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

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

3. 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)

4. 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

5. 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

6. 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?

7. 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

8. 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

9. 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

10. 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?

11. 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

12. 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

13. 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”

14. Next Lecture We will move to the decline of the Commerce Clause
From the Taney Court to the New Deal
Pages