Also known as: bill of credit · state-issued paper money
Written by attorneys · grounded in primary & secondary sources — see below
Instruments of credit such as state-issued paper notes or promises to pay that are designed to circulate as currency. The Constitution bars states from emitting them to prevent the proliferation of depreciating paper money that disrupts interstate commerce and private contracts.
Beatrice Brown receives payment from a contractor in notes printed by the state treasury promising redemption in future tax receipts. When she attempts to use the notes to settle a debt with Bristol Steel, the company refuses them. A court holds the notes invalid because the state action violates the constitutional ban on emitting bills of credit.
Bradley Banks accepts certificates issued by a state-chartered bank that the legislature has declared receivable for all public dues. When the certificates lose value, Banks sues the state. A court determines that the certificates function as bills of credit and are therefore unenforceable against private parties.
Select any source to read its text and confirm it supports the definition.
Benito Benitez, a member of the Seminole Tribe, receives state-issued credit instruments under a gaming compact. When the instruments are dishonored, Benitez seeks enforcement in federal court. A court rules that the instruments constitute bills of credit whose issuance by the state is forbidden regardless of the compact.
Bella Barnes holds bills of credit issued by Georgia before ratification and sues the state for payment. A court refuses to entertain the action on the notes, explaining that the constitutional prohibition prevents enforcement of such instruments even though they predate the document.
Bruce Baldwin obtains mortgage notes from a state agency that guarantees redemption from tax revenues. When the agency defaults, Baldwin sues. A court finds the notes are bills of credit whose issuance exceeds state authority under the Constitution.
Barbara Bennett receives pension certificates from the state promising future payments funded by general revenues. When the state later repudiates them, Bennett sues. A court holds the certificates are bills of credit and therefore void from the moment of issuance.
Bills of credit are instruments intended to circulate as a medium of exchange and serve as currency substitutes. Ordinary bonds or warrants that do not function as circulating money fall outside the prohibition.
Supporting sources
The ban reaches any state-issued paper designed to circulate as money even if it is not formally declared legal tender for private debts. The constitutional text groups the prohibition with the separate ban on making anything but gold and silver a tender.
Supporting sources
Issuance through a state-controlled bank does not remove the constitutional bar when the instruments are backed by the state's credit and intended to circulate as currency. Courts look to the economic function rather than the formal issuer.
Supporting sources
Both provisions appear in the first sentence of Article I, Section 10 and reflect the Framers' concern with state laws that destabilize private obligations. The bills-of-credit ban prevents states from creating new paper money that would impair existing contracts.
Supporting sources
…"No State shall enter into any Treaty, Alliance, or Confederation; grant Letters of Marque and Reprisal; coin Money; emit Bills of Credit; make any Thing but gold or silver Coin a Tender in Payment of Debts; pass any Bill of Attainder, ex post facto Law, or Law impairing the Obligation of Contracts, or grant any Title of…