United States v. Winstar Corp.

518 U.S. 839, 116 S. Ct. 2432, 135 L. Ed. 2d 964, 42 Cont. Cas. Fed. 77,358, 10 Fla. L. Weekly Fed. S 166, 96 Daily Journal DAR 7865, 96 Cal. Daily Op. Serv. 4890, 1996 U.S. LEXIS 4266, 64 U.S.L.W. 4739

Opinions

Justice Souter

announced the judgment of the Court and delivered an opinion, in which Justice Stevens and Justice Breyer join, and in which Justice O’Connor joins except as to Parts IV-A and IV-B.

The issue in this case is the enforceability of contracts between the Government and participants in a regulated industry, to accord them particular regulatory treatment in exchange for their assumption of liabilities that threatened to produce claims against the Government as insurer. Although Congress subsequently changed the relevant law, and thereby barred the Government from specifically honoring its agreements, we hold that the terms assigning the risk of regulatory change to the Government are enforceable, and that the Government is therefore liable in damages for breach.

hH

We said in Fahey v. Mallonee, 332 U. S. 245, 250 (1947), that “[blanking is one of the longest regulated and most closely supervised of public callings.” That is particularly true of the savings and loan, or “thrift,” industry, which has been described as “a federally-conceived and assisted system to provide citizens with affordable housing funds.” H. R. Rep. No. 101-54, pt. 1, p. 292 (1989) (House Report). Because the contracts at issue in today’s case arise out of the National Government’s efforts over the last decade and a half to preserve that system from collapse, we begin with an overview of the history of federal savings and loan regulation.

A

The modern savings and loan industry traces its origins to the Great Depression, which brought default on 40 percent of the Nation’s $20 billion in home mortgages and the failure of some 1,700 of the Nation’s approximately 12,000 savings institutions. Id., at 292-293. In the course of the debacle, Congress passed three statutes meant to stabilize the thrift industry. The Federal Home Loan Bank Act created the Federal Home Loan Bank Board (Bank Board), which was authorized to channel funds to thrifts for loans on houses and for preventing foreclosures on them. Ch. 522, 47 Stat. 725 (1932) (codified, as amended, at 12 U. S. C. §§ 1421-1449 (1988 ed.)); see also House Report, at 292. Next, the Home Owners’ Loan Act of 1933 authorized the Bank Board to charter and regulate federal savings and loan associations. Ch. 64, 48 Stat. 128 (1933) (codified, as amended, at 12 U. S. C. §§ 1461-1468 (1988 ed.)). Finally, the National Housing Act created the Federal Savings and Loan Insurance Corporation (FSLIC), under the Bank Board’s authority, with responsibility to insure thrift deposits and regulate all federally insured thrifts. Ch. 847, 48 Stat. 1246 (1934) (codified, as amended, at 12 U. S. C. §§ 1701-1750g (1988 ed.)).

The resulting regulatory regime worked reasonably well until the combination of high interest rates and inflation in the late 1970’s and early 1980’s brought about a second crisis in the thrift industry. Many thrifts found themselves holding long-term, fixed-rate mortgages created when interest rates were low; when market rates rose, those institutions had to raise the rates they paid to depositors in order to attract funds. See House Report, at 294-295. When the costs of short-term deposits overtook the revenues from long-term mortgages, some 435 thrifts failed between 1981 and 1983. Id., at 296; see also General Accounting Office, Thrift Industry: Forbearance for Troubled Institutions 1982-1986, p. 9 (May 1987) (GAO, Forbearance for Troubled Institutions) (describing the origins of the crisis).

The first federal response to the rising tide of thrift failures was “extensive deregulation,” including “a rapid expansion in the scope of permissible thrift investment powers and a similar expansion in a thrift’s ability to compete for funds with other financial services providers.” House Report, at 291; see also id., at 295-297; Breeden, Thumbs on the Scale: The Role that Accounting Practices Played in the Savings and Loan Crisis, 59 Ford. L. Rev. S71, S72-S74 (1991) (describing legislation permitting nonresidential real estate lending by thrifts and deregulating interest rates paid to thrift depositors).¹ Along with this deregulation came moves to weaken the requirement that thrifts maintain adequate capital reserves as a cushion against losses, see 12 CFR §563.13 (1981), a requirement that one commentator described as “the most powerful source of discipline for financial institutions.” Breeden, supra, at S75. The result was a drop in capital reserves required by the Bank Board from five to four percent of assets in November 1980, see 45 Fed. Reg. 76111, and to three percent in January 1982, see 47 Fed. Reg. 3543; at the same time, the Board developed new “regulatory accounting principles” (RAP) that in many instances replaced generally accepted accounting principles (GAAP) for purposes of determining compliance with its capital requirements.² According to the House Banking Committee, “[t]he use of various accounting gimmicks and reduced capital standards masked the worsening financial condition of the industry, and the FSLIC, and enabled many weak institutions to continue operating with an increasingly inadequate cushion to absorb future losses.” House Report, at 298. The reductions in required capital reserves, moreover, allowed thrifts to grow explosively without increasing their capital base, at the same time deregulation let them expand into new (and often riskier) fields of investment. See Note, Causes of the Savings and Loan Debacle, 59 Ford. L. Rev. S301, S311 (1991); Breeden, supra, at S74-S75.

While the regulators tried to mitigate the squeeze on the thrift industry generally through deregulation, the multitude of already-failed savings and loans confronted FSLIC with deposit insurance liabilities that threatened to exhaust its insurance fund. See Olympic Federal Savings and Loan Assn. v. Director, Office of Thrift Supervision, 732 F. Supp. (DC 1990). According to the General Accounting Office, FSLIC’s total reserves declined from $6.46 billion in 1980 to $4.55 billion in 1985, GAO, Forbearance for Troubled Institutions 12, when the Bank Board estimated that it would take $15.8 billion to close all institutions deemed insolvent under GAAP. General Accounting Office, Troubled Financial Institutions: Solutions to the Thrift Industry Problem 108 (Feb. 1989) (GAO, Solutions to the Thrift Industry Problem). By 1988, the year of the last transaction involved in this case, FSLIC was itself insolvent by over $50 billion. House Report, at 304. And by early 1989, the GAO estimated that $85 billion would be needed to cover FSLIC’s responsibilities and put it back on the road to fiscal health. GAO, Solutions to the Thrift Industry Problem 43. In the end, we now know, the cost was much more even than that. See, e. g., Horowitz, The Continuing Thrift Bailout, Investor’s Business Daily, Feb. 1, 1996, p. A1 (reporting an estimated $140 billion total public cost of the savings and loan crisis through 1995).

Realizing that FSLIC lacked the funds to liquidate all of the failing thrifts, the Bank Board chose to avoid the insurance liability by encouraging healthy thrifts and outside investors to take over ailing institutions in a series of “supervisory mergers.” See GAO, Solutions to the Thrift Industry Problem 52; L. White, The S&L Debacle: Public Policy Lessons for Bank and Thrift Regulation 157 (1991) (White).³ Such transactions, in which the acquiring parties assumed the obligations of thrifts with liabilities that far outstripped their assets, were not intrinsically attractive to healthy institutions; nor did FSLIC have sufficient cash to promote such acquisitions through direct subsidies alone, although cash contributions from FSLIC were often part of a transaction. See M. Lowy, High Rollers: Inside the Savings and Loan Debacle 37 (1991) (Lowy). Instead, the principal inducement for these supervisory mergers was an understanding that the acquisitions would be subject to a particular accounting treatment that would help the acquiring institutions meet their reserve capital requirements imposed by federal regulations. See Investigation of Lincoln Savings & Loan Assn.: Hearing Before the House Committee on Banking, Finance, and Urban Affairs, 101st Cong., 1st Sess., pt. 5, p. 447 (1989) (testimony of M. Danny Wall, Director, Office of Thrift Supervision) (noting that acquirers of failing thrifts were allowed to use certain accounting methods “in lieu of [direct] federal financial assistance”).

B

Under GAAP there are circumstances in which a business combination may be dealt with by the “purchase method” of accounting. See generally R. Kay & D. Searfoss, Handbook of Accounting and Auditing 23-21 to 23-40 (2d ed. 1989) (describing the purchase method); Accounting Principles Board Opinion No. 16 (1970) (establishing rules as to what method must be applied to particular transactions). The critical aspect of that method for our purposes is that it permits the acquiring entity to designate the excess of the purchase price over the fair value of all identifiable assets acquired as an intangible asset called “goodwill.” Id., ¶ 11, p. 284; Kay & Searfoss, supra, at 23-38.⁴ In the ordinary case, the recognition of goodwill as an asset makes sense: a rational purchaser in a free market, after all, would not pay a price for a business in excess of the value of that business’s assets unless there actually were some intangible “going concern” value that made up the difference. See Lowy 39.⁵ For that reason, the purchase method is frequently used to account for acquisitions, see A. Phillips, J. Butler, G. Thompson, & R. Whitman, Basic Accounting for Lawyers 121 (4th ed. 1988), and GAAP expressly contemplated its application to at least some transactions involving savings and loans. See Financial Accounting Standards Board Interpretation No. 9 (Feb. 1976). Goodwill recognized under the purchase method as the result of an FSLIC-sponsored supervisory merger was generally referred to as “supervisory goodwill.”

Recognition of goodwill under the purchase method was essential to supervisory merger transactions of the type at issue in this case. Because FSLIC had insufficient funds to make up the difference between a failed thrift’s liabilities and assets, the Bank Board had to offer a “cash substitute” to induce a healthy thrift to assume a failed thrift’s obligations. Former Bank Board Chairman Richard Pratt put it this way in testifying before Congress:

“The Bank Board ... did not have sufficient resources to close all insolvent institutions, [but] at the same time, it had to consolidate the industry, move weaker institutions into stronger hands, and do everything possible to minimize losses during the transition period. Goodwill was an indispensable tool in performing this task.” Savings and Loan Policies in the Late 1970’s and 1980’s: Hearings before the House Committee on Banking, Finance, and Urban Affairs, 101st Cong., 2d Sess., Ser. No. 101-176, p. 227 (1990).⁶

Supervisory goodwill was attractive to healthy thrifts for at least two reasons. First, thrift regulators let the acquiring institutions count supervisory goodwill toward their reserve requirements under 12 CFR §563.13 (1981). This treatment was, of course, critical to make the transaction possible in the first place, because in most cases the institution resulting from the transaction would immediately have been insolvent under federal standards if goodwill had not counted toward regulatory net worth. From the acquiring thrift’s perspective, however, the treatment of supervisory goodwill as regulatory capital was attractive because it inflated the institution’s reserves, thereby allowing the thrift to leverage more loans (and, it hoped, make more profits). See White 84; cf. Breeden, 59 Ford. L. Rev., at S75-S76 (explaining how loosening reserve requirements permits asset expansion).

A second and more complicated incentive arose from the decision by regulators to let acquiring institutions amortize the goodwill asset over long periods, up to the 40-year maximum permitted by GAAP, see Accounting Principles Board Opinion No. 17, ¶ 29, p. 340 (1970). Amortization recognizes that intangible assets such as goodwill are useful for just so long; accordingly, a business must “write down” the value of the asset each year to reflect its waning worth. See Kay & Searfoss, Handbook of Accounting and Auditing, at 15-36 to 15-37; Accounting Principles Board Opinion No. 17, supra, ¶ 27, at 339-340.⁷ The amount of the write down is reflected on the business’s income statement each year as an operating expense. See generally E. Paris, Accounting and Law in a Nutshell §12.2(q) (1984) (describing amortization of goodwill). At the same time that it amortizes its goodwill asset, however, an acquiring thrift must also account for changes in the value of its loans, which are its principal assets. The loans acquired as assets of the failed thrift in a supervisory-merger were generally worth less than their face value, typically because they were issued at interest rates below the market rate at the time of the acquisition. See Black, Ending Our Forebearers’ Forbearances: FIRREA and Supervisory Goodwill, 2 Stan. L. & Policy Rev. 102, 104-105 (1990). This differential or “discount,” J. Rosenberg, Dictionary of Banking and Financial Services 233 (2d ed. 1985), appears on the balance sheet as a “contra-asset” account, or a deduction from the loan’s face value to reflect market valuation of the asset, R. Estes, Dictionary of Accounting 29 (1981). Because loans are ultimately repaid at face value, the magnitude of the discount declines over time as redemption approaches; this process, technically called “accretion of discount,” is reflected on a thrift’s income statement as a series of capital gains. See Rosenberg, supra, at 9; Estes, supra, at 39-40.

The advantage in all this to an acquiring thrift depends upon the fact that accretion of discount is the mirror image of amortization of goodwill. In the typical case, a failed thrift’s primary assets were long-term mortgage loans that earned low rates of interest and therefore had declined in value to the point that the thrift’s assets no longer exceeded its liabilities to depositors. In such a case, the disparity between assets and liabilities from which the accounting goodwill was derived was virtually equal to the value of the discount from face value of the thrift’s outstanding loans. See Black, 2 Stan. L. & Policy Rev., at 104-105. Thrift regulators, however, typically agreed to supervisory merger terms that allowed acquiring thrifts to accrete the discount over the average life of the loans (approximately seven years), see id., at 105, while permitting amortization of the goodwill asset over a much longer period. Given that goodwill and discount were substantially equal in overall values, the more rapid accrual of capital gain, from accretion resulted in a net paper profit over the initial years following the acquisition. See ibid.; Lowy 39-40.⁸ The difference between amortization and accretion schedules thus allowed acquiring thrifts to seem more profitable than they in fact were.

Some transactions included yet a further inducement, described as a “capital credit.” Such credits arose when FSLIC itself contributed cash to further a supervisory merger and permitted the acquiring institution to count the FSLIC contribution as a permanent credit to regulatory capital. By failing to require the thrift to subtract this FSLIC contribution from the amount of supervisory goodwill generated by the merger, regulators effectively permitted double counting of the cash as both a tangible and an intangible asset. See, e. g., Transohio Savings Bank v. Director, Office of Thrift Supervision, 967 F. 2d 598, 604 (CADC 1992). Capital credits thus inflated the acquiring thrift’s regulatory capital and permitted leveraging of more and more loans.

As we describe in more detail below, the accounting treatment to be accorded supervisory goodwill and capital credits was the subject of express arrangements between the regulators and the acquiring institutions. While the extent to which these arrangements constituted a departure from prior norms is less clear, an acquiring institution would reasonably have wanted to bargain for such treatment. Although GAAP demonstrably permitted the use of the purchase method in acquiring a thrift suffering no distress, the relevant thrift regulations did not explicitly state that intangible goodwill assets created by that method could be counted toward regulatory capital. See 12 CFR §563.13 (a)(3) (1981) (permitting thrifts to count as reserves any “items listed in the definition of net worth”); § 561.13(a) (defining “net worth” as “the sum of all reserve accounts . . . , retained earnings, permanent stock, mutual capital certificates . . . , and any other non-withdrawable accounts of an insured institution”).⁹ Indeed, the rationale for recognizing goodwill stands on its head in a supervisory merger: ordinarily, goodwill is recognized as valuable because a rational purchaser would not pay more than assets are worth; here, however, the purchase is rational only because of the accounting treatment for the shortfall. See Black, supra, at 104 (“GAAP’s treatment of goodwill... assumes that buyers do not overpay when they purchase an S&L”). In the end, of course, such reasoning circumvented the whole purpose of the reserve requirements, which was to protect depositors and the deposit insurance fund. As some in Congress later recognized, “[gjoodwill is not cash. It is a concept, and a shadowy one at that. When the Federal Government liquidates a failed thrift, goodwill is simply no good. It is valueless. That means, quite simply, that the taxpayer picks up the tab for the shortfall.” 135 Cong. Rec. 11795 (1989) (remarks of Rep. Barnard); see also White 84 (acknowledging that in some instances supervisory goodwill “involved the creation of an asset that did not have real value as protection for the FSLIC”). To those with the basic foresight to appreciate all this, then, it was not obvious that regulators would accept purchase accounting in determining compliance with regulatory criteria, and it was clearly prudent to get agreement on the matter.

The advantageous treatment of amortization schedules and capital credits in supervisory mergers amounted to more clear-cut departures from GAAP and, hence, subjects worthy of agreement by those banking on such treatment. In 1983, the Financial Accounting Standards Board (the font of GAAP) promulgated Statement of Financial. Accounting Standards No. 72 (SFAS 72), which applied specifically to the acquisition of a savings and loan association. SFAS 72 provided that “[i]f, and to the extent that, the fair value of liabilities assumed exceeds the fair value of identifiable assets acquired in the acquisition of a banking or thrift institution, the unidentifiable intangible asset recognized generally shall be amortized to expense by the interest method over a period no longer than the discount on the long-term interest-bearing assets acquired is to be recognized as interest income.” Accounting Standards, Original Pronouncements (July 1973-June 1, 1989), p. 725. In other words, SFAS 72 eliminated any doubt that the differential amortization periods on which acquiring thrifts relied to produce paper profits in supervisory mergers were inconsistent with GAAP. SFAS 72 also barred double counting of capital credits by requiring that financial assistance from regulatory authorities must be deducted from the cost of the acquisition before the amount of goodwill is determined. SFAS 72, ¶9.¹⁰ Thrift acquirers relying on such credits, then, had every reason for concern as to the continued availability of the RAP in effect at the time of these transactions.

C

Although the results of the forbearance policy, including the departures from GAAP, appear to have been mixed, see GAO, Forbearance for Troubled Institutions 4, it is relatively clear that the overall regulatory response of the early and mid-1980’s was unsuccessful in resolving the crisis in the thrift industry. See, e. g., Transohio Savings Bank, 967 F. 2d, at 602 (concluding that regulatory measures “actually aggravated] the decline”). As a result, Congress enacted the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (FIRREA), Pub. L. 101-73, 103 Stat. 183, with the objects of preventing the collapse of the industry, attacking the root causes of the crisis, and restoring public confidence.

FIRREA made enormous changes in the structure of federal thrift regulation by (1) abolishing FSLIC and transferring its functions to other agencies; (2) creating a new thrift deposit insurance fund under the Federal Deposit Insurance Corporation; (3) replacing the Bank Board with the Office of Thrift Supervision (OTS), a Treasury Department office with responsibility for the regulation of all federally insured savings associations; and (4) establishing the Resolution Trust Corporation to liquidate or otherwise dispose of certain closed thrifts and their assets. See note following 12 U. S. C. § 1437, §§ 1441a, 1821. More importantly for the present case, FIRREA also obligated OTS to “prescribe and maintain uniformly applicable capital standards for savings associations” in accord with strict statutory requirements. § 1464(t)(l)(A).¹¹ In particular, the statute required thrifts to “maintain core capital in an amount not less than 3 percent of the savings association’s total assets,” § 1464(t)(2)(A), and defined “core capital” to exclude “unidentifiable intangible assets,” § 1464(t)(9)(A), such as goodwill. Although the reform provided a “transition rule” permitting thrifts to count “qualifying supervisory goodwill” toward half the core capital requirement, this allowance was phased out by 1995. § 1464(t)(3)(A). According to the House Report, these tougher capital requirements reflected a congressional judgment that “[t]o a considerable extent, the size of the thrift crisis resulted from the utilization of capital gimmicks that masked the inadequate capitalization of thrifts.” House Report, at 310.

The impact of FIRREA’s new capital requirements upon institutions that had acquired failed thrifts in exchange for supervisory goodwill was swift and severe. OTS promptly issued regulations implementing the new capital standards along with a bulletin noting that FIRREA “eliminates [capital and accounting] forbearances” previously granted to certain thrifts. Office of Thrift Supervision, Capital Adequacy: Guidance on the Status of Capital and Accounting Forbear-ances and Capital Instruments held by a Deposit Insurance Fund, Thrift Bulletin No. 38-2, Jan. 9, 1990. OTS accordingly directed that “[a]ll savings associations presently operating with these forbearances . . . should eliminate them in determining whether or not they comply with the new minimum regulatory capital standards.” Ibid. Despite the statute’s limited exception intended to moderate transitional pains, many institutions immediately fell out of compliance with regulatory capital requirements, making them subject to seizure by thrift regulators. See Black, 2 Stan. L. & Policy Rev., at 107 (“FIRREA’s new capital mandates have caused over 500 S&Ls ... to report that they have failed one or more of the three capital requirements”).

D

This case is about the impact of FIRREA’s tightened capital requirements on three thrift institutions created by way of supervisory mergers. Respondents Glendale Federal Bank, FSB, Winstar Corporation, and The Statesman Group, Inc., acquired failed thrifts in 1981, 1984, and 1988, respectively. After the passage of FIRREA, federal regulators seized and liquidated the Winstar and Statesman thrifts for failure to meet the new capital requirements. Although the Glendale thrift also fell out of regulatory capital compliance as a result of the new rules, it managed to avoid seizure through a massive private recapitalization. Believing that the Bank Board and FSLIC had promised them that the supervisory goodwill created in their merger transactions could be counted toward regulatory capital requirements, respondents each filed suit against the United States in the Court of Federal Claims, seeking monetary damages on both contractual and constitutional theories. That court granted respondents’ motions for partial summary judgment on contract liability, finding in each case that the Government had breached contractual obligations to permit respondents to count supervisory goodwill and capital credits toward their regulatory capital requirements. See Winstar Corp. v. United States, 21 Cl. Ct. 112 (1990) (Winstar I) (finding an implied-in-fact contract but requesting further briefing on contract issues); 25 Cl. Ct. 541 (1992) (Winstar II) (finding contract breached and entering summary judgment on liability); Statesman Savings Holding Corp. v. United States, 26 Cl. Ct. 904 (1992) (granting summary judgment on liability to Statesman and Glendale). In so holding, the Court of Federal Claims rejected two central defenses asserted by the Government: that the Government could not be held to a promise to refrain from exercising its regulatory authority in the future unless that promise was unmistakably clear in the contract, Winstar I, supra, at 116; Winstar II, supra, at 544-549; Statesman, supra, at 919-920, and that the Government’s alteration of the capital reserve requirements in FIRREA was a sovereign act that could not trigger contractual liability, Winstar II, supra, at 550-553; Statesman, supra, at 915-916. The Court of Federal Claims consolidated the three cases and certified its decisions for interlocutory appeal.

A divided panel of the Federal Circuit reversed, holding that the parties did not allocate to the Government, in an unmistakably clear manner, the risk of a subsequent change in the regulatory capital requirements. Winstar Corp. v. United States, 994 F. 2d 797, 811-813 (1993). The full court, however, vacated this decision and agreed to rehear the case en banc. After rebriefing and reargument, the en banc court reversed the panel decision and affirmed the Court of Federal Claims’ rulings on liability. Winstar Corp. v. United States, 64 F. 3d 1531 (1995). The Federal Circuit found that FSLIC had made express contracts with respondents, including a promise that supervisory goodwill and capital credits could be counted toward satisfaction of the regulatory capital requirements. Id., at 1540, 1542-1543. The court rejected the Government’s unmistakability argument, agreeing with the Court of Federal Claims that that doctrine had no application in a suit for money damages. Id., at 1545-1548. Finally, the en banc majority found that FIRREA’s new capital requirements “single[d] out supervisory goodwill for special treatment” and therefore could not be said to be a “public” and “general act” within the meaning of the sovereign acts doctrine. Id., at 1548-1551. Judge Nies dissented, essentially repeating the arguments in her prior opinion for the panel majority, id., at 1551-1552, and Judge Lourie also dissented on the ground that FIRREA was a public and general act, id., at 1552-1553. We granted certiorari, 516 U. S. 1087 (1996), and now affirm.

H-t ) — I

We took this case to consider the extent to which special rules, not generally applicable to private contracts, govern enforcement of the governmental contracts at issue here. We decide whether the Government may assert four special defenses to respondents’ claims for breach: the canon of contract construction that surrenders of sovereign authority must appear in unmistakable terms, Bowen v. Public Agencies Opposed to Social Security Entrapment, 477 U. S. 41, 52 (1986); the rule that an agent’s authority to make such surrenders must be delegated in express terms, Home Telephone & Telegraph Co. v. Los Angeles, 211 U. S. 265 (1908); the doctrine that a government may not, in any event, contract to surrender certain reserved powers, Stone v. Mississippi, 101 U. S. 814 (1880); and, finally, the principle that a Government’s sovereign acts do not give rise to a claim for breach of contract, Horowitz v. United States, 267 U. S. 458, 460 (1925).

The anterior question whether there were contracts at all between the Government and respondents dealing with regulatory treatment of supervisory goodwill and capital credits, although briefed and argued by the parties in this Court, is not strictly before us. See Yee v. Escondido, 503 U. S. 519, 535 (1992) (noting that “we ordinarily do not consider questions outside those presented in the petition for cer-tiorari”); this Court’s Rule 14.1(a). And although we may review the Court of Federal Claims’ grant of summary judgment de novo, Eastman Kodak Co. v. Image Technical Services, Inc., 504 U. S. 451, 465, n. 10 (1992), we are in no better position than the Federal Circuit and the Court of Federal Claims to evaluate the documentary records of the transactions at issue. Our resolution of the legal issues raised by the petition for certiorari, however, does require some consideration of the nature of the underlying transactions.

The Federal Circuit found that “[t]he three plaintiff thrifts negotiated contracts with the bank regulatory agencies that allowed them to include supervisory goodwill (and capital credits) as assets for regulatory capital purposes and to amortize that supervisory goodwill over extended periods of time.” 64 F. 3d, at 1545. Although each of these transactions was fundamentally similar, the relevant circumstances and documents vary somewhat from case to case.

In September 1981, Glendale was approached about a possible merger by the First Federal Savings and Loan Association of Broward County, which then had liabilities exceeding the fair value of its assets by over $734 million. At the time, Glendale’s accountants estimated that FSLIC would have needed approximately $1.8 billion to liquidate Broward, only about $1 billion of which could be recouped through the sale of Broward’s assets. Glendale, on the other hand, was both profitable and well capitalized, with a net worth of $277 million.¹² After some preliminary negotiations with the regulators, Glendale submitted a merger proposal to the Bank Board, which had to approve all mergers involving savings and loan associations, see 12 U. S. C. §§ 1467a(e)(l)(A) and (B); § 1817(j)(l); that proposal assumed the use of the purchase method of accounting to record supervisory goodwill arising from the transaction, with an amortization period of 40 years. The Bank Board ratified the merger, or “Supervisory Action Agreement” (SAA), on November 19, 1981.

The SAA itself said nothing about supervisory goodwill, but did contain the following integration clause:

“This Agreement . . . constitutes the entire agreement between the parties thereto and supersedes all prior agreements and understandings of the parties in connection herewith, excepting only the Agreement of Merger and any resolutions or letters issued contemporaneously herewith.” App. 598-599.

The SAA thereby incorporated Bank Board Resolution No. 81-710, by which the Board had ratified the SAA. That resolution referred to two additional documents: a letter to be furnished by Glendale’s independent accountant identifying and supporting the use of any goodwill to be recorded on Glendale’s books, as well as the resulting amortization periods; and “a stipulation that any goodwill arising from this transaction shall be determined and amortized in accordance with [Bank Board] Memorandum R-31b.” Id., at 607. Memorandum R-31b, finally, permitted Glendale to use the purchase method of accounting and to recognize goodwill as an asset subject to amortization. See id., at 571-574.

The Government does not seriously contest this evidence that the parties understood that goodwill arising from these transactions would be treated as satisfying regulatory requirements; it insists, however, that these documents simply reflect statements of then-current federal regulatory policy rather than contractual undertakings. Neither the Court of Federal Claims nor the Federal Circuit so read the record, however, and we agree with those courts that the Government’s interpretation of the relevant documents is fundamentally implausible. The integration clause in Glendale’s SAA with FSLIC, which is similar in all relevant respects to the analogous provisions in the Winstar and Statesman contracts, provides that the SAA supersedes “all prior agreements and understandings ... excepting only ... any resolutions or letters issued contemporaneously” by the Board, id., at 598-599; in other words, the SAA characterizes the Board’s resolutions and letters not as statements of background rules, but as part of the “agreements and understandings” between the parties.

To the extent that the integration clause leaves any ambiguity, the other courts that construed the documents found that the realities of the transaction favored reading those documents as contractual commitments, not mere statements of policy, see Restatement (Second) of Contracts §202(1) (1981) (“Words and other conduct are interpreted in the light of all the circumstances, and if the principal purpose of the parties is ascertainable it is given great weight”), and we see no reason to disagree. As the Federal Circuit noted, “[i]t is not disputed that if supervisory goodwill had not been available for purposes of meeting regulatory capital requirements, the merged thrift would have been subject to regulatory noncompliance and penalties from the moment of its creation.” 64 F. 3d, at 1542. Indeed, the assumption of Broward’s liabilities would have rendered Glendale immediately insolvent by approximately $460 million, but for Glendale’s right to count goodwill as regulatory capital. Although one can imagine cases in which the potential gain might induce a party to assume a substantial risk that the gain might be wiped out by a change in the law, it would have been irrational in this case for Glendale to stake its very existence upon continuation of current policies without seeking to embody those policies in some sort of contractual commitment. This conclusion is obvious from both the dollar amounts at stake and the regulators’ proven propensity to make changes in the relevant requirements. See Brief for United States 26 (“[I]n light of the frequency with which federal capital requirements had changed in the past... , it would have been unreasonable for Glendale, FSLIC, or the Bank Board to expect or rely upon the fact that those requirements would remain unchanged”); see also infra, at 909-910. Under the circumstances, we have no doubt that the parties intended to settle regulatory treatment of these transactions as a condition of their agreement. See, e.g., The Binghamton Bridge, 3 Wall. 51, 78 (1866) (refusing to construe charter in such a way that it would have been “madness” for private party to enter into it).¹³ We accordingly have no reason to question the Court of Appeals’s conclusion that “the government had an express contractual obligation to permit Glendale to count the supervisory goodwill generated as a result of its merger with Broward as a capital asset for regulatory capital purposes.” 64 F. 3d, at 1540.

In 1983, FSLIC solicited bids for the acquisition of Windom Federal Savings and Loan Association, a Minnesota-based thrift in danger of failing. At that time, the estimated cost to the Government of liquidating Windom was approximately $12 million. A group of private investors formed Winstar Corporation for the purpose of acquiring Windom and submitted a merger plan to FSLIC; it called for capital contributions of $2.8 million from Winstar and $5.6 million from FSLIC, as well as for recognition of supervisory goodwill to be amortized over a period of 35 years.

The Bank Board accepted the Winstar proposal and made an Assistance Agreement that incorporated, by an integration clause much like Glendale’s, both the Board’s resolution approving the merger and a forbearance letter issued on the date of the agreement. See App. 112. The forbearance letter provided that “[f]or purposes of reporting to the Board, the value of any intangible assets resulting from accounting for the merger in accordance with the purchase method may be amortized by [Winstar] over a period not to exceed 35 years by the straight-line method.” Id., at 123. Moreover, the Assistance Agreement itself contained an “Accounting Principles” section with the following provisions:

“Except as otherwise provided, any computations made for the purposes of this Agreement shall be governed by generally accepted accounting principles as applied on a going concern basis in the savings and loan industry, except that where such principles conflict with the terms of this Agreement, applicable regulations of the Bank Board or the [FSLIC], or any resolution or action of the Bank Board approving or adopted concurrently with this Agreement, then this Agreement, such regulations, or such resolution or action shall govern. ... If there is a conflict between such regulations and the Bank Board’s resolution or action, the Bank Board’s resolution or action shall govern. For purposes of this section, the governing regulations and the accounting principles shall be those in effect on the Effective Date or as subsequently clarified, interpreted, or amended by the Bank Board or the Financial Accounting Standards Board (“FASB”), respectively, or any successor organization to either.” Id., at 108-109.

The Government emphasizes the last sentence of this clause, which provides that the relevant accounting principles may be “subsequently clarified ... or amended,” as barring any inference that the Government assumed the risk of regulatory change. Its argument, however, ignores the preceding sentence providing that the Bank Board’s resolutions and actions in connection with the merger must prevail over contrary regulations. If anything, then, the accounting principles clause tilts in favor of interpreting the contract to lock in the then-current regulatory treatment of supervisory goodwill.

In any event, we do not doubt the soundness of the Federal Circuit’s finding that the overall “documentation in the Win-star transaction establishes an express agreement allowing Winstar to proceed with the merger plan approved by the Bank Board, including the recording of supervisory goodwill as a capital asset for regulatory capital purposes to be amortized over 35 years.” 64 F. 3d, at 1544. As in the Glendale transaction, the circumstances of the merger powerfully support this conclusion: The tangible net worth of the acquired institution was a negative $6.7 million, and the new Winstar thrift would have been out of compliance with regulatory capital standards from its very inception, without including goodwill in the relevant calculations. We thus accept the Court of Appeals’s conclusion that “it was the intention of the parties to be bound by the accounting treatment for goodwill arising in the merger.” Ibid.

Statesman, another nonthrift entity, approached FSLIC in 1987 about acquiring a subsidiary of First Federated Savings Bank, an insolvent Florida thrift. FSLIC responded that if Statesman wanted Government assistance in the acquisition it would have to acquire all of First Federated as well as three shaky thrifts in Iowa. Statesman and FSLIC ultimately agreed on a complex plan for acquiring the four thrifts; the agreement involved application of the purchase method of accounting, a $21 million cash contribution from Statesman to be accompanied by $60 million from FSLIC, and (unlike the Glendale and Winstar plans) treatment of $26 million of FSLIC’s contribution as a permanent capital credit to Statesman’s regulatory capital.

The Assistance Agreement between Statesman and FSLIC included an “accounting principles” clause virtually identical to Winstar’s, see App. 402-403, as well as a specific provision for the capital credit:

“For the purposes of reports to the Bank Board . . . , $26 million of the contribution [made by FSLIC] shall be credited to [Statesman’s] regulatory capital account and shall constitute regulatory capital (as defined in §561.13 of the Insurance Regulations).” Id., at 362a.

As with Glendale and Winstar, the agreement had an integration clause incorporating contemporaneous resolutions and letters issued by the Board. Id., at 407-408. The Board’s resolution explicitly acknowledged both the capital credits and the creation of supervisory goodwill to be amortized over 25 years, id., at 458-459, and the Forbearance Letter likewise recognized the capital credit provided for in the agreement. Id., at 476. Finally, the parties executed a separate Regulatory Capital Maintenance Agreement stating that, “[i]n consideration of the mutual promises contained [t]herein,” id., at 418, Statesman would be obligated to maintain the regulatory capital of the acquired thrifts “at the level... required by § 563.13(b) of the Insurance Regulations . . . or any successor regulation . . . .” The agreement further provided, however, that “[f]or purposes of this Agreement, any determination of [Statesman’s] Required Regulatory Capital. . . shall include . . . amounts permitted by the FSLIC in the Assistance Agreement and in the forbearances issued in connection with the transactions discussed herein.” Id., at 418-419. Absent those forbearances, Statesman’s thrift would have remained insolvent by almost $9 million despite the cash infusions provided by the parties to the transaction.

For the same reasons set out above with respect to the Glendale and Winstar transactions, we accept the Federal Circuit’s conclusion that “the government was contractually obligated to recognize the capital credits and the supervisory goodwill generated by the merger as part of the Statesman’s regulatory capital requirement and to permit such goodwill to be amortized on a straight line basis over 25 years.” 64 F. 3d, at 1543. Indeed, the Government’s' position is even weaker in Statesman’s case because the capital credits portion of the agreement contains an express commitment to include those credits in the calculation of regulatory capital. The Government asserts that the reference to §563.13 of FSLIC regulations, which at the time defined regulatory capital for thrift institutions, indicates that the Government’s obligations could change along with the relevant regulations. But, just as in Winstar’s case, the Government would have us overlook the specific incorporation of the then-current regulations as part of the agreement.¹⁴ The Government also cites a provision requiring Statesman to “comply in all material respects with all applicable statutes, regulations, orders of, and restrictions imposed by the United States or ... by any agency of [the United States],” App. 407, but this simply meant that Statesman was required to observe FIRREA’s new capital requirements once they were promulgated. The clause was hardly necessary to oblige Statesman to obey the law, and nothing in it barred Statesman from asserting that passage of that law required the Government to take action itself or be in breach of its contract.

It is important to be clear about what these contracts did and did not require of the Government. Nothing in the documentation or the circumstances of these transactions purported to bar the Government from changing the way in which it regulated the thrift industry. Rather, what the Federal Circuit said of the Glendale transaction is true of the Winstar and Statesman deals as well: “the Bank Board and the FSLIC were contractually bound to recognize the supervisory goodwill and the amortization periods reflected” in the agreements between the parties. 64 F. 3d, at 1541-1542. We read this promise as the law of contracts has always treated promises to provide something beyond the promi-sor’s absolute control, that is, as a promise to insure the promisee against loss arising from the promised condition’s nonoccurrence.¹⁵ Holmes’s example is famous: “[i]n the case of a binding promise that it shall rain to-morrow, the immediate legal effect of what the promisor does is, that he takes the risk of the event, within certain defined limits, as between himself and the promisee.” Holmes, The Common Law (1881), in 3 The Collected Works of Justice Holmes 268 (S. Novick ed. 1995).¹⁶ Contracts like this are especially appropriate in the world of regulated industries, where the risk that legal change will prevent the bargained-for performance is always lurking in the shadows. The drafters of the Restatement attested to this when they explained that, “[w]ith the trend toward greater governmental regulation . . . parties are increasingly aware of such risks, and a party may undertake a duty that is not discharged by such supervening governmental actions . . . .” Restatement (Second) of Contracts §264, Comment a. “Such an agreement,” according to the Restatement, “is usually interpreted as one to pay damages if performance is prevented rather than one to render a performance in violation of law.” Ibid.17

When the law as to capital requirements changed in the present instance, the Government was unable to perform its promise and, therefore, became liable for breach. We accept the Federal Circuit’s conclusion that the Government breached these contracts when, pursuant to the new regulatory capital requirements imposed by FIRREA, 12 U. S. C. § 1464(t), the federal regulatory agencies limited the use of supervisory goodwill and capital credits in calculating respondents’ net worth. 64 F. 3d, at 1545. In the case of Winstar and Statesman, the Government exacerbated its breach when it seized and liquidated respondents’ thrifts for regulatory noncompliance. Ibid.

In evaluating the relevant documents and circumstances, we have, of course, followed the Federal Circuit in applying ordinary principles of contract construction and breach that would be applicable to any contract action between private parties. The Government’s case, however, is that the Federal Circuit’s decision to apply ordinary principles was error for a variety of reasons, each of which we consider, and reject, in the sections ahead.

< J-H

The Government argues for reversal, first, on the principle that “contracts that limit the government’s future exercises of regulatory authority are strongly disfavored; such contracts will be recognized only rarely, and then only when the limitation on future regulatory authority is expressed in unmistakable terms.” Brief for United States 16. Hence, the Government says, the agreements between the Bank Board, FSLIC, and respondents should not be construed to waive Congress’s authority to enact a subsequent bar to using supervisory goodwill and capital credits to meet regulatory capital requirements.

The argument mistakes the scope of the unmistakability doctrine. The thrifts do not claim that the Bank Board and FSLIC purported to bind Congress to ossify the law in conformity to the contracts; they seek no injunction against application of FIRREA’s new capital requirements to them and no exemption from FIRREA’s terms. They simply claim that the Government assumed the risk that subsequent changes in the law might prevent it from performing, and agreed to pay damages in the event that such failure to perform caused financial injury. The question, then, is not whether Congress could be constrained but whether the doctrine of unmistakability is applicable to any contract claim against the Government for breach occasioned by a subsequent Act of Congress. The answer to this question is no.

The unmistakability doctrine invoked by the Government was stated in Bowen v. Public Agencies Opposed to Social Security Entrapment: “ '[Sovereign power . . . governs all contracts subject to the sovereign’s jurisdiction, and will remain intact unless surrendered in unmistakable terms.’” 477 U. S., at 52 (quoting Merrion v. Jicarilla Apache Tribe, 455 U. S. 130, 148 (1982)). This doctrine marks the point of intersection between two fundamental constitutional concepts, the one traceable to the theory of parliamentary sovereignty made familiar by Blackstone, the other to the theory that legislative power may be limited, which became familiar to Americans through their experience under the colonial charters, see G. Wood, Creation of the American Republic 1776-1787, pp. 268-271 (1969).

In his Commentaries, Blackstone stated the centuries-old concept that one legislature may not bind the legislative authority of its successors:

“Acts of parliament derogatory from the power of subsequent parliaments bind not.. .. Because the legislature, being in truth the sovereign power, is always of equal, always of absolute authority: it acknowledges no superior upon earth, which the prior legislature must have been, if it’s [sic] ordinances could bind the present parliament.” 1 W. Blackstone, Commentaries on the Laws of England 90 (1765).¹⁸

In England, of course, Parliament was historically supreme in the sense that no “higher law” limited the scope of legislative action or provided mechanisms for placing legally enforceable limits upon it in specific instances; the power of American legislative bodies, by contrast, is subject to the overriding dictates of the Constitution and the obligations that it authorizes. See Eule, Temporal Limits on the Legislative Mandate: Entrenchment and Retroactivity, 1987 Am. Bar Found. Research J. 379, 392-393 (observing that the English rationale for precluding a legislature from binding its successors does not apply in America). Hence, although we have recognized that “a general-law ... may be repealed, amended or disregarded by the legislature which enacted it,” and “is not binding upon any subsequent legislature,” Manigault v. Springs, 199 U. S. 473, 487 (1905),¹⁹ on this side of the Atlantic the principle has always lived in some tension with the constitutionally created potential for a legislature, under certain circumstances, to place effective limits on its successors, or to authorize executive action resulting in such a limitation.

The development of this latter, American doctrine in federal litigation began in cases applying limits on state sovereignty imposed by the National Constitution. Thus Chief Justice Marshall’s exposition in Fletcher v. Peck, 6 Cranch 87 (1810), where the Court held that the Contract Clause, U. S. Const., Art. I, § 10, cl. 1, barred the State of Georgia’s effort to rescind land grants made by a prior state legislature. Marshall acknowledged “that one legislature is competent to repeal any act which a former legislature was competent to pass; and that one legislature cannot abridge the powers of a succeeding legislature.” 6 Cranch, at 135. “The correctness of this principle, so far as respects general legislation,” he said, “can never be controverted.” Ibid. Marshall went on to qualify the principle, however, noting that “if an act be done under a law, a succeeding legislature cannot undo it. The past cannot be recalled by the most absolute power.” Ibid. For Marshall, this was true for the two distinct reasons that the intrusion on vested rights by the Georgia Legislature’s Act of repeal might well have gone beyond the limits of “the legislative power,” and that Georgia’s legislative sovereignty was limited by the Federal Constitution’s bar against laws impairing the obligation of contracts. Id., at 135-136.

The impetus for the modern unmistakability doctrine was thus Chief Justice Marshall’s application of the Contract Clause to public contracts. Although that Clause made it possible for state legislatures to bind their successors by entering into contracts, it soon became apparent that such contracts could become a threat to the sovereign responsibilities of state governments. Later decisions were accordingly less willing to recognize contractual restraints upon legislative freedom of action, and two distinct limitations developed to protect state regulatory powers. One came to be known as the “reserved powers” doctrine, which held that certain substantive powers of sovereignty could not be contracted away. See West River Bridge Co. v. Dix, 6 How. 507 (1848) (holding that a State’s contracts do not surrender its eminent domain power).²⁰ The other, which surfaced somewhat earlier in Providence Bank v. Billings, 4 Pet. 514 (1830), and Proprietors of Charles River Bridge v. Proprietors of Warren Bridge, 11 Pet. 420 (1837), was a canon of construction disfavoring implied governmental obligations in public contracts. Under this rule that “[a]ll public grants are strictly construed,” The Delaware Railroad Tax, 18 Wall. 206, 225 (1874), we have insisted that “[njothing can be taken against the State by presumption or inference,” ibid., and that “neither the right of taxation, nor any other power of sovereignty, will be held ... to have been surrendered, unless such surrender has been expressed in terms too plain to be mistaken.” Jefferson Branch Bank v. Skelly, 1 Black 436, 446 (1862).

The posture of the government in these early unmistaka-bility cases is important. In each, a state or local government entity had made a contract granting a private party some concession (such as a tax exemption or a monopoly), and a subsequent governmental action had abrogated the contractual commitment. In each case, the private party was suing to invalidate the abrogating legislation under the Contract Clause. A requirement that the government’s obligation unmistakably appear thus served the dual purposes of limiting contractual incursions on a State’s sovereign powers and of avoiding difficult constitutional questions about the extent of state authority to limit the subsequent exercise of legislative power. Cf. Edward J. DeBartolo Corp. v. Florida Gulf Coast Building & Constr. Trades Council, 485 U. S. 568, 575 (1988) (“[W]here an otherwise acceptable construction of a statute would raise serious constitutional problems, the Court will construe the statute to avoid such problems unless such construction is plainly contrary to the intent of Congress”); Ashwander v. TVA, 297 U. S. 288, 348 (1936) (Brandeis, J., concurring) (same).

The same function of constitutional avoidance has marked the expansion of the unmistakability doctrine from its Contract Clause origins dealing with state grants and contracts to those of other governmental sovereigns, including the United States. See Merrion v. Jicarilla Apache Tribe, 455 U. S., at 148 (deriving the unmistakability principle from St. Louis v. United Railways Co., 210 U. S. 266 (1908), a Contract Clause suit against a state government).²¹ Although the Contract Clause has no application to acts of the United States, Pension Benefit Guaranty Corporation v. R. A. Gray & Co., 467 U. S. 717, 732, n. 9 (1984), it is clear that the National Government has some capacity to make agreements binding future Congresses by creating vested rights, see, e. g., Perry v. United States, 294 U. S. 330 (1935); Lynch v. United States, 292 U. S. 571 (1934). The extent of that capacity, to be sure, remains somewhat obscure. Compare, e. g., United States Trust Co. of N. Y. v. New Jersey, 431 U. S. 1, 26 (1977) (heightened Contract Clause scrutiny when States abrogate their own contractual obligations), with Pension Benefit Guaranty Corporation, supra, at 733 (contrasting less exacting due process standards governing federal economic legislation affecting private contracts). But the want of more developed law on limitations independent of the Contract Clause is in part the result of applying the un-mistakability canon of construction to avoid this doctrinal thicket, as we have done in several cases involving alleged surrenders of sovereign prerogatives by the National Government and Indian tribes.

First, we applied the doctrine to protect a tribal sovereign in Merrion v. Jicarilla Apache Tribe, supra, which held that long-term oil and gas leases to private parties from an Indian Tribe, providing for specific royalties to be paid to the Tribe, did not limit the Tribe's sovereign prerogative to tax the proceeds' from the lessees’ drilling activities. Id., at 148. Because the lease made no reference to the Tribe’s taxing power, we held simply that a waiver of that power could not be “inferred . . . from silence,” ibid., since the taxing power of any government remains “unless it is has been specifically surrendered in terms which admit of no other reasonable interpretation.” Ibid, (internal quotation marks and citation omitted).

In Bowen v. Public Agencies Opposed to Social Security Entrapment, 477 U. S. 41 (1986), this Court confronted a state claim that § 103 of the Social Security Amendments Act of 1983, 97 Stat. 71, 42 U. S. C. § 418(g) (1982 ed., Supp. II), was unenforceable to the extent it was inconsistent with the terms of a prior agreement with the National Government. Under the law before 1983, a State could agree with the Secretary of Health and Human Services to cover the State’s employees under the Social Security scheme subject to a right to withdraw them from coverage later. When the 1983 Act eliminated the right of withdrawal, the State of California and related plaintiffs sought to enjoin application of the new law to them, or to obtain just compensation for loss of the withdrawal right (a remedy which the District Court interpreted as tantamount to the injunction, since it would mandate return of all otherwise required contributions, see 477 U. S., at 51). Although we were able to resolve the case by reading the terms of a state-federal coverage agreement to reserve the Government’s right to modify its terms by subsequent legislation, in the alternative we rested the decision on the more general principle that, absent an “unmistakable” provision to the contrary, “contractual arrangements, including those to which a sovereign itself is a party, ‘remain subject to subsequent legislation’ by the sovereign.” Id., at 52 (quoting Merrion, supra, at 147). We thus rejected the proposal “to find that a ‘sovereign forever waives the right to exercise one of its sovereign powers unless it expressly reserves the right to exercise that power in’ the contract,” Bowen, supra, at 52 (quoting Merrion, supra, at 148), and held instead that unmistakability was needed for waiver, not reservation.

Most recently, in United States v. Cherokee Nation of Okla., 480 U. S. 700 (1987), we refused to infer a waiver of federal sovereign power from silence. There, an Indian Tribe with property rights in a riverbed derived from a Government treaty sued for just compensation for damage to its interests caused by the Government’s navigational improvements to the Arkansas River. The claim for compensation presupposed, and was understood to presuppose, that the Government had conveyed to the Tribe its easement to control navigation; absent that conveyance, the Tribe’s property included no right to be free from the Government’s riverbed improvements. Id., at 704. We found, however, that the treaty said nothing about conveying the Government’s navigational easement, see id., at 706, which we saw as an aspect of sovereignty. This, we said, could be “ ‘surrendered [only] in unmistakable terms,’ ” id., at 707 (quoting Bowen, supra, at 52), if indeed it could be waived at all.

Merrion, Bowen, and Cherokee Nation thus announce no new rule distinct from the canon of construction adopted in Providence Bank and Charles River Bridge; their collective holding is that a contract with a sovereign government will not be read to include an unstated term exempting the other contracting party from the application of a subsequent sovereign act (including an Act of Congress), nor will an ambiguous term of a grant or contract be construed as a conveyance or surrender of sovereign power. The cases extending back into the 19th century thus stand for a rule that applies when the Government is subject either to a claim that its contract has surrendered a sovereign power²² (e. g., to tax or control navigation), or to a claim that cannot be recognized without creating an exemption from the exercise of such a power (e. g., the equivalent of exemption from Social Security obligations). The application of the doctrine thus turns on whether enforcement of the contractual obligation alleged would block the exercise of a sovereign power of the Government.

Since the criterion looks to the effect of a contract’s enforcement, the particular remedy sought is not dispositive and the doctrine is not rendered inapplicable by a request for damages, as distinct from specific performance. The respondents in Cherokee Nation sought nothing beyond damages, but the case still turned on the unmistakability doctrine because there could be no claim to harm unless the right to be free of the sovereign power to control navigation had been conveyed away by the Government.²³ So, too, in Bowen: the sole relief sought was dollars and cents, but the award of damages as requested' would have been the equivalent of exemption from the terms of the subsequent statute.

The application of the doctrine will therefore differ according to the different kinds of obligations the Government may assume and the consequences of enforcing them. At one end of the wide spectrum are claims for enforcement of contractual obligations that could not be recognized without effectively limiting sovereign authority, such as a claim for rebate under an agreement for a tax exemption. Granting a rebate, like enjoining enforcement, would simply block the exercise of the taxing power, cf. Bowen, 477 U. S., at 51, and the unmistakability doctrine would have to be satisfied.²⁴ At the other end are contracts, say, to buy food for the army; no sovereign power is limited by the Government’s promise to purchase and a claim for damages implies no such limitation. That is why no one would seriously contend that enforcement of humdrum supply contracts might be subject to the unmistakability doctrine. Between these extremes lies an enormous variety of contracts including those under which performance will require exercise (or not) of a power peculiar to the Government. So long as such a contract is reasonably construed to include a risk-shifting component that may be enforced without effectively barring the exercise of that power, the enforcement of the risk allocation raises nothing for the unmistakability doctrine to guard against, and there is no reason to apply it.

The Government argues that enforcement of the contracts in this case would implicate the unmistakability principle, with the consequence that Merrion, Bowen, and Cherokee Nation are good authorities for rejecting respondents’ claims. The Government’s position is mistaken, however, for the complementary reasons that the contracts have not been construed as binding the Government’s exercise of authority to modify banking regulation or of any other sovereign power, and there has been no demonstration that awarding damages for breach would be tantamount to any such limitation.

As construed by each of the courts that considered these contracts before they reached us, the agreements do not purport to bind the Congress from enacting regulatory measures, and respondents do not ask the courts to infer from silence any such limit on sovereign power as would violate the holdings of Merrion and Cherokee Nation. The contracts have been read 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. They seek no injunction against application of the law to them, as the plaintiffs did in Bowen and Merrion, cf. Reichelderfer v. Quinn, 287 U. S. 315 (1932), and they acknowledge that the Bank Board and FSLIC could not bind Congress (and possibly could not even bind their future selves) not to change regulatory policy.

Nor do the damages respondents seek amount to exemption from the new law, in the manner of the compensation sought in Bowen, see 477 U. S., at 51. Once general jurisdiction to make an award against the Government is conceded, a requirement to pay money supposes no surrender of sovereign power by a sovereign with the power to contract. See, e. g., Amino Bros. Co. v. United States, 178 Ct. Cl. 515, 525, 372 F. 2d 485, 491 (“The Government cannot make a binding contract that it will not exercise a sovereign power, but it can agree in a contract that if it does so, it will pay the other contracting party the amount by which its costs are increased by the Government’s sovereign act”), cert. denied, 889 U. S. 846 (1967).²⁵ Even if respondents were asking that the Government be required to make up any capital deficiency arising from the exclusion of goodwill and capital credits from the relevant calculations, such relief would hardly amount to an exemption from the capital requirements of FIRREA; after all, Glendale (the only respondent thrift still in operation) would still be required to maintain adequate tangible capital reserves under FIRREA, and the purpose of the statute, the protection of the insurance fund, would be served. Nor would such a damages award deprive the Government of money it would otherwise be entitled to receive (as a tax rebate would), since the capital require-merits of FIRRE A govern only the allocation of resources to a thrift and require no payments to the Government at all.²⁶

We recognize, of course, that while agreements to insure private parties against the costs of subsequent regulatory change do not directly impede the exercise of sovereign power, they may indirectly deter needed governmental regulation by raising its costs. But all regulations have their costs, and Congress itself expressed a willingness to bear the costs at issue here when it authorized FSLIC to “guarantee [acquiring thrifts] against loss” that might occur as a result of a supervisory merger. 12 U. S. C. § 1729(f)(2) (1988 ed.) (repealed 1989). Just as we have long recognized that the Constitution “ ‘barfs] Government from forcing some people alone to bear public burdens which, in all fairness and justice, should be borne by the public as a whole,’ ” Dolan v. City of Tigard, 512 U. S. 374, 384 (1994) (quoting Armstrong v. United States, 364 U. S. 40, 49 (1960)), so we must reject the suggestion that the Government may simply shift costs of legislation onto its contractual partners who are adversely affected by the change in the law, when the Government has assumed the risk of such change.

The Government’s position would not only thus represent a conceptual expansion of the unmistakability doctrine beyond its historical and practical warrant, but would place the doctrine at odds with the Government’s own long-run interest as a reliable contracting partner in the myriad workaday transaction of its agencies. Consider the procurement contracts that can be affected by congressional or executive scale backs in federal regulatory or welfare activity; or contracts to substitute private service providers for the Government, which could be affected by a change in the official philosophy on privatization; or all the contracts to dispose of federal property, surplus or otherwise. If these contracts are made in reliance on the law of contract and without specific provision for default mechanisms,²⁷ should all the private'contractors be denied a remedy in damages unless they satisfy the unmistakability doctrine? The answer is obviously no because neither constitutional avoidance nor any apparent need to protect the Government from the consequences of standard operations could conceivably justify applying the doctrine. Injecting the opportunity for un-mistakability litigation into every common contract action would, however, produce the untoward result of compromising the Government’s practical capacity to make contracts, which we have held to be “of the essence of sovereignty” itself. United States v. Bekins, 304 U. S. 27, 51-52 (1938).²⁸ From a practical standpoint, it would make an inroad on this power, by expanding the Government’s opportunities for contractual abrogation, with the certain result of undermining the Government’s credibility at the bargaining table and increasing the cost of its engagements. As Justice Brandéis recognized, “[pjunctilious fulfillment of contractual obligations is essential to the maintenance of the credit of public as well as private debtors.” Lynch v. United States, 292 U. S., at 580.²⁹

The dissent’s only answer to our concern is to recognize that “Congress may not simply abrogate a statutory provision obligating performance without breaching the contract and rendering itself liable for damages.” Post, at 929 (citing Lynch, supra, at 580). Yet the only grounds that statement suggests for distinguishing Lynch from the present case is that there the contractual obligation was embodied in a statute. Putting aside the question why this distinction should make any difference, we note that the dissent seemingly does not deny that its view would apply the unmistakability doctrine to the vast majority of governmental contracts, which would be subject to abrogation arguments based on subsequent sovereign acts. Indeed, the dissent goes so far as to argue that our conclusion that damages are available for breach even where the parties did not specify a remedy in the contract depends upon “reading of additional terms into the contract.” Post, at 930. That, of course, is not the law; damages are always the default remedy for breach of contract.³⁰ And we suspect that most Government contractors would be quite surprised by the dissent’s conclusion that, where they have failed to require an express provision that damages will be available for breach, that remedy must be “implied in law” and therefore unavailable under the Tucker Act, ibid.

Nor can the dissenting view be confined to those contracts that are “regulatory” in nature. Such a distinction would raise enormous analytical difficulties; one could ask in this case whether the Government as contractor was regulating or insuring. The dissent understandably does not advocate such a distinction, but its failure to advance any limiting principle at all would effectively compromise the Government’s capacity as a reliable, straightforward contractor whenever the subject matter of a contract might be subject to subsequent regulation, which is most if not all of the time.³¹ Since the facts of the present case demonstrate that the Government may wish to further its regulatory goals through contract, we are unwilling to adopt any rule of construction that would weaken the Government’s capacity to do business by converting every contract it makes into an arena for unmistakability litigation.

In any event, we think the dissent goes fundamentally wrong when it concludes that “the issue of remedy for . . . breach” can arise only “[i]f the sovereign did surrender its power unequivocally.” Post, at 929. This view ignores the other, less remarkable possibility actually found by both courts that construed these contracts: that the Government agreed to do something that did not implicate its sovereign powers at all, that is, to indemnify its contracting partners against financial losses arising from regulatory change. We accordingly hold that the Federal Circuit correctly refused to apply the unmistakability doctrine here. See 64 F. 3d, at 1548. There being no need for an unmistakably clear “second promise” not to change the capital requirements, it is sufficient that the Government undertook an obligation that it subsequently found itself unable to perform. This conclusion does not, of course, foreclose the assertion of a defense that the contracts were ultra vires or that the Government’s obligation should be discharged under the common-law doctrine of impossibility, see infra, at 888-891, 904-910, but nothing in the nature of the contracts themselves raises a bar to respondents’ claims for breach.³²

B

The answer to the Government’s unmistakability argument also meets its two related contentions on the score of ultra vires: that the Bank Board and FSLIC had no authority to bargain away Congress’s power to change the law in the future, and that we should in any event find no such authority conferred without an express delegation to that effect. The first of these positions rests on the reserved powers doctrine, developed in the course of litigating claims that States had violated the Contract Clause. See supra, at 874. It holds that a state government may not contract away “an essential attribute of its sovereignty,” United States Trust, 431 U. S., at 23, with the classic example of its limitation on the scope of the Contract Clause being found in Stone v. Mississippi, 101 U. S. 814 (1880). There a corporation bargained for and received a state legislative charter to conduct lotteries, only to have them outlawed by statute a year later. This Court rejected the argument that the charter immunized the corporation from the operation of the statute, holding that “the legislature cannot bargain away the police power of a State.” Id., at 817.³³

The Government says that “[t]he logic of the doctrine . . . applies equally to contracts alleged to have been made by the federal government.” Brief for United States 38. This may be so but is also beside the point, for the reason that the Government’s ability to set capital requirements is not limited by the Bank Board’s and FSLIC’s promises to make good any losses arising from subsequent regulatory changes. See supra, at 882-883. The answer to the Government’s contention that the State cannot barter away certain elements of its sovereign power is that a contract to adjust the risk of subsequent legislative change does not strip the Government of its legislative sovereignty.³⁴

The same response answers the Government’s demand for express delegation of any purported authority to fetter the exercise of sovereign power. It is true, of course, that in Home Telephone & Telegraph Co. v. Los Angeles, 211 U. S., at 273, we said that “[t]he surrender, by contract, of a power of government, though in certain well-defined cases it may be made by legislative authority, is a very grave act, and the surrender itself, as well as the authority to make it, must be closely scrutinized.” Hence, where “a contract has the effect of extinguishing pro tanto an undoubted power of government,” we have insisted that “both [the contract’s] existence and the authority to make it must clearly and unmistakably appear, and all doubts must be resolved in favor of the continuance of the power.” Ibid. But Home Telephone & Telegraph simply has no application to the present case, because there were no contracts to surrender the Government’s sovereign power to regulate.³⁵

There is no question, conversely, that the Bank Board and FSLIC had ample statutory authority to do what the Court of Federal Claims and the Federal Circuit found they did do, that is, promise to permit respondents to count supervisory goodwill and capital credits toward regulatory capital and to pay respondents’ damages if that performance became impossible. The organic statute creating FSLIC as an arm of the Bank Board, 12 U. S. C. § 1725(c) (1988 ed.) (repealed 1989), generally empowered it “[t]o make contracts,”³⁶ and § 1729(f)(2), enacted in 1978, delegated more specific powers in the context of supervisory mergers:

“Whenever an insured institution is in default or, in the judgment of the Corporation, is in danger of default, the Corporation may, in order to facilitate a merger or consolidation of such insured institution with another insured institution ... guarantee such other insured institution against loss by reason of its merging or consolidating with or assuming the liabilities and purchasing the assets of such insured institution in or in danger of default.” 12 U. S. C. § 1729(f)(2) (1976 ed., Supp. V) (repealed 1989).

Nor is there any reason to suppose that the breadth of this authority was not meant to extend to contracts governing treatment of regulatory capital. Congress specifically recognized FSLIC’s authority to permit thrifts to count goodwill toward capital requirements when it modified the National Housing Act in 1987:

“No provision of this section shall affect the authority of the [FSLIC] to authorize insured institutions to utilize subordinated debt and goodwill in meeting reserve and other regulatory requirements.” 12 U. S. C. § 1730h(d) (1988 ed.) (repealed 1989).

See also S. Rep. No. 100-19, p. 55 (1987) (“It is expected .. . that the [Bank Board] will retain its own authority to determine . .. the components and level of capital to be required of FSLIC-insured institutions”); NLRB v. Bell Aerospace Co., 416 U. S. 267, 275 (1974) (“[Subsequent legislation declaring the intent of an earlier statute is entitled to significant weight”). There is no serious question that FSLIC (and the Bank Board acting through it) was authorized to make the contracts in issue.

IV

The Government’s final line of defense is the sovereign acts doctrine, to the effect that “ ‘[w]hatever acts the government may do, be they legislative or executive, so long as they be public and general, cannot be deemed specially to alter, modify, obstruct or violate the particular contracts into which it enters with private persons.’” Horowitz v. United States, 267 U. S., at 461 (quoting Jones v. United States, 1 Ct. Cl. 383, 384 (1865)). Because FIRREA’s alteration of the regulatory capital requirements was a “public and general act,” the Government says, that act could not amount to a breach of the Government’s contract with respondents.

The Government’s position cannot prevail, however, for two independent reasons. The facts of this case do not warrant application of the doctrine, and even if that were otherwise the doctrine would not suffice to excuse liability under this governmental contract allocating risks of regulatory change in a highly regulated industry.

In Horowitz, the plaintiff sued to recover damages for breach of a contract to purchase silk from the Ordnance Department. The agreement included a promise by the Department to ship the silk within a certain time, although the manner of shipment does not appear to have been a subject of the contract. Shipment was delayed because the United States Railroad Administration placed an embargo on shipments of silk by freight, and by the time the silk reached Horowitz the price had fallen, rendering the deal unprofitable. This Court barred any damages award for the delay, noting that “[i]t has long been held by the Court of Claims that the United States when sued as a contractor cannot be held liable for an obstruction to the performance of the particular contract resulting from its public and general acts as a sovereign.” 267 U. S., at 461. This statement was not, however, meant to be read as broadly as the Government urges, and the key to its proper scope is found in that portion of our opinion explaining that the essential point was to put the Government in the same position that it would have enjoyed as a private contractor:

“‘The two characters which the government possesses as a contractor and as a sovereign cannot be thus fused; nor can the United States while sued in the one character be made liable in damages for their acts done in the other. Whatever acts the government may do, be they legislative or executive, so long as they be public and general, cannot be deemed specially to alter, modify, obstruct or violate the particular contracts into which it enters with private persons.... In this court the United States appear simply as contractors; and they are to be held liable only within the same limits that any other defendant would be in any other court. Though their sovereign acts performed for the general good may work injury to some private contractors, such parties gain nothing by having the United States as their defendants.’” Ibid, (quoting Jones v. United States, supra, at 384).

The early Court of Claims cases upon which Horowitz relied anticipated the Court’s emphasis on the Government’s dual and distinguishable capacities and on the need to treat the Government-as-contractor the same as a private party. In Deming v. United States, 1 Ct. Cl. 190 (1865), the Court of Claims rejected a suit by a supplier of army rations whose costs increased as a result of Congress’s passage of the Legal Tender Act. The Deming court thought it “grave error” to suppose that “general enactments of Congress are to be construed as evasions of [the plaintiff’s] particular contract.” Id., at 191. “The United States as a contractor are not responsible for the United States as a lawgiver,” the court said. “In this court the United States can be held to no greater liability than other contractors in other courts.” Ibid. Similarly, Jones v. United States, supra, refused a suit by surveyors employed by the Commissioner of Indian Affairs, whose performance had been hindered by the United States’s withdrawal of troops from Indian country. “The United States as a contractor,” the Claims Court concluded, “cannot be held liable directly or indirectly for the public acts of the United States as a sovereign.” Id., at 385.

The Government argues that “[t]he relevant question [under these cases] is whether the impact [of governmental action] ... is caused by a law enacted to govern regulatory policy and to advance the general welfare.” Brief for United States 45. This understanding assumes that the dual characters of Government as contractor and legislator are never “fused” (within the meaning of Horowitz) so long as the object of the statute is regulatory and meant to accomplish some public good. That is, on the Government’s reading, a regulatory object is proof against treating the legislature as having acted to avoid the Government’s contractual obligations, in which event the sovereign acts defense would not be applicable. But the Government’s position is open to serious objection.

As an initial matter, we have already expressed our doubt that a workable line can be drawn between the Government’s “regulatory” and “nonregulatory” capacities. In the present case, the Government chose to regulate capital reserves to protect FSLIC’s insurance fund, much as any insurer might impose restrictions on an insured as a condition of the policy. The regulation thus protected the Government in its capacity analogous to a private insurer, the same capacity in which it entered into supervisory merger agreements to convert some of its financial insurance obligations into responsibilities of private entrepreneurs. In this respect, the supervisory mergers bear some analogy to private contracts for reinsurance.³⁷ On the other hand, there is no question that thrift regulation is, in fact, regulation, and that both the supervisory mergers of the 1980’s and the subsequent passage of FIRREA were meant to advance a broader public interest. The inescapable conclusion from all of this is that the Government’s “regulatory” and “nonregulatory” capacities were fused in the instances under consideration, and we suspect that such fusion will be so common in the modern regulatory state as to leave a criterion of “regulation” without much use in defining the scope of the sovereign acts doctrine.³⁸

An even more serious objection is that allowing the Government to avoid contractual liability merely by passing any “regulatory statute” would flout the general principle that, “[w]hen the United States enters into contract relations, its rights and duties therein are governed generally by the law applicable to contracts between private individuals.” Lynch v. United States, 292 U. S., at 579.³⁹ Careful attention to the cases shows that the sovereign acts doctrine was meant to serve this principle, not undermine it. In Horowitz, for example, if the defendant had been a private shipper, it would have been entitled to assert the common-law defense of impossibility of performance against Horowitz’s claim for breach. Although that defense is traditionally unavailable where the barrier to performance arises from the act of the party seeking discharge, see Restatement (Second) of Contracts §261; 2 E. Farnsworth, Contracts §9.6, p. 551 (1990); cf. W. R. Grace & Co. v. Rubber Workers, 461 U. S. 757, 767-768, n. 10 (1983), Horowitz held that the “public and general” acts of the sovereign are not attributable to the Government as contractor so as to bar the Government’s right to discharge. The sovereign acts doctrine thus 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 the answer to the further question, whether that act would otherwise release the Government from liability under ordinary principles of contract law.⁴⁰ Neither question can be answered in the Government’s favor here.

If the Government is to be treated like other contractors, some line has to be drawn in situations like the one before us between regulatory legislation that is relatively free of Government self-interest and therefore cognizable for the purpose of a legal impossibility defense and, on the other hand, statutes tainted by a governmental object of self-relief. Such an object is not necessarily inconsistent with a public purpose, of course, and when we speak of governmental “self-interest,” we simply mean to identify instances in which the Government seeks to shift the costs of meeting its legitimate public responsibilities to private parties. Cf. Armstrong v. United States, 364 U. S., at 49 (The Government may not “forc[e] some people alone to bear public burdens which . . . should be borne by the public as a whole”). Hence, while the Government might legitimately conclude that a given contractual commitment was no longer in the public interest, a government seeking relief from such commitments through legislation would obviously not be in a position comparable to that of the private contractor who willy-nilly was barred by law from performance. There would be, then, good reason in such circumstance to find the regulatory and contractual characters of the Government fused together, in Horowitz’s terms, so that the Government should not have the benefit of the defense.⁴¹

Horowitz’s criterion of “public and general act” thus reflects the traditional “rule of law” assumption that generality in the terms by which the use of power is authorized will tend to guard against its misuse to burden or benefit the few unjustifiably.⁴² See, e. g., Hurtado v. California, 110 U. S. 516, 535-536 (1884) (“Law .. . must be not a special rule for a particular person or a particular case, but... ‘[t]he general law...’ so ‘that every citizen shall hold his life, liberty, property and immunities under the protection of the general rules which govern society’” (citation omitted)).⁴³ Hence, governmental action will not be held against the Government for purposes of the impossibility defense so long as the action’s impact upon public contracts is, as in Horowitz, merely incidental to the accomplishment of a broader governmental objective. See O’Neill v. United States, 231 Ct. Cl. 823, 826 (1982) (noting that the sovereign acts doctrine recognizes that “the Government’s actions, otherwise legal, will occasionally incidentally impair the performance of contracts”).⁴⁴ The greater the Government’s self-interest, however, the more suspect becomes the claim that its private contracting partners ought to bear the financial burden of the Government’s own improvidence, and where a substantial part of the impact of the Government’s action rendering performance impossible falls on its own contractual obligations, the defense will be unavailable. Cf. Sun Oil Co. v. United States, 215 Ct. Cl. 716, 768, 572 F. 2d 786, 817 (1978) (rejecting sovereign acts defense where the Secretary of the Interior’s actions were “ ‘directed principally and primarily at plaintiffs’ contractual right’ ”).⁴⁵

The dissent would adopt a different rule that the Government’s dual roles of contractor and sovereign may never be treated as fused, relying upon Deming’s pronouncement that “ ‘[t]he United States as a contractor are not responsible for the United States as a lawgiver.’ ” Post, at 931 (quoting 1 Ct. Cl., at 191). But that view would simply eliminate the “public and general” requirement, which presupposes that the Government’s capacities must be treated as fused when the Government acts in a nongeneral way. Deming itself twice refers to the “general” quality of the enactment at issue, 1 Ct. Cl., at 191, and notes that “[t]he statute bears upon [the governmental contract] as it bears upon all similar contracts between citizens, and affects it in no other way.” Ibid. At the other extreme, of course, it is clear that any benefit at all to the Government will not disqualify an act as “public and general”; the silk embargo in Horowitz, for example, had the incidental effect of releasing the Government from its contractual obligation to transport Mr. Horowitz’s shipment. Our holding that a governmental act will not be public and general if it has the substantial effect of releasing the Government from its contractual obligations strikes a middle course between these two extremes.⁴⁶

B

In the present case, it is impossible to attribute the exculpatory “public and general” character to FIRREA. Although we have not been told the dollar value of the relief the Government would obtain if insulated from liability under contracts such as these, the attention given to the regulatory contracts prior to passage of FIRREA shows that a substantial effect on governmental contracts is certain. The statute not only had the purpose of eliminating the very accounting gimmicks that acquiring thrifts had been promised, but the specific object of abrogating enough of the acquisition contracts as to make that consequence of the legislation a focal point of the congressional debate.⁴⁷ Opponents of FIRREA’s new capital requirements complained that “[i]n its present form, [FIRREA] would abrogate written agreements made by the U. S. government to thrifts that acquired failing institutions by changing the rules in the middle of the game.” 135 Cong. Rec. 12145 (1989) (statement of Rep. Ackerman). Several Congressmen observed that, “[sjimply put, [Congress] has reneged on the agreements that the government entered into concerning supervisory goodwill.” House Report, at 498 (additional views of Reps. Annunzio, Kanjorski, and Flake).⁴⁸ A similar focus on the supervisory merger contracts is evident among proponents of the legislation; Representative Rostenkowski, for example, insisted that “the Federal Government should be able to change requirements when they have proven to be disastrous and contrary to the public interest. The contracts between the savings and loan owners when they acquired failing institutions in the early 1980’s are not contracts written in stone.” 135 Cong. Rec., at 12077.⁴⁹

This evidence of intense concern with contracts like the ones before us suffices to show that FIRREA had the substantial effect of releasing the Government from its own contractual obligations. Congress obviously expected FIRREA to have such an effect, and in the absence of any evidence to the contrary we accept its factual judgment that this would be so.⁵⁰ Nor is Congress’s own judgment neutralized by the fact, emphasized by the Government, that FIRREA did not formally target particular transactions. Legislation can almost always be written in a formally general way, and the want of an identified target is not much security when a measure’s impact nonetheless falls substantially upon the Government’s contracting partners. For like reason, it does not answer the legislative record to insist, as the Government does, that the congressional focus is irrelevant because the broad purpose of FIRREA was to “advance the general welfare.” Brief for United States 45. We assume nothing less of all congressional action, with the result that an intent to benefit the public can no more serve as a criterion of a “public and general” sovereign act than its regulatory character can.⁵¹ While our limited en-quiry into the background and evolution of the thrift crisis leaves us with the understanding that Congress acted to protect the public in the FIRREA legislation, the extent to which this reform relieved the Government of its own contractual obligations precludes a finding that the statute is a “public and general” act for purposes of the sovereign acts defense.⁵²

c

Even if FIRREA were to qualify as “public and general,” however, other fundamental reasons would leave the sovereign acts doctrine inadequate to excuse the Government’s breach of these contracts. As Horowitz makes clear, that defense simply relieves the Government as contractor from the traditional blanket rule that a contracting party may not obtain discharge if its own act rendered performance impossible. But even if the Government stands in the place of a private party with respect to “public and general” sovereign acts, it does not follow that discharge will always be available, for the common-law doctrine of impossibility imposes additional requirements before a party may avoid liability for breach. As the Restatement puts it,

“[w]here, after a contract is made, a party’s performance is made impracticable without his fault by the occurrence of an event the non-occurrence of which was a basic assumption on which the contract was made, his duty to render that performance is discharged, unless the language or the circumstances indicate the contrary.” Restatement (Second) of Contracts §261.

See also 2 Farnsworth on Contracts § 9.6, at 543-544 (listing four elements of the impossibility defense). Thus, since the object of the sovereign acts defense is to place the Government as contractor on par with a private contractor in the same circumstances, Horowitz, 267 U. S., at 461, the Government, like any other defending party in a contract action, must show that the passage of the statute rendering its performance impossible was an event contrary to the basic assumptions on which the parties agreed, and must ultimately show that the language or circumstances do not indicate that the Government should be liable in any case. While we do not say that these conditions can never be satisfied when the Government contracts with participants in a regulated industry for particular regulatory treatment, we find that the Government as such a contractor has not satisfied the conditions for discharge in the present case.

For a successful impossibility defense the Government would have to show that the nonoccurrence of regulatory amendment was a basic assumption of these contracts. See, e. g., Restatement (Second) of Contracts §261; 2 Farnsworth, supra, § 9.6, at 549-550. The premise of this requirement is that the parties will have bargained with respect to any risks that are both within their contemplation and central to the substance of the contract; as Justice Traynor said, “[i]f [the risk] was foreseeable there should have been provision for it in the contract, and the absence of such a provision gives rise to the inference that the risk was assumed.” Lloyd v. Murphy, 25 Cal. 2d 48, 54, 153 P. 2d 47, 50 (1944).⁵³ That inference is particularly compelling, where, as here, the contract provides for particular regulatory treatment (and, a fortiori, allocates the risk of regulatory change). Such an agreement reflects the inescapable recognition that regulated industries in the modern world do not live under the law of the Medes and the Persians, and the very fact that such a contract is made at all is at odds with any assumption of regulatory stasis. In this particular case, whether or not the reach of the FIRREA reforms was anticipated by the parties, there is no doubt that some changes in the regulatory structure governing thrift capital reserves were both foreseeable and likely when these parties contracted with the Government, as even the Government agrees. It says in its brief to this Court that “in light of the frequency with which federal capital requirements had changed in the past ... , it would have been unreasonable for Glendale, FSLIC, or the Bank Board to expect or rely upon the fact that those requirements would remain unchanged.” Brief for United States 26; see also id., at 3, n. 1 (listing the changes).⁵⁴ The Federal Circuit panel in this case likewise found that the regulatory capital requirements “have been the subject of numerous statutory and regulatory changes over the years,” and “changed three times in 1982 alone.” 994 F. 2d, at 801.⁵⁵ Given these fluctuations, and given the fact that a single modification of the applicable regulations could, and ultimately did, eliminate virtually all of the consideration provided by the Government in these transactions, it would be absurd to say that the nonoccurrence of a change in the regulatory capital rules was a basic assumption upon which these contracts were made. See, e.g., Moncrief v. Williston Basin Interstate Pipeline Co., 880 F. Supp. 1495, 1508 (Wyo. 1995); Vollmar v. CSX Transportation, Inc., 705 F. Supp. 1154, 1176 (ED Va. 1989), aff’d, 898 F. 2d 413 (CA4 1990).

Finally, any governmental contract that not only deals with regulatory change but allocates the risk of its occurrence 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. See Restatement (Second) of Contracts §261 (no impossibility defense where the “language or the circumstances” indicate allocation of the risk to the party seeking discharge).⁵⁶ The mere fact that the Government’s contracting agencies (like the Bank Board and FSLIC) could not themselves preclude Congress from changing the regulatory rules does not, of course, 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. It is, after all, not uncommon for a contracting party to assume the risk of an event he cannot control,⁵⁷ even when that party is an agent of the Government. As the Federal Circuit has recognized, “[Government] contracts routinely include provisions shifting financial responsibility to the Government for events which might occur in the future. That some of these events may be triggered by sovereign government action does not render the relevant contractual provisions any less binding than those which contemplate third party acts, inclement weather and other force majeure.” Hughes Communications Galaxy, Inc. v. United States, 998 F. 2d 953, 958-959 (CA Fed. 1993).⁵⁸

As to each of the contracts before us, our agreement with the conclusions of the Court of Federal Claims and the Federal Circuit forecloses any defense of legal impossibility, for those courts found that the Bank Board resolutions, Forbearance Letters, and other documents setting forth the accounting treatment to be accorded supervisory goodwill generated by the transactions were not mere statements of then-current regulatory policy, but in each instance were terms in an allocation of risk of regulatory change that was essential to the contract between the parties. See supra, at 861-864. Given that the parties went to considerable lengths in procuring necessary documents and drafting broad integration clauses to incorporate their terms into the contract itself, the Government’s suggestion that the parties meant to say only that the regulatory treatment laid out in these documents would apply as an initial matter, subject to later change at the Government’s election, is unconvincing. See ibid. It would, indeed, have been madness for respondents to have engaged in these transactions with no more protection than the Government’s reading would have given them, for the very existence of their institutions would then have been in jeopardy from the moment their agreements were signed.

* * *

We affirm the Federal Circuit’s ruling that the United States is liable to respondents for breach of contract. Because the Court of Federal Claims has not yet determined the appropriate measure or amount of damages in this case, we remand for farther proceedings.

It is so ordered.

1 The easing of federal regulatory requirements was accompanied by similar initiatives on the state level, especially in California, Florida, and Texas. The impact of these changes was substantial, since as of 1980 over 50 percent of federally insured thrifts were chartered by the States. See House Report, at 297.

2 “Regulatory and statutory accounting gimmicks included permitting thrifts to defer losses from the sale of assets with below market yields; permitting the use of income capital certificates, authorized by Congress, in place of real capital; letting qualifying mutual capital certificates be included as RAP capital; allowing FSLIC members to exclude from liabilities in computing net worth, certain contra-asset accounts, including loans in process, unearned discounts, and deferred fees and credits; and permitting the inclusion of net worth certificates, qualifying subordinated debentures and appraised equity capital as RAP net worth.” House Report, at 298. The result of these practices was that “[b]y 1984, the difference between RAP and GAAP net worth at S&L’s stood at $9 billion,” which meant “that the industry’s capital position, or . . . its cushion to absorb losses was overstated by $9 billion.” Ibid.

3 See also White 157 (noting that “[t]he FSLIC developed lists of prospective acquirers, made presentations, held seminars, and generally tried to promote the acquisitions of these insolvents”); Grant, The FSLIC: Protection through Professionalism, 14 Federal Home Loan Bank Board Journal 9-10 (Feb. 1981) (describing the pros and cons of various default-prevention techniques from FSLIC’s perspective). Over 300 such mergers occurred between 1980 and 1986, as opposed to only 48 liquidations. GAO, Forbearance for Troubled Institutions 13. There is disagreement as to whether the Government actually saved money by pursuing this course rather than simply liquidating the insolvent thrifts. Compare, e. g., Brief for Franklin Financial Group, Inc., et al. as Amici Curiae 7, quoting remarks by H. Brent Beasley, Director of FSLIC, before the California Savings and Loan League Management Conference (Sept. 9, 1982) (concluding that FSLIC-assisted mergers have “ ‘[hjistorically . . . cost about 70% of [the] cost of liquidation’ ”), with GAO, Solutions to the Thrift Industry Problem 52 (“FSLIC’s cost analyses may . . . understate] the cost of mergers to the government”).

4 See also Accounting Principles Board Opinion No. 17, ¶ 26, p. 339 (1970) (providing that “[i]ntangible assets acquired ... as part of an acquired company should ... be recorded at cost,” which for unidentifiable intangible assets like goodwill is “measured by the difference between the cost of the ... enterprise acquired and the sum of the assigned costs of individual tangible and identifiable intangible assets acquired less liabilities assumed”).

5 See Newark Morning Ledger Co. v. United States, 507 U. S. 546, 556 (1993) (describing “goodwill” as “the total of all the imponderable qualities that attract customers to the business”). Justice Story defined “goodwill” somewhat more elaborately as “the advantage or benefit, which is acquired by an establishment, beyond the mere value- of the capital, stock, funds, or property employed therein, in consequence of the general public patronage and encouragement, which it receives from constant or habitual customers, on account of its local position, or common celebrity, or reputation for skill or affluence, or punctuality, or from other accidental circumstances, or necessities, or even from ancient partialities, or prejudices.” J. Story, Law of Partnership § 99, p. 139 (1841).

6 See also 135 Cong. Ree. 12061 (1989) (statement of Rep. Hyde) (observing that FSLIC used goodwill as “an inducement to the healthy savings and loans to merge with the sick ones”); Brief for Franklin Financial Group, Inc., et al. as Amici Curiae 9, quoting Deposition of Thurman Connell, former official at the Atlanta Federal Home Loan Bank, Joint App. in Charter Federal Savings Bank v. Office of Thrift Supervision, Nos. 91-2647, 91-2708 (CA4), p. 224 (recognizing that treating supervisory goodwill as regulatory capital was “‘a very important aspect of [the acquiring thrifts’] willingness to enter into these agreements,’ ” and concluding that the regulators “ ‘looked at [supervisory goodwill] as kind of the engine that made this transaction go. Because without it, there wouldn’t have been any train pulling out of the station, so to speak’ ”).

7 In this context, “amortization” of an intangible asset is equivalent to depreciation of tangible assets. See Newark Morning Ledger Co. v. United States, supra, at 571, n. 1 (Souter, J., dissenting); Gregorcich, Amortization of Intangibles: A Reassessment of the Tax Treatment of Purchased Goodwill, 28 Tax Lawyer 251, 253 (1975). Both the majority opinion and dissent in Newark Morning Ledger agreed that “goodwill” was not subject to depreciation (or amortization) for federal tax purposes, see 507 U. S., at 565, n. 13; id., at 573 (Souter, J., dissenting), although we disagreed as to whether one could accurately estimate the useful life of certain elements of goodwill and, if so, permit depreciation of those elements under Internal Revenue Service regulations. Id., at 566-567; id., at 576-577 (Souter, J., dissenting). Neither of the Newark Morning Ledger opinions, however, denied the power of another federal agency, such as the Bank Board or FSLIC, to decide that goodwill is of transitory value and impose a particular amortization period to be used for its own regulatory purposes.

8 See also National Commission on Financial Institution Reform, Recovery and Enforcement, Origins and Causes of the S&L Debacle: A Blueprint for Reform, A Report to the President and Congress of the United States 38-39 (July 1993) (explaining the advantages of different amortization and accretion schedules to an acquiring thrift). The downside of a faster accretion schedule, of course, was that it exhausted the discount long before the goodwill asset had been fully amortized. As a result, this treatment resulted in a net drag on earnings over the medium and long terms. See Lowy 40-41; Black, Ending Our Forebearers’ Forbearances: FIRREA and Supervisory Goodwill, 2 Stan. L. & Policy Rev. 102, 104-105 (1990). Many thrift managers were apparently willing to take the short-term gain, see Lowy 40-41, and others sought to stave off the inevitable losses by pursuing farther acquisitions, see Black, supra, at 105.

9 The 1981 regulations quoted above were in effect at the time of the Glendale transaction. The 1984 regulations relevant to the Winstar transaction were identical in all material respects, and although substantial changes had been introduced into §563.13 by the time of the Statesman merger in 1988, they do not appear to resolve the basic ambiguity as to whether goodwill could qualify as regulatory capital. See 12 CFR § 563.13 (1988). Section 563.13 has since been superseded by the Financial Institutions Reform, Recovery, and Enforcement Act.

10 Although the Glendale transaction in this ease occurred before the promulgation of SFAS 72 in 1983, the proper amortization period for goodwill under GAAP was uncertain prior to that time. According to one observer, “when the accounting profession designed the purchase accounting rules in the early 1970s, they didn’t anticipate the case of insolvent thrift institutions .... The rules for that situation were simply unclear until September 1982,” when the SEAS 72 rules were first aired. Lowy 39-40.

11 See 135 Cong. Ree. 18863 (1989) (remarks of Sen. Riegle) (emphasizing that these capital requirements were at the “heart” of the legislative reform); id., at 18860 (remarks of Sen. Chafee) (describing capital standards as FIRREA’s “strongest and most critical requirement” and “the backbone of the legislation”); id., at 18853 (remarks of Sen. Dole) (describing the “[t]ough new capital standards [as] perhaps the most important provisions in this bill”).

12 Glendale’s premerger net worth amounted to 5.45 percent of its total assets, which comfortably exceeded the 4 percent capital/asset ratio, or net worth requirement, then in effect. See 12 GFR § 568.13(a)(2) (1981).

13 See also Appleby v. Delaney, 271 U. S. 408, 413 (1926) (“It is not reasonable to suppose that the grantees would pay $12,000 . . . and leave to the city authorities the absolute right completely to nullify the chief consideration for seeking this property,... or that the parties then took that view of the transaction”).

14 As part of the contract, the Government’s promise to count supervisory goodwill and capital credits toward regulatory capital was alterable only by written agreement of the parties. See App. 408. This was also true of the Glendale and Winstar transactions. See id., at 112, 600.

15 To be sure, each side could have eliminated any serious contest about the correctness of their interpretive positions by using clearer language. See, e. g., Guaranty Financial Services, Inc. v. Ryan, 928 F. 2d 994, 999-1000 (CA11 1991) (finding, based on very different contract language, that the Government had expressly reserved the right to ehange the capital requirements without any responsibility to the acquiring thrift). The failure to be even more explicit is perhaps more surprising here, given the size and complexity of these transactions. But few contract cases would be in court if contract language had articulated the parties’ postbreach positions as clearly as might have been done, and the failure to specify remedies in the contract is no reason to find that the parties intended no remedy at all. The Court of Claims and Federal Circuit were thus left with the familiar task of determining which party’s interpretation was more nearly supported by the evidence.

16 See also Day v. United States, 245 U. S. 159, 161 (1917) (Holmes, J.) (“One who makes a contract never can be absolutely certain that he will be able to perform it when the time comes, and the very essence of it is that he takes the risk within the limits of his undertaking”).

17 See, e. g., Hughes Communications Galaxy, Inc. v. United States, 998 F. 2d 953, 957-959 (CA Fed. 1993) (interpreting contractual incorporation of then-current Government policy on space shuttle launches not as a promise not to change that policy, but as a promise “to bear the cost of changes in launch priority and scheduling resulting from the revised policy”); Hills Materials Co. v. Rice, 982 F. 2d 514, 516-517 (CA Fed. 1992) (interpreting contract to incorporate safety regulations extant when contract was signed and to shift responsibility for costs incurred as a result of new safety regulations to the Government); see generally 18 W. Jaeger, Williston on Contracts § 1934, pp. 19-21 (3d ed. 1978) (“Although a warranty in effect is a promise to pay damages if the facts are not as warranted, in terms it is an undertaking that the facts exist. And in spite of occasional statements that an agreement impossible in law is void there seems no greater difficulty in warranting the legal possibility of a performance than its possibility in fact .... [T]here seems no reason of policy forbidding a contract to perform a certain act legal at the time of the contract if it remains legal at the time of performance, and if not legal, to indemnify the promisee for non-performance” (footnotes omitted)); 5A A. Corbin, Corbin on Contracts § 1170, p. 254 (1964) (noting that in some cases where subsequent legal change renders contract performance illegal, “damages are still available as a remedy, either because the promisor assumed the risk or for other reasons,” but specific performance will not be required).

18 See also H. Hart, The Concept of Law 145 (1961) (recognizing that Parliament is “sovereign, in the sense that it is free, at every moment of its existence as a continuing body, not only from legal limitations imposed ab extra, but also from its own prior legislation”).

19 See also Reichelderfer v. Quinn, 287 U. S. 315, 318 (1932) (“[T]he will of a particular Congress . . . does not impose itself upon those to follow in succeeding years”); Black, Amending the Constitution: A Letter to a Congressman, 82 Yale L. J. 189, 191 (1972) (characterizing this “most familiar and fundamental principle]” as “so obvious as rarely to be stated”).

20 See also Stone v. Mississippi, 101 U. S. 814 (1880) (State may not contract away its police power); Butchers’ Union Slaughter-House & Live-Stock Landing Co. v. Crescent City Live-Stock Landing & Slaughter-House Co., 111 U. S. 746 (1884) (same); see generally Griffith, Local Government Contracts: Escaping from the Governmental/Proprietary Maze, 75 Iowa L. Rev. 277, 290-299 (1990) (recounting the early development of the reserved powers doctrine). We discuss the application of the reserved powers doctrine to this case infra, at 888-889.

21 United Railways is in the line of cases stretching back to Providence Bank v. Billings, 4 Pet. 514 (1830), and Proprietors of Charles River Bridge v. Proprietors of Warren Bridge, 11 Pet. 420 (1837). Justice Day’s opinion in United Railways relied heavily upon New Orleans City & Lake R. Co. v. New Orleans, 143 U. S. 192 (1892), which in turn relied upon classic Contract Clause unmistakability cases like Vicksburg S. & P. R. Co. v. Dennis, 116 U. S. 665 (1886), Memphis Gas Light Co. v. Taxing Dish of Shelby Cty., 109 U. S. 398 (1883), and Piqua Branch of State Bank of Ohio v. Knoop, 16 How. 369 (1854). And Home Building & Loan Assn. v. Blaisdell, 290 U. S. 398 (1934), upon which Merrion also relied, cites Charles River Bridge directly. See 290 U. S., at 435; see also Note, Forbearance Agreements: Invalid Contracts for the Surrender of Sovereignty, 92 Colum. L. Rev. 426, 453 (1992) (linking the unmistakability principle applied in Bowen v. Public Agencies Opposed to Social Security Entrapment, 477 U. S. 41 (1986), to the Charles River Bridge/Providence Bank line of cases).

22 “Sovereign power” as used here must be understood as a power that could otherwise affect the Government’s obligation under the contract. The Government could not, for example, abrogate one of its contracts by a statute abrogating the legal enforceability of that contract, Government contracts of a class including that one, or simply all Government contracts. No such legislation would provide the Government with a defense under the sovereign acts doctrine, see infra, at 891-899.

23 The Government’s right to take the Tribe’s property upon payment of compensation, of course, did not depend upon the navigational servitude; where it applies, however, the navigational easement generally obviates the obligation to pay compensation at all. See, e. g., United States v. Kansas City Life Ins. Co., 339 U. S. 799, 808 (1950) (“When the Government exercises [the navigational] servitude, it is exercising its paramount power in the interest of navigation, rather than taking the private property of anyone”); Scranton v. Wheeler, 179 U. S. 141, 163 (1900) (“Whatever the nature of the interest of a riparian owner in the submerged lands in front of his upland bordering on a public navigable water, his title is not as full and complete as his title to fast land which has no direct connection with the navigation of such water. It is a qualified title ... to be held at all times subordinate to such use of the submerged lands and of the waters flowing over them as may be consistent with or demanded by the public right of navigation”). Because an order to pay compensation would have placed the Government in the same position as if the navigational easement had been surrendered altogether, the holding of Cherokee Nation is on all fours with the approach we describe today.

24 The dissent is mistaken in suggesting there is question begging in speaking of what a Government contract provides without first applying the unmistakability doctrine, see post, at 929. A contract may reasonably be read under normal rules of construction to contain a provision that does not satisfy the more demanding standard of unmistakable clarity. If an alleged term could not be discovered under normal standards, there would be no need for an unmistakability doctrine. It would, of course, make good sense to apply the unmistakability rule if it was clear from the start that a contract plaintiff could not obtain the relief sought without effectively barring exercise of a sovereign power, as in the example of the promisee of the tax exemption who claims a rebate.

25 See also Hughes Communications Galaxy, Inc. v. United States, 998 F. 2d, at 958 (finding the unmistakability doctrine inapplicable to “the question of how liability for certain contingencies was allocated by the contract”); Sunswick Corp. v. United States, 109 Ct. Cl. 772, 798, 75 F. Supp. 221, 228 (“We know of no reason why the Government may not by the terms of its contract bind itself for the consequences of some act on its behalf which, but for the contract, would be nonactionable as an act of the sovereign. As shown in United States v. Bostwick, 94 U. S. 53, 69 [(1877)], the liability of the Government in such circumstances rests upon the contract and not upon the act of the Government in its sovereign capacity”), cert. denied, 334 U. S. 827 (1948); see generally Eule, Temporal Limits on the Legislative Mandate: Entrenchment and Retroactivity, 1987 Am. Bar Found. Research J. 379, 424 (observing that limiting the Government’s obligation to “compensating for the financial losses its repudiations engender . . . affords the current legislature the freedom to respond to constituents’ needs, while at the same time protecting those whose contractual interests are impaired”); Note, A Procedural Approach to the Contract Clause, 93 Yale L. J. 918, 928-929 (1984) (“A damage remedy is superior to an injunction because damages provide the states with the flexibility to impair contracts retroactively when the benefits exceed the costs. So long as the victims of contract impairments are made whole through compensation, there is little reason to grant those victims an in-junctive remedy”).

26 This point underscores the likelihood that damages awards will have the same effect as an injunction only in eases, like Bowen, where a private party seeks the return of payments to the Government. The classic examples, of course, are tax eases like St. Louis v. United Railways Co., 210 U. S. 266 (1908). Because a request for rebate damages in that case would effectively have exempted the plaintiffs from the law by forcing the reimbursement of their tax payments, the dissent is quite wrong to suggest, see post, at 928-929, that the plaintiffs could have altered the outcome by pleading their case differently.

27 See Posner & Rosenfield, Impossibility and Related Doctrines in Contract Law: An Economic Analysis, 6 J. Legal Studies 83,88-89 (1977) (noting that parties generally rely on contract law “to reduce the costs of contract negotiation by supplying contract terms that the parties would probably have adopted explicitly had they negotiated over them”).

28 See also Bowen v. Public Agencies Opposed to Social Security Entrapment, 477 U. S., at 52 (“[T]he Federal Government, as sovereign, has the power to enter contracts that confer vested rights, and the concomitant duty to honor those rights . . .”); Perry v. United States, 294 U. S. 330, 353 (1935) (“[T]he right to make binding obligations is a competence attaching to sovereignty”); cf. Hart, The Concept of Law, at 145-146 (noting that the ability to limit a body’s future authority is itself one aspect of sovereignty).

29 See also Logue, Tax Transitions, Opportunistic Retroactivity, and the Benefits of Government Precommitment, 94 Mich. L. Rev. 1129, 1146 (1996) (“If we allowed the government to break its contractual promises without having to pay compensation, such a policy would come at a high cost in terms of increased default premiums in future government contracts and increased disenchantment with the government generally”).

30 See, e. g., Restatement (Second) of Contracts § 346, Comment a (1981) (“Every breach of contract gives the injured party a right to damages against the party in breach” unless “[t]he parties ... by agreement vary the rules”); 3 E. Farnsworth, Contracts § 12.8, p. 185 (1990) (“The award of damages is the common form of relief for breach of contract. Virtually any breach gives the injured party a claim for damages”).

31 The dissent justifies its all-devouring view of unmistakability not by articulating any limit, but simply by reminding us that “ ‘[m]en must turn square corners when they deal with the Government.’” Post, at 937 (quoting Rock Island, A. & L. R. Co. v. United States, 254 U. S. 141, 143 (1920) (Holmes, J.)). We have also recognized, however, that “ ‘[i]t is no less good morals and good law that the Government should turn square corners in dealing with the people than that the people should turn square corners in dealing with their government.’” Heckler v. Community Health Services of Crawford Cty., Inc., 467 U. S. 51, 61, n. 13 (1984) (quoting St. Regis Paper Co. v. United States, 368 U. S. 208, 229 (1961) (Black, J., dissenting). See also Federal Crop Ins. Corp. v. Merrill, 332 U. S. 380, 387-388 (1947) (Jackson, J., dissenting) (“It is very well to say that those who deal with the Government should turn square corners. But there is no reason why the square corners should constitute a one-way street”).

32 Justice Scalia offers his own theory of unmistakability, see post, at 919-922, which would apply in a wide range of cases and so create some tension with the general principle that the Government is ordinarily treated just like a private party in its contractual dealings, see, e. g., Perry v. United States, 294 U. S., at 352, but which would be satisfied by an inference of fact and therefore offer a only a low barrier to litigation of constitutional issues if a party should, in fact, prove a governmental promise not to change the law. Justice Scalia seeks to minimize the latter concern by quoting Holmes’s pronouncement on damages as the exclusive remedy at law for breach of contract, see post, at 919-920, but this ignores the availability of specific performance in a nontrivial number of eases, see, e. g., Restatement (Second) of Contracts §§357-359, including the Contract Clause cases in which the unmistakability doctrine itself originated. See, e. g., Carter v. Greenhow, 114 U. S. 317, 322 (1885) (stating that “the only right secured” by the Contract Clause is “to have a judicial determination, declaring the nullity of the attempt to impair [the contract’s] obligation”); Note, Takings Law and the Contract Clause: A Takings Law Approach to Legislative Modifications of Public Contracts, 36 Stan. L. Rev. 1447, 1462 (1984) (suggesting that “analysis under the contract clause is limited to declaring the statute unconstitutional. The provision does not authorize the courts to award damages in lieu of requiring the state to adhere to the original terms of the contract”); ef. C. Fried, Contract as Promise 117-118 (1981) (arguing that “Holmes’s celebrated dictum . . . goes too far, is too simple”). Finally, we have no need to consider the close relationship that Justice Scalia sees between the unmistakability and sovereign acts doctrines, see post, at 923-924, because, even considered separately, neither one favors the Government in this case.

33 See also Atlantic Coast Line R. Co. v. Goldsboro, 232 U. S. 548, 558 (1914) (“[T]he power of the State to establish all regulations that are reasonably necessary to secure the health, safety, good order, comfort, or general welfare of the community . . . can neither be abdicated nor bargained away, and is inalienable even by express grant”); West River Bridge Co. v. Dix,, 6 How. 507 (1848) (State’s contracts do not relinquish its eminent domain power).

34 To the extent that Justice Scalia finds the reserved powers doctrine inapplicable because “the private party to the contract does not seek to stay the exercise of sovereign authority, but merely requests damages for breach of contract,” post, at 923, he appears to adopt a distinction between contracts of indemnity and contracts not to change the law similar to the unmistakability analysis he rejects. He also suggests that the present case falls outside the “core governmental powers” that cannot be surrendered under the reserved powers doctrine, but this suggestion is inconsistent with our precedents. See Stone v. Mississippi, 101 U. S. 814, 817 (1880) (“[T]he legislature cannot bargain away the police power of a State”); Veix v. Sixth Ward Building & Loan Assn. of Newark, 310 U. S. 32, 38 (1940) (recognizing that thrift regulation is within the police power).

35 See Speidel, Implied Duties of Cooperation and the Defense of Sovereign Acts in Government Contracts, 51 Geo. L. J. 516, 542 (1968) (“[W]hile the contracting officers of Agency X cannot guarantee that the United States will not perform future acts of effective government, they can agree to compensate the contractor for damages resulting from justifiable acts of the United States in its ‘sovereign capacity’ ” (footnotes omitted)).

36 See also 1 R. Nash & J. Cibinic, Federal Procurement Law 5 (3d ed. 1977) (“The authority of the executive to use contracts in carrying out authorized programs is . . . generally assumed in the absence of express statutory prohibitions or limitations”).

37 Nor is there any substance to the claim that these were contracts that only the Government could make. The regulatory capital or net worth requirements at issue applied only to thrifts choosing to carry federal deposit insurance, see Federal Home Loan Bank System, A Guide to the Federal Home Loan Bank System 69 (5th ed. 1987), and institutions choosing to self-insure or to seek private insurance elsewhere would have been free to make similar agreements with private insurers.

38 Moreover, if the dissent were correct that the sovereign acts doctrine permits the Government to abrogate its contractual commitments in “regulatory” cases even where it simply sought to avoid contracts it had come to regret, then the Government’s sovereign contracting power would be of very little use in this broad sphere of public activity. We rejected a virtually identical argument in Perry v. United States, 294 U. S. 330 (1935), in which Congress had passed a resolution regulating the payment of obligations in gold. We held that the law could not be applied to the Government’s own obligations, noting that “the right to make binding obligations is a competence attaching to sovereignty.” Id., at 353.

39 See also Clearfield Trust Co. v. United States, 318 U. S. 363, 369 (1943) (“ ‘The United States does business on business terms’ ”) (quoting United States v. National Exchange Bank of Baltimore, 270 U. S. 527, 534 (1926)); Perry v. United States, supra, at 352 (1935) (“When the United States, with constitutional authority, makes contracts, it has rights and incurs responsibilities similar to those of individuals who are parties to such instruments. There is no difference except that the United States cannot be sued without its consent” (citation omitted)); United States v. Bostwick, 94 U. S. 53, 66 (1877) (“The United States, when they contract with their citizens, are controlled by the same laws that govern the citizen in that behalf”); Cooke v. United States, 91 U. S. 389, 398 (1875) (explaining that when the United States “comes down from its position of sovereignty, and enters the domain of commerce, it submits itself to the same laws that govern individuals there”).

40 See Jones v. United States, 1 Ct. Cl. 383, 385 (1865) (“Wherever the public and private acts of the government seem to commingle, a citizen or corporate body must by supposition be substituted in its place, and then the question be determined whether the action will lie against the supposed defendant”); O’Neill v. United States, 231 Ct. Cl. 823, 826 (1982) (sovereign acts doctrine applies where, “[w]ere [the] contracts exclusively between private parties, the party hurt by such governing action could not claim compensation from the other party for the governing action”). The dissent ignores these statements (including the statement from Jones, from which ease Horowitz drew its reasoning literally verbatim), when it says, post, at 931, that the sovereign acts cases do not emphasize the need to treat the government-as-contractor the same as a private party.

41 Our Contract Clause cases have demonstrated a similar concern with governmental self-interest by recognizing that “complete deference to a legislative assessment of reasonableness and necessity is not appropriate because the State’s self-interest is at stake.” United States Trust Co. of N. Y. v. New Jersey, 431 U. S. 1, 26 (1977); see also Energy Reserves Group, Inc. v. Kansas Power & Light Co., 459 U. S. 400, 412-413, and n. 14 (1983) (noting that a stricter level of scrutiny applies under the Contract Clause when a State alters its own contractual obligations); cf. Perry, supra, at 350-351 (drawing a “clear distinction” between Congress’s power over private contracts and “the power of the Congress to alter or repudiate the substance of its own engagements”).

42 The generality requirement will almost always be met where, as in Denting, the governmental action “bears upon [the Government’s contract] as it bears upon all similar contracts between citizens.” Deming v. United States, 1 Ct. Cl. 190, 191 (1865). Denting is less helpful, however, in cases where, as here, the public contracts at issue have no obvious private analogs.

43 The dissent accuses us of transplanting this due process principle into alien soil, see post, at 931-932. But this Court did not even wait until the Term following Hurtado before applying its principle of generality to a case that, like this one, involved the deprivation of property rights. See Hagar v. Reclamation Dist. No. 108, 111 U. S. 701, 708 (1884). More importantly, it would be surprising indeed if the sovereign acts doctrine, resting on the inherent nature of sovereignty, were not shaped by fundamental principles about how sovereigns ought to behave.

44 See also Speidel, 51 Geo. L. J., at 539-540 (observing that “the commonly expressed conditions to the availability of the sovereign acts defense” are not only that “the act... must have been ‘public and general,’ ” but also that “the damage to the contractor must have been caused indirectly”); cf. Exxon Corp. v. Eagerton, 462 U. S. 176, 191-192 (1983) (distinguishing between direct and incidental impairments under the Contract Clause).

45 Cf. also Resolution Trust Corporation v. Federal Savings and Loan Insurance Corporation, 25 F. 3d 1493, 1501 (CA10 1994) (“The limits of this immunity [for sovereign acts] are defined by the extent to which the government’s failure to perform is the result of legislation targeting a class of contracts to which it is a party”); South Louisiana Grain Services, Inc. v. United States, 1 Cl. Ct. 281, 287, n. 6 (1982) (rejecting sovereign acts defense where the Government agency’s actions “were directed specifically at plaintiff’s alleged contract performance”). Despite the dissent’s predictions, the sun is not, in fact, likely to set on the sovereign acts doctrine. While an increase in regulation by contract will produce examples of the “fusion” that bars the defense, we may expect that other sovereign activity will continue to occasion the sovereign acts defense in cases of incidental effect.

46 A different intermediate position would be possible, at least in theory. One might say that a governmental action was not “public and general” under Horowitz if its predominant purpose or effect was avoidance of the Government’s contractual commitments. The difficulty, however, of ascertaining the relative intended or resulting impacts on governmental and purely private contracts persuades us that this test would prove very difficult to apply.

47 We note that whether or not Congress intended to abrogate supervisory merger agreements providing that supervisory goodwill would count toward regulatory capital requirements has been the subject of extensive litigation in the Courts of Appeals, and that every Circuit to consider the issue has concluded that Congress did so intend. See Transohio Sav. Bank v. Director, Office of Thrift Supervision, 967 F. 2d 598, 617 (CADC 1992); Carteret Sav. Bank v. Office of Thrift Supervision, 963 F. 2d 567, 581-582 (CA3 1992); Security Sav. & Loan v. Director, Office of Thrift Supervision, 960 F. 2d 1318, 1322 (CA5 1992); Far West Federal Bank v. Director, Office of Thrift Supervision, 951 F. 2d 1093, 1098 (CA9 1991); Guaranty Financial Services, Inc. v. Ryan, 928 F. 2d 994, 1006 (CA11 1991); Franklin Federal Sav. Bank v. Director, Office of Thrift Supervision, 927 F. 2d 1332, 1341 (CA6), cert. denied, 502 U. S. 937 (1991); cf. Resolution Trust Corporation, supra, at 1502 (observing that “FIRREA’s structure leaves little doubt that Congress well knew the crippling effects strengthened capital requirements would have on mergers that relied on supervisory goodwill,” but concluding that Congress sought to mitigate the impact by giving OTS authority to exempt thrifts until 1991); Charter Federal Sav. Bank v. Office of Thrift Supervision, 976 F. 2d 203, 210 (CA4 1992) (accepting the conclusions of the other Circuits in dictum), cert. denied, 507 U. S. 1004 (1993).

48 See also House Report, at 534 (additional views of Reps. Hiler, Ridge, Bartlett, Dreier, MeCandless, Saiki, Baker, and Paxon) (“For the institutions with substantial supervisory goodwill, the bill radically changes the terms of previously negotiated transactions”); id., at 507-508 (additional views of Rep. LaFalce) (“Those institutions which carry intangible assets on their books do so generally under written agreements they have entered into with the U. S. government, agreements which generally state that they cannot be superseded by subsequent regulations”); id., pt. 5, at 27 (additional views of Rep. Hyde) (“[Thrifts] were told that they would be able to carry this goodwill on their books as capital for substantial periods of time. .. . The courts could well construe these agreements as formal contracts. Now, . . . Congress is telling these same thrifts that they cannot count this goodwill toward meeting the new capital standards”); 135 Cong. Rec. 12063 (1989) (statement of Rep. Crane) (FIRREA “would require these S&Ls to write off this goodwill in a scant 5 years. This legislation violates the present agreements that these institutions made with the Federal Government”). Although there was less of a focus on the impact of FIRREA on supervisory goodwill in the Senate, at least two Senators noted that the new capital requirements would have the effect of abrogating government contracts. See id., at 9563 (statement of Sen. Hatfield) (“The new tangible capital standards in the legislation specifically exclude supervisory goodwill, and in doing so effectively abrogate agreements made between the Federal Home Loan Bank Board, on behalf of the U. S. Government, and certain healthy thrift institutions”); id., at 18874 (statement of Sen. D’Amato) (asking “whether any future transactions involving failed or failing institutions will be possible after this bill sanctions a wholesale reneging of Federal agency agreements”).

49 See also House Report, at 545 (Supplemental Views of Reps. Schumer, Morrison, Roukema, Gonzalez, Vento, McMillen, and Hoagland) (“[A]n overriding public policy would be jeopardized by the continued adherence to arrangements which were blithely entered into by the FSLIC”); 135 Cong. Rec., at 12062 (statement of Rep. Gonzalez) (“[I]n blunt terms, the Bank Board and FSLIC insurance fund managers entered into bad deals— I might even call them steals”); id., at 11789 (statement of Rep. Saxton) (“In short[,] goodwill agreements were a mistake and as the saying goes . . . ‘Two wrongs don’t make a right’ ”). These proponents defeated two amendments to FIRREA, proposed by Reps. Quillen and Hyde, which would have given thrifts that had received capital forbearances from thrift regulators varying degrees of protection from the new rules. See Transohio Sav. Bank v. Director, Office of Thrift Supervision, supra, at 616— 617; see also 135 Cong. Rec. 12068 (1989) (statement of Rep. Price) (“[T]he proponents of [the Hyde] amendment say a ‘Deal is a Deal’ .... But to claim that Congress can never change a regulator’s decision ... in the future is simply not tenable”); Franklin Federal Sav. Bank v. Director, Office of Thrift Supervision, supra, at 1340-1341 (reviewing the House debate and concluding that “[njobody expressed the view that FIRREA did not abrogate forbearance agreements regarding supervisory goodwill” (emphasis in original)).

50 Despite the claims of the dissent, our test does not turn upon “some sort of legislative intent,” post, at 933. Rather, we view Congress’s expectation that the Government’s own obligations would be heavily affected simply as good evidence that this was, indeed, the case.

51 We have, indeed, had to reject a variant of this argument before. See Lynch v. United States, 292 U. S. 571, 580 (1934) (acknowledging a public need for governmental economy, but holding that “[t]o abrogate contracts, in the attempt to lessen governmental expenditure, would be not the practice of economy, but an act of repudiation”); see also Speidel, 51 Geo. L. J., at 522 (noting that even when “the Government’s acts are motivated or required by public necessity ... [t]he few decisions on point seem to reject public convenience or necessity as a defense, particularly where [the Government’s action] directly alters the terms of the contract”).

52 The dissent contends that FIRREA must be a “public and general” act because it “occupies 372 pages in the Statutes at Large, and under 12 substantive titles contains more than 150 numbered sections.” Post, at 934. But any act of repudiation can be buried in a larger piece of legislation, and if that is enough to save it then the Government’s contracting power will not count for much. To the extent that The Chief Justice relies on the fact that FIRREA’s core capital requirements applied to all thrift institutions, we note that neither he nor the Government has provided any indication of the relative incidence of the new statute in requiring capital increases for thrifts subject to regulatory agreements affecting capital and those not so subject.

53 See also Transatlantic Financing Corp. v. United States, 363 F. 2d 312, 315 (CADC 1966) (requiring that the contingency rendering performance impossible be “ ‘something’ unexpected”); Companhia de Navegacao Lloyd Brasiliero v. C. G. Blake Co., 34 F. 2d 616, 619 (CA2 1929) (L. Hand, J.) (asking “how unexpected at the time [the contract was made] was the event which prevented performance”); see also Kel Kim Corp. v. Central Markets, Inc., 70 N. Y. 2d 900, 902, 524 N. E. 2d 295, 296 (1987) (“[T]he impossibility must be produced by an unanticipated event that could not have been foreseen or guarded against in the contract”); Barbarossa & Sons, Inc. v. Iten Chevrolet, Inc., 265 N. W. 2d 655, 659 (Minn. 1978) (asking “whether the risk of the given contingency was so unusual or unforeseen and would have such severe consequences that to require performance would be to grant the promisee an advantage for which he could not be said to have bargained in making the contract”); Mishara Construction Co. v. Transit-Mixed Concrete Corp., 365 Mass. 122, 129, 310 N. E. 2d 363, 367 (1974) (“The question is . . . [w]as the contingency which developed one which the parties could reasonably be thought to have foreseen as a real possibility which could affect performance?”); Krell v. Henry, 2 K. B. 740, 752 (1903) (“The test seems to be whether the event which causes the impossibility was or might have been anticipated and guarded against”); 18 W. Jaeger, Williston on Contracts § 1931, p. 8 (3d ed. 1978) (“The important question is whether an unanticipated circumstance has made performance of the promise vitally different from what should reasonably have been within the contemplation of both parties when they entered into the contract. If so, the risk should not fairly be thrown upon the promisor”). Although foreseeability is generally a relevant, but not dispositive, factor, see 2 E. Farnsworth, Contracts §9.6, at 665-656; Opera Company of Boston, Inc. v. Wolf Trap Foundation for the Performing Arts, 817 F. 2d 1094, 1101 (CA4 1987), there is no reason to look further where, as here, the risk was foreseen to be more than minimally likely, went to the central purpose of the contract, and could easily have been allocated in a different manner had the parties chosen to do so, see id., at 1099-1102; 18 Williston on Contracts, supra, § 1953, at 119.

54 The Government confirmed this point at oral argument. When asked whether FIRREA’s tightening of the regulatory capital standards was “exactly the event that the parties assumed might happen when they made their contracts,” the Government responded, “Exactly. Congress had changed capital standards many times over the years.” Tr. of Oral Arg. 9.

55 See, e. g., Garn-St Germain Depository Institutions Act of 1982, Pub. L. 97-320, 96 Stat. 1469 (eliminating any fixed limits to Bank Board discretion in setting reserve requirements); Depository Institutions Deregulation and Monetary Control Act of 1980, Pub. L. 96-221, 94 Stat. 132, 160 (conferring discretionary authority on the Bank Board to set reserve requirements between 3 and 6 percent); 47 Fed. Reg. 3543 (lowering the reserve ratio from 4 to 3 percent); id., at 31859 (excluding certain “contra-asset” accounts from reserve calculations); id., at 52961 (permitting thrifts to count appraised equity capital toward reserves); see also Charter Federal Sav. Bank v. Office of Thrift Supervision, 976 F. 2d, at 212 (noting that because “[ejapital requirements have been an evolving part of the regulatory scheme since its inception,” the Bank Board “would have expected changes in statutory requirements, including capital requirements”); Carteret Sav. Bank v. Office of Thrift Supervision, 963 F. 2d, at 581 (observing that “[i]n the massively regulated banking industry,... the rules of the game change with some regularity”).

56 See also Hughes Communications Galaxy, Inc. v. United States, 998 F. 2d, at 957-959 (rejecting sovereign acts defense where contract was interpreted as expressly allocating the risk of change in governmental policy); Posner & Rosenfield, 6 J. Legal Studies, at 98 (noting that, subject to certain constraints, “[t]he contracting parties’ chosen allocation of risk” should always be honored as the most efficient one possible).

57 See, e. g., Chicago, M. & St. P. R. Co. v. Hoyt, 149 U. S. 1, 14-15 (1893) (“There can be no question that a party may by an absolute contract bind himself or itself to perform things which subsequently become impossible, or to pay damages for the nonperformance”). This is no less true where the event that renders performance impossible is a change in the governing law. See, e.g., 4 R. Anderson, Anderson on the Uniform Commercial Code § 2-615:34, p. 286 (3d ed. 1983) (“Often in regard to impossibility due to change of law ... there would be no difficulty in a promisor’s assuming the risk of the legal possibility of his promise”); 6 A. Corbin, Corbin on Contracts § 1346, p. 432 (1962) (“Just as in other cases of alleged impossibility, the risk of prevention by courts and administrative officers can be thrown upon a contractor by a provision in the contract itself or by reason of established custom and general understanding”).

58 See generally Hills Materials Co. v. Rice, 982 F. 2d 514, 516, n. 2 (CA Fed. 1992) (“[T]he [sovereign acts] doctrine certainly does not prevent the government as contractor from affirmatively assuming responsibility for specific sovereign acts”); D & L Construction Co. v. United States, 185 Ct. Cl. 736, 752, 402 F. 2d 990, 999 (1968) (“It has long been established that while the United States cannot be held liable directly or indirectly for public acts which it performs as a sovereign, the Government can agree in a contract that if it doe,s exercise a sovereign power, it will pay the other contracting party the amount by which its costs are increased by the Government’s sovereign act, and that this agreement can be implied as well as expressed”); Amino Brothers Co. v. United States, 178 Ct. Cl. 515, 525, 372 F. 2d 485, 491 (same), cert. denied, 389 U. S. 846 (1967); Gerhardt F. Meyne Co. v. United States, 110 Ct. Cl. 527, 550, 76 F. Supp. 811, 815 (1948) (same). A common example of such an agreement is mandated by Federal Acquisition Regulation 52.222-43, which requires Government entities entering into certain fixed price service contracts to include a price adjustment clause shifting tó the Government responsibility for cost increases resulting from compliance with Department of Labor wage and fringe benefit determinations. 48 CFR § 52.222-43 (1995).