840
Syllabus
the United States is liable to respondents for breach of contract. Pp. 860-896; 904-910. (a) There is no reason to question the Federal Circuit's conclusion that the Government had express contractual obligations to permit respondents to use goodwill and capital credits in computing their regulatory capital reserves. When the law as to capital requirements changed, the Government was unable to perform its promises and became liable for breach under ordinary contract principles. Pp. 860-871. (b) The unmistakability doctrine is not implicated here because enforcement of the contractual obligation alleged would not block the Government's exercise of a sovereign power. The courts below did not construe these contracts as binding the Government's exercise of authority to modify its regulation of thrifts, and there has been no demonstration that awarding damages for breach would be tantamount to such a limitation. They read the contracts as solely risk-shifting agreements, and respondents seek nothing more than the benefit of promises by the Government to insure them against any losses arising from future regulatory change. Applying the unmistakability doctrine to such contracts not only would represent a conceptual expansion of the doctrine beyond its historical and practical warrant, but also would compromise the Government's practical capacity to make contracts, which is "of the essence of sovereignty" itself, United States v. Bekins, 304 U. S. 27, 51-52. Pp. 871-887. (c) The answer to the Government's unmistakability argument also meets its two related ultra vires contentions: that, under the reserved powers doctrine, Congress's power to change the law in the future was an essential attribute of its sovereignty that the Bank Board and FSLIC had no authority to bargain away; and that in any event no such authority can be conferred without an express delegation to that effect. A contract to adjust the risk of subsequent legislative change does not strip the Government of its legislative sovereignty, and the contracts did not surrender the Government's sovereign power to regulate. And there is no serious question that FSLIC (and the Bank Board acting through it) lacked authority to guarantee respondents against losses arising from subsequent regulatory changes. Pp. 888-891. (d) The facts of this case do not warrant application of the sovereign act doctrine. That doctrine balances the Government's need for freedom to legislate with its obligation to honor its contracts by asking whether the sovereign act is properly attributable to the Government as contractor. If the answer is no, the Government's defense to liability depends on whether that act would otherwise release the Government from liability under ordinary contract principles. Pp. 891-896.
Page: Index Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 NextLast modified: October 4, 2007