Whatever Happened to the Contract Clause?

Abstract:     
This paper examines the decline of the contract clause in constitutional jurisprudence. Although the contract clause occupied a key and much-litigated place in constitutional law during the nineteenth century, the Supreme Court never read the clause with literal exactness. Over time the Court began to limit the reach of the contract clause in a number of ways. It early distinguished between contractual rights and the remedy available to enforce such rights. States retained some room to modify enforcement procedures. Thereafter the Court insisted upon strictly construing legislative grants and recognized an inalienable police power to protect the health, safety, and morals of the public. Moreover, the Supreme Court upheld rent control laws and mortgage moratorium measures as valid legislative responses to emergency conditions which trumpted contracts between individuals. In short, the Supreme Court recognized so many exceptions to the contract clause as to virtually read it out of the Constitution. The advent of New Deal constitutionalism in the late 1930s, which downplayed economic rights and affirmed broad regulatory authority, completed the effective destruction of the contract clause. Despite some fleeting interest in revitalizing the clause, and a few decisions enforcing contract clauses in state constitutions, this once-powerful provision remains at the fringe of modern constitutional law. The paper contends that the decline of the contract clause likely reflects a diminished faith in contractual bargaining and competitive markets.

Keywords: contract clause, contracts, John Marshall, Dartmouth College v. Woodward, Roger B. Taney, police power, publis trust doctrine, rent control, Charles Evans Hughes, George Sutherland, New Deal, mortgage moratoriium, emergency doctrine, corporations, eminent domain

Working Paper Series