What restriction does the contract clause impose on state laws?

The contract clause, primarily found in Article I, Section 10 of the United States Constitution, prohibits states from passing laws that would impair the obligation of contracts. This means that once a contract has been established, states cannot enact laws that would retroactively alter the terms of that contract or interfere with the rights of the parties involved. This protection is crucial to maintaining trust and reliability in contractual relationships, allowing individuals and businesses to enter into agreements with the assurance that those agreements will be honored.

The other options do not accurately reflect the provisions of the contract clause. For example, states are allowed to create new contracts; they simply cannot enact laws that would negatively affect pre-existing contracts. While federal contracts must be honored, there is no requirement for states individually to have inherent contracts with the federal government. Similarly, states are capable of changing their contract laws but must do so within the bounds established by the contract clause, rather than needing federal approval for such changes. Overall, the clause's main focus is the protection of existing contractual obligations from state interference.