Lecture 39 The Contract Clause Part 1: Framers and the Marshall Court

This unit The Contract Clause Economic Substantive Due Process This is the most important chapter The Takings Clause

Cases this chapter Fletcher v. Peck (1810) Trustees of Dartmouth College v. Woodward (1819) Proprietors of Charles River Bridge v. Proprietors of Warren Bridge (1837) Stone v. Mississippi (1880) Home Building & Loan Association v. Blaisdell (1934) United States Trust Company v. New Jersey (1977) Allied Structural Steel Company v. Spannus (1978)

This Chapter The Framers and the Contract Clause Marshall and the Contract Clause Decline of the Contract Clause: From the Taney Court to the New Deal Modern Applications of the Commerce Clause

The Framers and the Contract Clause Article I, section 10, clause 1 No State shall… Law impairing the Obligation of Contracts This part was done to protect creditors To prevent states from passing laws that would erase debts of persons like small farmers bankruptcy laws This only applied to states, not the federal government When party control would change, states might try to cancel or change contracts The 14th Amendment makes this provision less important What is a contract? Black’s Law Dictionary says An agreement, upon sufficient consideration, to do or not to do a particular thing Marshall was a champion of this provision Not allowing states to break contracts and private property was a natural right

Fletcher v. Peck (1810) Fletcher v. Peck (1810) Background Georgia sold 35 million acres at very low prices the Yazoo Lands It was motivated by bribery Much present day Alabama and Mississippi Many prominent leaders supported it because they had a stake in it Georgia tries to rescind the sale and get the land back However, the land companies had already sold a lot of the land Jefferson had tried to work out a compromise This was a carefully orchestrated plan to get a favorable ruling they would make $$$ Question: Could this contract be invalidated by the state of Georgia?

Fletcher v. Peck- II Arguments For Fletcher (uphold Georgia law) Georgia had no right to sell these lands they belonged to the U.S. or Indians Fraud and bribery should have nullified this sale The act of the state of Georgia invalidated any sales after 1796 For Peck (overturn Georgia law) Georgia had power to sell the lands The law authorizing the sale is still valid and cannot be disregarded by the judiciary The Contract Clause prevents Georgia from impairing any contracts The parties here are innocent of fraud they purchased the land long after

Fletcher v. Peck- III Unanimous opinion by Chief Justice Marshall The current parties were not infected by the initial fraud in the sales The original purchase and sale could be undone do to fraud, but not third parties There was valid consideration here this was a contract This would essentially be an ex post facto law Punishing someone for an act that was not punishable when committed This is punishing this party for something legal at the time it occurred This contract cannot be invalidated even if originally corrupt The State of Georgia did not have power to invalidate a previously passed binding agreement Eventually Congress settled these claims through compensation So that Mississippi could become a state

Other cases New Jersey v. Wilson (1812) A tribe of Indians gets title to land with a tax exempt provision They sell the land and the state sought to tax it The tax exemption stayed with the land Sturges v. Crowningshield (1819) States could enact bankruptcy laws But they still cannot invalidate a contract

Trustees of Dartmouth College v. Woodward (1819) Background King George III gives a corporate charter to Dartmouth College It had a self-perpetuating board the President became John Wheelock He made alliances with the Jeffersonians and got a radical change to the board approved It made the old board mostly powerless They changed it to a public university but most sided with the old guard They old trustees hired Daniel Webster to represent them Question: Did the New Hampshire Legislature violate the contract clause by their interference?

Trustees of Dartmouth College v. Woodward- II Arguments For the Trustees (invalidate the New Hampshire law) The grant’s provisions on appointments remain in perpetuity The trustees must agree to any change This was taking property rights from one group to another The charter was a contract This law violates the Contract Clause

Trustees of Dartmouth College v. Woodward- III Arguments For Woodward (uphold the New Hampshire law) This charter was for a public purpose The Contract Clause protects private agreements The parties of the contract are not parties in this lawsuit The addition of new trustees does not affect the old ones The Revolution changed powers had by the King to the legislatures of states

Trustees of Dartmouth College v. Woodward- IV Chief Justice Marshall writes a 5-1 opinion This qualifies as a contract between private parties Therefore the New Hampshire Legislature had no place in trying to change the charter The fact that the government put forward this charter does not transform the college into a public institution Contracts are involving private citizens, not their relations between they are the government The term contract referred to transactions involving individual property rights, not to "the political relations between the government and its citizens”

Next Lecture We will move to the decline of the Commerce Clause From the Taney Court to the New Deal Pages 603-616