 THE IMPAIRMENT CLAUSE  Imposes conditions which are/are not expressed in the contract; or

PURPOSE OF THE IMPAIRMENT CLAUSE:  Diminishes the consideration agreed upon by the parties

 To safeguard the integrity of valid contractual obligations. Is VOID as impairing the obligations of the contract within the meaning of the Constitution.

 To protect the intention, rights and obligations of the  LIMITATIONS TO THE SCOPE OF LAWS INCLUDED IN SEC. 10
contracting parties.
The impairment clause, however, does not include court decisions or acts of board officers
 To assure fulfillment of lawful promises. acting in a quasi-judicial capacity.

 CONTRACT  OBLIGATION

Refers to any lawful agreement on property or property rights, whether real or personal, The “obligation” of a contract is the law or duty which binds the parties to perform their
tangible or intangible. agreement according to its terms and intent.

The agreement may be executed or executory.  IMPAIRMENT

 PARTIES TO A CONTRACT Impairment is anything that diminishes the efficacy of the contract.

The parties may be private persons only (natural or artificial), or private persons on the one The obligation of a contract is impaired when its terms or conditions are changed by law or
hand and the government or its agencies in the other. by a party without consent of the other, thus weakening the rights of the latter.

Includes franchises or charters granted to private persons or entities.  LIMITATION OF THE CONTRACTING PARTIES

 LIMITATIONS TO THE SCOPE OF CONTRACTS INCLUDED IN SEC. 10 The contracting parties may stipulate whatever they may deem convenient and/or necessary
provided it is not contrary to laws, morals, good customs, public order and public policy .
The impairment clause, however, does not cover licenses, marriage contracts and public
offices. Freedom to contract is not absolute and is limited by police power in the interest of general
welfare and social justice.
 LAW
 LIMITATIONS OF THE IMPAIRMENT CLAUSE
As used in the impairment clause, “law” includes:
Limited only to valid contracts.
 Executive and administrative orders of the President;
Taxation laws may validly limit the impairment clause.
 Administrative orders by Heads of Departments; and
Does not prevent the proper exercise by the State of it police powers.
 Ordinances executed by the local government.
Does not apply to matters within the domain of the lawmaking body to regulate.
 A law which:

 Takes from the party a right to which he is entitled to under the contract;

 Deprives him of enforcing such right;