CONSTITUTIONAL

LAW 2
THE IMPAIRMENT CLAUSE
Based on the 2007 edition of Constitutional Law by Isagani Cruz

Art. III, Sec. 10 HOW IMPAIRED: Retroactivity.

No law impairing the obligation of OBLIGATION
contracts shall be passed. It is the vinculum juris (tie that binds the
parties to each other) of the contract so
PURPOSE: that parties perform their undertaking
To safeguard the integrity of valid or agreement according to its term and
contractual agreements against intent.
unwarranted interference by the State.
Should not be tampered by subsequent IMPAIRMENT
laws that will change the intention of Anything that diminishes the efficacy of
the parties OR modify their rights and the contract.
obligations. As long as the original rights of either
Protection is not absolute because a parties are changed to his prejudice,
contract may be valid at the time of there is impairment.
conclusion but may become invalid by In case of REMEDIES: Impairment only if
virtue of supervening legislation. all remedies are withdrawn resulting to
parties unable to enforce their rights
CONTRACT under the original agreement.
Definition: It is a lawful agreement on There is NO IMPAIRMENT as long as a
property or property rights, whether substantial and efficacious remedy
real or personal, tangible or intangible. remains.
It may be executed or executory.
Parties may be private persons only, LIMITATIONS:
natural or artificial or private persons If the law is a proper exercise of the
and the government. police power, it will prevail over the
It includes franchises or charters contract.
granted to private persons or entities. A contract is said to suffer a congenital
It does not cover licenses, marriage infirmity if the agreement deals with a
contracts and public offices. matter affecting public welfare.
The legislature cannot bargain away the
LAW police power through the medium of a
Statutes enacted by the national contract.
legislature Parties may not restrain the legislative
Executive orders authority by contract on matters that
Administrative regulations promulgated are within their lawmaking powers to
under a valid delegation of power regulate.
Municipal ordinances passed by local Norman v. Baltimore (Gold Clause
legislative bodies. Cases): Currency is within the exclusive
Judicial decisions and adjudications by power of the legislature to control so
administrative bodies are not included. the agreement of repayment of loan,
despite the change in legal tender from
Ivan Chris T. Luzuriaga, 1-O
 CONSTITUTIONAL LAW 2
THE IMPAIRMENT CLAUSE
Based on the 2007 edition of Constitutional Law by Isagani Cruz

gold to silver, was subject to

modification by the State in the exercise
of the police power.
Lozano v. Martinez (Challenge to the
constitutionality of BP No. 22): It is
constitutional because checks cannot be
categorized as mere contracts. It is a
commercial instruments which is a
convenient substitute for money; it
forms part of the banking system and
therefore not entirely free from the
regulatory powers of the state.
A lawful tax on a new subject or an
increased tax on an old one DOES NOT
interfere with a contract or impair its
obligation within the meaning of the
Constitution.
Where a law grants a tax exemption in
exchange for valuable consideration,
such exemption is a CONTRACT and
cannot be repealed because of the
impairment clause.
ALL OTHER tax exemptions are NOT
CONTRACTUAL and so may be revoked
at will by the legislature.


*NOT ALL DOCTRINES/CASES ARE INCLUDED*

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Ivan Chris T. Luzuriaga, 1-O