not prevent Florida from regulating how its own citizens may engage in sponge fishing outside its territorial waters. Speaking on behalf of a unanimous court, Chief Justice Hughes said, “Unless his action is contrary to federal law, the sovereign authority of the state over the conduct of its citizens on the high seas is analogous to the sovereign authority of the United States over its citizens in similar circumstances.”  Not all state subsidies constitute “contracts” within the meaning of Article I, § 10. In his decision of Dartmouth College, Chief Justice Marshall conceded that “if the constituting act is a concession of political power, if it creates a civil institution to be installed in the administration of government.
the question is one in which the state legislature can act according to its own judgment”, without restriction by the Constitution2095 – and thus draw a line of demarcation between “public” and “private” enterprises, which have remained intact for more than half a century.2096 The question of the nature and source of the obligation of a contract, which was discussed in Fletcher v. .