The Debts and Engagements Clause

All Debts contracted and Engagements entered into, before the Adoption of this Constitution, shall be as valid against the United States under this Constitution, as under the Confederation.

—Judge Paul B. Matey

Introduction

Debt fueled the American Revolution and created lingering obligations as the Framers contemplated a new form of government. Drawing on centuries of classical thought, they understood that the new government must inherit old obligations. The Debts and Engagements Clause honored that tradition and bolstered the creditworthiness of the new American Republic.

History Before 1776

The duty of a successor government to honor the obligations of its predecessor has deep roots in classical thought.¹ Dutch jurist Hugo Grotius understood the people as the source of sovereignty “whatever the form of government may be,” just as the “Roman people” were “the same, whether under kings, consuls, or emperors.”² So because “it is the same people, possessing all the same rights, and powers, which are now exercised in a different manner,” it is “evident that a state, which from a commonwealth has become a regal government, is answerable for the debts incurred before that change.”³ Thomas Rutherforth, a mid-eighteenth-century natural law thinker,⁴ wrote that a change in the “civil constitution of a state is” merely “a change of the form of government in a state, and not a change in the essential form of the state itself.”⁵And E. de Vattel, an influential Swiss jurist,⁶ viewed the state as a moral actor that “has its own affairs and interests . . . deliberates and takes resolutions in common, and . . . thus becomes a moral person . . . susceptible at once of obligations and of rights.”⁷ Vattel reasoned “[w]hen a person duly authorized contracts in the name of the State[,] his act binds the Nation itself and consequently all future rulers of the social body. . . . Nothing can release the Nation from the obligation of discharging such debts.”⁸

The views of these classical thinkers were echoed in colonial writings. George Mason of Virginia noted that the “Ministry in Great Britain, as well as the Torys here, have indeed constantly accused us of engaging in the War to avoid the Payment of our Debts; but every honest Man has denyed so injurious a Charge, with Indignation.”⁹

The Articles of Confederation

The Continental Congress grappled with our Nation’s soaring war debts.¹⁰ The Articles of Confederation made all debts chargeable to the Continental Congresses enforceable against their successor, the Congress of the Confederation. Article XII provided that “[a]ll bills of credit emitted, monies borrowed, and debts contracted by or under the authority of congress, before the assembling of the united states, in pursuance of the present confederation, shall be deemed and considered as a charge against the united States, for payment and satisfaction whereof the said united states and the public faith are hereby solemnly pledged.”¹¹ That was a sizable obligation stemming from the central government’s inability to raise revenue.¹² Congress was forced to rely on credit, often taking loans purely to pay the interest on prior borrowing.¹³

By 1783, citing the “successful termination of the war” and “the critical exigencies of public affairs,” Oliver Ellsworth, James Madison, and Alexander Hamilton proposed it was “the duty of Congress to review and provide for the debts which the war has left upon the United States, and to look forward to the means of obviating dangers which may interrupt the harmony and tranquillity of the Confederacy.”¹⁴

The Constitutional Convention

During the Constitutional Convention of 1787, the Framers debated the need to assure creditors that plans for a new republican government would not erase the existing debts and obligations of the states.¹⁵ The Framers looked to the Articles of Confederation’s language; the classical legal theory arising from the European “synthesis” of Roman, canon, and civil law;¹⁶ and the natural law’s moral precepts.¹⁷

The earliest version of the Debts and Engagements Clause appeared on May 29, 1787. Edmund Randolph of Virginia proposed that “provision ought to be made for the continuance of [the Confederation] Congress and their authorities and privileges, until a given day after the reform of the articles of Union shall be adopted, and for the completion of all their engagements.”¹⁸ The delegates agreed to this proposal on June 5 by a vote of 9 to 2 without any debate.¹⁹

The Convention revisited the proposal on July 18. But Gouverneur Morris of Pennsylvania opposed the “assumption of their engagements.”²⁰ Madison contended that the provision would only “prevent[] an interregnum, which must exist in the interval between the adoption of the New Govt. and the commencement of its operation.”²¹ However, James Wilson of Pennsylvania noted that “some provision on the subject would be proper in order to prevent any suspicion that the obligations of the Confederacy might be dissolved along with the Governt. under which they were contracted.”²²

Ultimately, the Convention rejected the part relating to the continuance of Congress by a 6 to 3 vote and unanimously disapproved of the part about completion of the Congress’s engagements. At this point, the provision did not yet address the assumption of debts.

On August 21, William Livingston of New Jersey delivered the recommendation from the Committee of Eleven “respecting the debts of the several States.”²³ The proposal stated that “[t]he Legislature of the U. S. shall have power to fulfil the engagements which have been entered into by Congress and to discharge as well the debts of the U– S: as the debts incurred by the several States during the late war, for the common defence and general welfare.”²⁴ Critically, however, this proposal did not make the assumption of debt mandatory. Elbridge Gerry of Massachusetts thought that Congress should be given “the power only, without adopting the obligation,” and observed that states that “had done most” to “sink their respective debts . . . would be alarmed, if they were now to be saddled with a share of the debts of States which had done least.”²⁵

The Convention further debated the proposal the next day. Madison thought this provision was “necessary,” noting that after 1776, “Debtors to Brittish subjects” argued that “contracts under the old Government were dissolved by the Revolution which destroyed the political identity of the society.”²⁶ Morris proposed an amendment stating that Congress “shall discharge the debts & fulfil the engagements (of the U. States).”²⁷ The proposal was adopted unanimously.

On August 23, the Convention considered a further amendment that again introduced the idea of mandatory debt assumption: “The Legislature shall fulfil the engagements and discharge the debts of the U. S.”²⁸ This proposal stirred fresh opposition focused on the kinds of debt. Pierce Butler of South Carolina expressed “his dissatisfaction lest it should compel payment as well to the Blood-suckers who had speculated on the distresses of others, as to those who had fought & bled for their country.”²⁹

The Convention returned to this clause on August 25. George Mason of Virginia thought the obligation was “too strong” and would “beget speculations” because “the Government will be more able to pay them.”³⁰ Randolph urged softer language: “All debts contracted & engagements entered into, by or under the authority of Congs. shall be as valid agst the U. States under this constitution as under the Confederation.”³¹ Randolph’s proposal passed by a vote of 10 to 1 with only Morris voting against it.³² Notably, this text did not squarely address whether Congress would assume state debts from before ratification.

The Committee of Style, which included Morris, altered the text: “All debts contracted and engagements entered into before the adoption of this Constitution”³³ would be valid. Professor William Treanor has observed that Randolph’s proposal “[i]mplicitly . . . did not allow assumption of state debts unauthorized by Congress.”³⁴ But the Committee’s change “allowed Congress to assume state debts” from the Articles of Confederation government “regardless of whether those debts had been previously authorized by Congress.”³⁵ By contrast, Professor David Schwartz has argued that the change had no substantive effect.³⁶

But perhaps there is a more innocuous justification for the change. On August 25, shortly after Randolph’s proposal was adopted, the Supremacy Clause was modified. With this revision, the Supreme Law of the Land would include treaties “which shall be made” in the future “under the Authority of the United States,” as well as “all Treaties made” prior to ratification of the Constitution.³⁷ Madison explained that this change would “obviate all doubt concerning the force of treaties preexisting” the Constitution.³⁸ Likewise, Article III provides that the “judicial Power” extends to cases concerning “Treaties made” before ratification, “or which shall be made” after ratification.³⁹ The Committee of Style would separate the Debts and Engagements Clause from Congress’s enumerated powers, moving it to Article VI, immediately before the Supremacy Clause.⁴⁰ The Committee may have attempted to standardize the language in Article VI such that treaties, as well as debts and engagements, were all valid whether entered into before or after ratification.

The Ratification Debates

During the ratification debates, Madison and Hamilton drew on the classical tradition and its natural law foundation to defend the clause. In Federalist No. 43, Madison claimed that the Clause “can only be considered as a declaratory proposition” built on the natural law moral principle that no “government would dare, with, or even without, this constitutional declaration before it, to remit the debts justly due to the public” on the pretext that a change in government erases its obligations. In Federalist No. 84, Hamilton similarly emphasized the “established doctrine of political law that ‘States neither lose any of their rights, nor are discharged from any of their obligations by a change in the form of their civil government.’”⁴¹

The Anti-Federalists focused more on the accumulation of federal debt than the Debts and Assumptions Clause. Brutus, for example, wrote that he could “scarcely contemplate a greater calamity that could befal this country, than to be loaded with a debt exceeding their ability ever to discharge.”⁴² Centinel agreed that the clause protects debts “against the United States.”⁴³ Agrippa argued that assumption of state debt was an “[a]ssurance[] of [the] sort easily given, and as easily forgotten,” leaving states responsible for their own obligations and those of the new Republic.⁴⁴ Related concerns about the tax power were shared by Madison and James Monroe. Monroe wrote to Madison that “No proposition that I have seen removes my objections to [the assumption provision],” which “at best, if it does not compell the industrious & complying States to pay the debts, or a part of the debts, of those who have been less deserving, it prefers the exercise of taxation in the hands of the national to those of the State governments, [which] I cannot approve.”⁴⁵

Early Practice

In 1790, the First Congress passed Treasury Secretary Alexander Hamilton’s financial plan, which assumed states’ Revolutionary War debts.⁴⁶ Federalists in Congress argued that “the Constitution gave the national government this power.”⁴⁷

The French Revolution provided an early test of whether the new government would honor its debt obligations. After King Louis XVI was deposed in 1792, the Washington Administration considered stopping payments on the French loans that financed the American Revolution. Then-Secretary of State Thomas Jefferson wrote that it was an “oblig[atio]n of Contracts” in the “nature of [a] Moral oblig[atio]n” imposed “on individuals” as well as “societies” in the “aggregate.”⁴⁸ Morris agreed: “The honest Nation is that which like the honest Man ‘hath to its plighted Faith and vow forever firmly stood, and tho it promise to its Loss yet makes that Promise good.’”⁴⁹ Ultimately, the nation honored its debts.

Justice Joseph Story later concurred that the clause expressed “the doctrine[] that revolutions in government have, or rather ought to have, no effect whatsoever upon private rights, and contracts, or upon the public obligations of nations.”⁵⁰ Because this doctrine “result[ed] from the law of nations, and the moral obligations of society,” it had the effect of reassuring the nation’s “public creditors, foreign as well as domestic.”⁵¹

Judicial Precedent

The Debts and Engagements Clause has rarely prompted litigation, probably because the First Congress promptly assumed all state debts, satisfying creditors. The Engagements prong was indirectly raised in antebellum cases concerning slavery. The Northwest Ordinance of 1787, adopted before the Constitution’s ratification, prohibited slavery in the territories.

Did the ordinance and its prohibition of slavery remain valid after ratification? In Strader v. Graham (1850) and Dred Scott v. Sandford (1857), Chief Justice Roger B. Taney reasoned that the Northwest Ordinance’s ban on slavery “ceased to be in force upon the adoption of the Constitution.”⁵² But in his Strader dissent, Justice John Catron countered that the Northwest Ordinance was “an ‘engagement entered into’ before the adoption of the Constitution,” making it “equally binding on the one Congress as the other, according to the sixth article of the new Constitution.”⁵³ Justice Henry Baldwin had made a similar point a decade earlier in Heirs v. Kibbe (1840).⁵⁴

Open Questions

Scholars have recently cited the clause in debates over secondary issues such as whether Morris used his position on the Committee of Style to alter the substantive meaning of the Constitution.⁵⁵ Otherwise, few questions about the Debts and Engagements Clause remain open.

1. Hugo Grotius, The Rights of War and Peace 120–21 (A.C. Campbell trans., 1901) (1625); Andrew Forsyth, Common Law and Natural Law in America 24–25 (2019); John Locke, Some Thoughts Concerning Education §§ 185–86 (1693). ↩︎
2. Grotius, supra at 120. ↩︎
3. Id. at 121. ↩︎
4. Gary L. McDowell, The Limits of Natural Law: Thomas Rutherforth and the American Legal Tradition, 37 Am. J. Juris. 57, 58 (1992). ↩︎
5. 2 Thomas Rutherforth, Institutes of Natural Law: Being the Substance of a Course of Lectures on Grotius de Jure Belli et Pacis 673 (1756). ↩︎
6. Vincent Chetail, Vattel and the American Dream: An Inquiry into the Reception of the Law of Nations in the United States, in The Roots of International Law 251–300 (Pierre-Marie Dupuy & Vincent Chetail eds., 2013). ↩︎
7. E. de Vattel, Law of Nations or the Principles of Natural Law § 2 (Charles G. Fenwick trans., 1916) (1758). ↩︎
8. Id. at §§ 215–16. ↩︎
9. Letter from George Mason to Arthur Campbell (May 7, 1783), https://perma.cc/E7TY-UQAJ. ↩︎
10. David P. Currie, The Constitution in Congress: Substantive Issues in the First Congress, 1789–1791, 61 U. Chi. L. Rev. 775, 802 (1994); Edmund W. Kitch & Julia D. Mahoney, Restructuring United States Government Debt: Private Rights, Public Values, and the Constitution, 2019 Mich. St. L. Rev. 1283, 1292 (2019). ↩︎
11. Articles of Confederation, art. XII. ↩︎
12. David Hutchison, The Foundations of the Constitution 94 (1928); Alexander Hamilton, Report Relative to a Provision for the Support of Public Credit (Jan. 9, 1790), https://perma.cc/EZ8T-HLED. ↩︎
13. 5 Elliot’s 22; 24 J. Cont. Cong. 277 (Apr. 26, 1783). ↩︎
14. 24 J. Cont. Cong. 277 (Apr. 26, 1783). ↩︎
15. 2 Farrand’s 413–15. ↩︎
16. Adrian Vermeule, Common Good Constitutionalism: Recovering the Classical Legal Tradition 1 (2022); Norman Barry, Classical Theory of Law, 73 Cornell L. Rev. 283, 284 (1988). ↩︎
17. Thomas G. West, The Political Theory of the American Founding: Natural Rights, Public Policy, and the Moral Conditions of Freedom (2017). ↩︎
18. 1 Farrand’s 22. ↩︎
19. Id. at 121, 227, 237. ↩︎
20. 2 Farrand’s 46–47. ↩︎
21. Id. at 47. ↩︎
22. Id. ↩︎
23. Id. at 355. ↩︎
24. Id. at 355–56. ↩︎
25. Id. at 356. ↩︎
26. Id. at 377. ↩︎
27. Id. ↩︎
28. Id. at 392. ↩︎
29. Id. ↩︎
30. Id. at 412; Joseph M. Lynch, Negotiating the Constitution: The Earliest Debates over Original Intent 72 (1999). ↩︎
31. 2 Farrand’s 414. ↩︎
32. Id. ↩︎
33. Id. at 603 (emphasis added). ↩︎
34. William M. Treanor, The Case of the Dishonest Scrivener: Gouverneur Morris and the Creation of the Federalist Constitution, 120 Mich. L. Rev. 1, 103 (2021). ↩︎
35. Id. ↩︎
36. David S. Schwartz, Framing the Framer: A Commentary on Treanor’s Gouverneur Morris as “Dishonest Scrivener,” 120 Mich. L. Rev. Online 51, 77–78 (2022). ↩︎
37. Art. VI, cl. 2. ↩︎
38. 2 Farrand’s 417. ↩︎
39. Art. III, § 2; 2 Farrand’s 432. ↩︎
40. 2 Farrand’s 569–71, 594–96, 603. ↩︎
41. Federalist No. 84 (Hamilton). ↩︎
42. Storing 2.9.94. ↩︎
43. Id. at 2.7.167. ↩︎
44. Storing 4.6.33. ↩︎
45. Letter from James Monroe to James Madison (July 26, 1790), https://perma.cc/N8XR-KDAU. ↩︎
46. Funding Act of 1790, 1 Stat. 138, 142; Max M. Edling, A Revolution in Favor of Government: Origins of the U.S. Constitution and the Making of the American State 206–14 (2003). ↩︎
47. Treanor, supra at 103. ↩︎
48. Thomas Jefferson, Notes for Opinion on the Treaty of Alliance with France (before Apr. 28, 1793), https://perma.cc/WV3R-2JXF. ↩︎
49. Letter from Gouverneur Morris to Thomas Jefferson (Dec. 21, 1792), https://perma.cc/JDB7-E3XJ. ↩︎
50. 3 Story’s Commentaries § 1827. ↩︎
51. Id. at §§ 1827–28. ↩︎
52. Strader v. Graham, 51 U.S. (10 How.) 82, 97 (1850); Dred Scott v. Sandford, 60 U.S. (19 How.) 393, 438 (1857). ↩︎
53. Strader, 51 U.S. at 98 (Catron, J., dissenting). ↩︎
54. 39 U.S. (14 Pet.) 353, 417 (1840) (Baldwin, J., concurring). ↩︎
55. Treanor, supra at 103; Schwartz, supra at 77–78. ↩︎