Cite as: 518 U. S. 839 (1996)
Syllabus
(e) Even if FIRREA were to qualify as a "public and general" act, the sovereign act doctrine cannot excuse the Government's breach here. Since the object of the doctrine is to place the Government as contractor on par with a private contractor in the same circumstances, Horowitz v. United States, supra, at 461, the Government, like any other defending party in a contract action, must show that passage of the statute rendering its performance impossible was an event contrary to the basic assumptions on which the parties agreed, and, ultimately, that the language or circumstances do not indicate that the Government should be liable in any case. The Government has not satisfied these conditions. There is no doubt that some changes in the regulatory structure governing thrift capital reserves were both foreseeable and likely when the parties contracted with the Government. In addition, any governmental contract that not only deals with regulatory change but allocates the risk of its occurring will, by definition, fail the further condition of a successful impossibility defense, for it will indeed indicate that the parties' agreement was not meant to be rendered nugatory by a change in the regulatory law. That the Bank Board and FSLIC could not themselves preclude Congress from changing the regulatory rules does not stand in the way of concluding that those agencies assumed the risk of such change, for determining the consequences of legal change was the point of the agreements. Pp. 904-910.
Justice Souter, joined by Justice Stevens and Justice Breyer, concluded in Parts IV-A and IV-B that, since the Government should not be excused by legislation when the substantial effect of regulation was to help itself out of improvident agreements, it is impossible to attribute the exculpatory "public and general" character to FIRREA. Not only did that statute have the purpose of eliminating the very accounting "gimmicks" that acquiring thrifts had been promised, but also the congressional debates indicate Congress's expectation, which there is no reason to question, that FIRREA would have a substantial effect on the Government's contractual obligations. The evidence of Congress's intense concern with contracts like those at issue is not neutralized by the fact that FIRREA did not formally target particular transactions or by FIRREA's broad purpose to advance the general welfare. Pp. 896-903.
Justice Scalia, joined by Justice Kennedy and Justice Thomas, agreed that the Government was contractually obligated to afford respondents favorable accounting treatment, and violated its obligations when it discontinued that treatment under FIRREA. The Government's sovereign defenses cannot be avoided by characterizing its obligations as not entailing a limitation on the exercise of sovereign power;
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