Front Page Titles (by Subject) CHAP. I.: THE UNCONSTITUTIONALITY OF ALL STATE LAWS RESTRAINING PRIVATE BANKING AND THE RATES OF INTEREST. - The Shorter Works and Pamphlets of Lysander Spooner vol. I (1834-1861)
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CHAP. I.: THE UNCONSTITUTIONALITY OF ALL STATE LAWS RESTRAINING PRIVATE BANKING AND THE RATES OF INTEREST. - Lysander Spooner, The Shorter Works and Pamphlets of Lysander Spooner vol. I (1834-1861) 
The Shorter Works and Pamphlets of Lysander Spooner vol. I (1834-1861) (Indianapolis: Liberty Fund, 2010).
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THE UNCONSTITUTIONALITY OF ALL STATE LAWS RESTRAINING PRIVATE BANKING AND THE RATES OF INTEREST.
The Constitution of the United States, (Art. 1, Sec. 10,) declares that “No State shall pass any law impairing the obligation of contracts.”
This clause does not designate what contracts have, and what have not, an “obligation.” It leaves that question to be decided by the proper tribunals. But it plainly recognizes two things, as fixed, constitutional principles—first, that there are contracts that have an “obligation;” and, secondly, that the people have a right to enter into, and have the benefit of, all such contracts.
The force of these implications will, perhaps, be more clearly seen, when applied to a particular contract, than when applied to contracts generally. Suppose, then, the constitution had merely said that no State should pass any law impairing the obligation of the marriage contract. This provision would have plainly implied, first, that marriage contracts were in their nature obligatory,—and, secoudly, that men had a right to enter into that species of contract. But the implications, which would, in this case, have applied to marriage contracts, now apply, under the constitution as it is, to all contracts whatsoever, that are in their nature obligatory.
That this constitutional prohibition, against “impairing the obligation of contracts,” implies that there are contracts having an obligation, no one will deny. But that it also implies that men have a constitutional right to enter into all such contracts, seems also to be perfectly clear.
Suppose the constitution had declared that no State should “pass any law impairing a man’s right to recover the wages of his labor”—This prohibition would have certainly implied that men had a right to labor for wages—and any law that should have forbidden them to labor for wages, would have been as much unconstitutional, as one that should have deprived them of the wages they had earned.
Or suppose again that the constitution had forbidden the States to “pass any law impairing the meaning and intent of wills.” Such a provision would have manifestly implied, and therefore established it as a constitutional principle, that all men had a right to make wills. And any law that should have forbidden men to make wills, would have been as much unconstitutional, as one that should have altered or invalidated their meaning and intent when made. So also the prohibition against “impairing the obligation of contracts,” implies that men have a right to enter into all contracts that have an obligation. And any laws that forbid men to enter into such contracts, are as much unconstitutional, as those that would impair the obligation of the contracts when made.
The assumption, also, in the constitution, that men’s contracts have an “obligation,” implies that the parties have a right to enter into them; for if they have no right to enter into them, no obligation could arise out of them.
This constitutional right of men to enter into all obligatory contracts, is a natural, inherent, inalienable right. It exists antecedently to, and independently of, any positive or municipal law. It may be recognized, acknowledged, guarantied, and secured, by the municipal law, but it is not derived from it—nor can the municipal law rightfully take it away. It is an original right of human nature, like the right of speech—the right to enjoy life, liberty and religion—the right to keep and bear arms—and the right of self-protection. And it is as an original right, existing prior to the constitution, that the clause quoted from the constitution, recognizes and guaranties it.
The right to enter into obligatory contracts, is also involved in the right to “acquire property”—for one man can acquire property of another only by means of an obligatory contract. Every purchase and sale of property that takes place between man and man, involves a contract—that is, an agreement—an assent of their minds to an exchange of values. And every purchase and sale, that takes place between man and man, depends, for its validity, upon the “obligation” of the contract or agreement, that the parties have entered into—an obligation, that is protected by the Constitution of the United States.
If the State Legislatures had power to declare, even prospectively, what contracts should, and what should not be obligatory, they might arbitrarily prohibit all trade between man and man—they might invalidate, not merely credit contracts, but even those contracts that are executed at the time they are entered into—for there is no difference in the intrinsic obligation of a contract that is to be executed, and one that is executed. The equitable right of property is transferred as absolutely by an executory, as by an executed contract; and government has as much right to declare, prospectively, that contracts that may afterward be actually executed, shall, notwithstanding, be void; and that men who may sell and deliver property, may nevertheless recover it back, as it has to declare that those who have sold property and promised to deliver it, shall still be entitled to retain it—or, what is the same thing, be released from their obligation to deliver it. A promise to pay money, for value that has been received, is a mere promise to deliver money, that has been sold and paid for—and government has as much right to declare that if a banker shall actually sell and deliver money, he may nevertheless recover it back, as it has to declare that if he promise to deliver money that he has sold, he shall be relieved from his obligation to deliver it. The law, that should enable a man to recover property, that he had actually sold and delivered, would no more interfere with men’s natural rights to acquire property, by contract, or purchase, than the law which should relieve a man from his obligation to deliver property, which he had sold and promised to deliver. But will any one pretend that government has a right, even by a prospective law, to invalidate contracts that may afterwards be actually executed? If not, he cannot consistently claim that it has a right to invalidate executory contracts—for the equitable right of property passes as absolutely by the latter contract, as the former.
The right to acquire property, is enumerated, in many, if not all, of the State Constitutions, as one of the natural, inherent, inalienable rights of men—one that is not surrendered to government—one which government has no power to infringe—one which government is bound to respect and secure. And this right to acquire property, as was before said, involves the right to enter into obligatory contracts—for men can acquire property of each other, only by such contracts.
The right of men, then, to enter into obligatory contracts, and to have the benefit of them, is guarantied, not only by the national constitution, but also by many, if not all, of the state constitutions. It is, in short, a fundamental principle in our systems of government—as much so, as the right of speech, or the right to life and liberty, or the free exercise of religion, or the right to keep and bear arms, or the right to acquire property.
But notwithstanding the general and State constitutions have thus guarantied to the citizens of this government their natural right to enter into all obligatory contracts with each other, and to have the obligation of their contracts respected, and enforced, it is nevertheless probable that the statute books of every State in the union, contain laws, or the forms of laws, whose avowed and only object is to abridge this right, and impair the obligation of these contracts; and which declare that certain contracts, that may be entered into by bankers and others, to pay money—contracts that are in their nature as obligatory as any others that men ever enter into—shall be entirely void, or essentially impaired, or that the individuals entering into them shall be fined or imprisoned.
To an unsophisticated mind, nothing could be more selfevident than the unconstitutionality of these laws. Yet they are enforced by the courts, and submitted to by the people, without their constitutionality being seriously questioned.
The Courts admit that the contracts, which are thus nullified or impaired, would be obligatory, were it not that the law has deprived them of their obligation. But this is no answer to the objection, because to impair their obligation is the very thing, which the law is forbidden to do. To say, therefore, that the law has deprived these contracts of their obligation, is equivalent to saying that a “law impairing the obligation of contracts” is constitutional. The very test of the constitutionality of the law, on this point, is, whether, if suffered to have its effect upon contracts, it would impair their obligation. If it would, it is unconstitutional, and, of course, void.
But let us now enquire, more particularly, what contracts are obligatory? or, rather, in what consists the obligation of contracts?
There have been differences of opinion on this point—but they have all arisen from a desire to uphold the arbitrary power that is assumed by legislatures over the subject. But for this, a doubt could never have arisen as to what constituted the obligation of a contract. The very phrase “obligation of contracts,” implies that the obligation is something intrinsic in the contracts themselves. It assumes that the obligation is something that pertains to the contract naturally, and as a matter of course—and not that it is a quality contingent upon the will of those who had no hand in forming the contract. The facts, also, that the right of acquiring property by contract, is a natural right, and not one derived from municipal authority, and that the contracts entered into by men in a state of nature, without reference to any municipal law, are obligatory, prove that the obligation of contracts must be something intrinsic in the contracts themselves, depending upon the acts of the parties, and not upon any extraneous will.
What, then, is this intrinsic “obligation of contracts?” It is, and it can be, nothing else than the requirements of natural justice, arising out of the acts of the parties. All judicial tribunals hold it to consist in this, and this alone—as is proved by the fact, that wherever this requirement is shown to exist, they hold the contract to be obligatory as matter of course, unless the legislature have specially ordered otherwise. And they will even imply a contract, in many cases, in order to enforce this requirement. On the other hand, where this requirement is shown not to have arisen out of the acts of the parties, the contract is held to be destitute of obligation. For instance, judicial tribunals hold that contracts entered into by persons that are mentally incompetent to make reasonable contracts, are not obligatory—that contracts entered into gratuitously, or without a valuable consideration, are not obligatory—that contracts obtained either by coercion or fraud, are not obligatory upon the party against whom the coercion or fraud has been practised—that contracts to commit any vice, crime or immorality, or to pay for the commission of any vice, crime, or immorality, or the object of which is to aid or encourage any vice, crime, or immorality, are of no obligation. All these contracts are destitute of obligation, and are held to be so by judicial tribunals, not because any legislative enactments have declared them void—(for, in general, there are no such enactments)—but, simply because natural justice does not require them to be fulfilled—or, what is the same thing, because the contracts had no intrinsic obligation—no foundation in natural justice. On the other hand, judicial tribunals, except where the legislature has ordered otherwise, hold all contracts to be obligatory, which justice and morality require to be fulfilled. Courts do not require statute authority for enforcing each particular contract. The principles of natural justice are a sufficient authority, and in most cases their only authority. And this practice of course proceeds on the ground that the requirements of natural justice are what constitute the obligation of contracts. And this practice shows also that the question of what contracts are obligatory, and what not, is a judicial, and not a legislative question. The legislature, as a general rule, pass no laws declaring either what contracts shall, or what shall not, be obligatory. The judicial tribunals are established as much to decide what contracts are obligatory, as to enforce the fulfilment of them. Their authority to do this, is derived directly from the constitution, and not from the legislature. In general, the legislature do not seek to encroach upon this prerogative of the judiciary—but leave it entirely to them to determine what contracts are, and what are not, obligatory. In fact, the judiciary do determine, and must determine, in the last resort, upon the obligation of every contract that is brought before them—for they must, of necessity, decide upon the obligation of all contracts, in regard to which the legislature have not spoken, and they must equally decide upon the obligation of those, in regard to which the legislature have spoken, because they must determine the validity of every legislative enactment, that assumes to interfere with, or control, the obligation of contracts.
The general principles, then, that obtain in regard to the obligation of contracts, are, 1st, that the obligation is intrinsic, arising solely from the acts of the parties, and that the requirements of natural justice constitute that obligation—and, second, that it is the province of the judiciary to determine in what cases that obligation exists.
But although such are the general principles that obtain in all our judicial tribunals, in regard to this particular point of the obligation and validity of contracts, the legislative department does nevertheless sometimes assume the authority of innovating upon these general principles, and of dictating to the judiciary, how they shall decide in regard to the obligation of particular contracts. In the case of the contracts of unlicensed bankers, for instance, they enact that the judiciary, whenever these contracts come before them, shall decide that they have no obligation. This is the whole purport of the law that declares that these contracts shall be void. It is nothing more, nor less, than a requirement upon the judiciary to deny their obligation—because the contracts are naturally obligatory, and the courts would of course hold them obligatory, if they were not required to do otherwise. And the legislature make this requirement, not at all on the ground that these contracts really have no obligation—but they do it arbitrarily, and simply because it is their will that the judiciary should deny the existence of this obligation. They thus, in effect, require that the judiciary shall assert a falsehood—that they shall declare that a contract has no obligation, when it really has an obligation. By thus requiring the judiciary to decide that a banker’s contract to pay money, has no obligation, they, in effect, require them to deny that he has received value for it—because, if he have received value for it, his obligation to pay has necessarily arisen, and that obligation has become an existing, unalterable fact—and however much the legislature may wish to have this fact denied, the fact itself still remains. The power of the legislature is as powerless to annul that fact, as it is to annul any other fact that has ever occurred. It is as powerless to annul that obligation, as it is to annul the parental, filial, or social obligations of mankind.
The question now is, whether any requirements, that may be made by the Legislature, upon the judiciary, to deny this fact, to deny this obligation, and to assert that no such fact or obligation exists, are binding upon the judiciary?
This question may probably be answered without going to the Constitution of the United States. The constitutions of most, if not all the states, contain, in some form or other, this provision, viz: that Courts shall be open, and that right and justice shall there be administered to every man without denial or delay. Now if the Legislature enact, that in adjudications upon bankers’ contracts, right and justice shall be violated, withholden or denied, are not such enactments in palpable violation of this provision of the constitution? And if the Legislature enact that the obligation of bankers’ contracts shall be denied, disregarded, or not enforced, by the courts, is not that equivalent to a requirement upon the courts that they shall withhold right and justice from the holders of those contracts? Clearly it is—and the requirement is consequently void even by the state constitutions.
But perhaps it will be said, that the Legislature does not assume to declare that right and justice shall be withholden, but only to declare what right and justice, under bankers’ contracts, shall be. The answer to this objection is, that right and justice, as accruing by contract, are judicial, and not legislative questions—and, therefore, if the legislature declare that right and justice, under certain contracts, shall be any thing different from what the judiciary would have decided them to be, they thereby virtually require the judiciary to violate or withhold right and justice. It is also an usurpation, on the part of the legislature, to prescribe what right and justice shall be, or to declare what rights accrue, under any contracts whatever. It is the business of the legislature to provide and prescribe the means, the instrumentalities, to be used, for enforcing the right and the justice, that may accrue to individuals, by virtue of their contracts—but it is the sole prerogative of the judiciary to determine what that right and that justice are. The legislature can prescribe, to the judicial tribunals, nothing that is of the essence of justice itself. If the legislature may prescribe to the judiciary what right and justice shall be, under one class of contracts, they may, by the same rule, prescribe what they shall be under all contracts whatsoever, and thus wholly usurp this prerogative of the judiciary. They may, in fact, make the judiciary a mere supple instrument in their hands.
But, perhaps it will be said, that the legislature do not merely require that bankers’ contracts shall be held void, but that they also forbid men to enter into those contracts—and that, inasmuch as the contracts themselves are forbidden, no obligation or rights can arise out of them. The answer to this, is, that the legislature has no authority to pass laws forbidding men to enter into obligatory contracts—and that all laws of that kind are unconstitutional, as conflicting with the constitutional right to acquire property. The natural right of men to acquire property of each other, being guarantied to them by the constitution, against the action of the legislature, the right to enter into obligatory contracts is necessarily guarantied also—because it is the only means by which they can acquire it.
It follows, then, that the people are secured, by the state constitutions generally, in the possession of these two rights, viz: to enter into all contracts with each other, that are in their nature obligatory—and, secondly, to have right and justice administered upon those contracts by the judiciary.
If these views are correct, we need go no farther than the State constitutions, to determine the validity of all those laws, or pretended laws by which the business of private banking is attempted to be prevented. These laws are palpably unconstitutional—and no mist of words, no professional quibbles, no arguments of expediency, no authority of long continued custom or acquiescence, can conceal or resist the fact.
But let us now inquire whether these laws are not also in violation of the constitution of the United States.
This constitution declares that “No State shall pass any law impairing the obligation of contracts.”
What is “the obligation,” which is here assumed to pertain to contracts, and is forbidden to be impaired?
We have already seen that the intrinsic obligation of contracts—the obligation that is recognized by all judicial tribunals—is the requirement of natural justice, arising out of certain acts of individuals. For instance, A sells to B a bushel of grain, and B promises that he will pay a reasonable compensation for it. Natural justice requires that he should make this payment—and this requirement of justice constitutes the obligation of this contract. And this requirement of natural justice is the kind of obligation, and the only kind, that is recognized and enforced by judicial tribunals. And it is recognized and enforced by them in all cases where it is shown to exist, except where legislatures specially interfere to set it aside. Is not this “the obligation,” which the constitution of the United States declares shall not be impaired? If any say that it is not, it is incumbent upon them to show what other kind of obligation is meant. No other obligation pertains intrinsically to contracts. No other is known to judicial tribunals—no other is known to the consciences of men. This obligation, it is true, is not always enforced in full—sometimes not even at all—but that is owing, as we say, to the authority allowed to unconstitutional laws. But no other obligation is ever enforced. No other obligation is even known. This, then, is “the obligation,” which the constitution declares shall not be impaired.*
A prospective law may impair this obligation, as well as a retrospective one. There is, in this respect, no difference between them. The prohibition of the constitution is against “any law”—whether prospective or retrospective—that should impair the obligation of contracts.
The laws which declare that the contracts of unlicensed bankers, to pay money, shall be void, are palpable violations of this clause of the constitution. And this position is so self-evidently correct, that I need spend no words in making it more clear. I will merely reply to the fictions and quibbles that are usually urged against it.
1st. It is said that if contracts are forbidden by law, they can have no obligation.
This ground is untenable for the following reasons. First—It assumes that the law is constitutional, and that the Legislature has authority to forbid men to enter into contracts that are in their nature obligatory—whereas this authority, as we have seen, is withholden from the legislature, even by the State constitutions—inasmuch as it would be in conflict with the constitutional right of the people to acquire property. If the legislature may forbid men to enter into one kind of obligatory contracts, they may, by the same rule, forbid them to enter into any—and the natural rights of men to buy, sell, contract, and exchange property, with each other, instead of being secured by the constitution, would become mere privileges to be withheld or permitted at the caprice or discretion of the Legislature. And if a banker’s contracts, for the purchase, sale, or delivery of money, are forbidden today, a farmer’s, merchant’s, and mechanic’s, for the purchase, sale, and delivery of their respective commodities, or appropriate articles of traffic, may be forbidden tomorrow.
2d. The State laws forbidding contracts that are in their nature obligatory, conflict also with the constitution of the United States—because the provision against impairing the obligation of contracts, implies that men have a constitutional right to enter into all contracts that have an obligation. And all laws that forbid men to exercise their constitutional rights, are of course void.
3d. To forbid men to enter into contracts that have an obligation, and then to infer that the contracts, simply because forbidden, have no obligation, is only a circuitous way of coming to the same end. It is only doing by indirection, what the constitution forbids being done by “any law” whatever. For it is still the law, and the law only, that impairs the obligation of the contract—and “any law” that would produce that effect, is void.
4th. The establishment of a constitution precedes, or is presumed to precede, in point of time, any laws that are to be governed or tested by it. Of course any principles, which the constitution establishes, as a guide to legislation, are principles that are presumed to exist independently of, and anterior to, any legislation under the constitution. The provision then, in the constitution, against impairing the obligation of contracts, assumes that the obligation of contracts is a principle existing at the time the constitution is established, and of course existing independently of any legislation under the constitution—and that it does not depend upon any mere arbitrary rule, that may subsequently be established. It assumes that the obligation of contracts is a principle existing in the nature of things, or at least independently of any legislative will—because it requires that the validity of legislation shall be tested by it. It sets up the obligation of contracts as a standard, by an appeal to which the constitutionality of subsequent legislation may be determined. But if a law were to be passed by the legislature, and the obligation of contracts should then be tested by it, the constitutional order of things would be reversed. The obligation of contracts would then be tried by the assumed authority of the law, instead of the constitutionality of the law being tested by its consistency with the obligation of the contract. The obligation of the contract is the constitutional standard, by which the validity of legislation is to be tried: and laws must conform to this standard, and not the standard be brought down to the measure of the laws.
5th. The constitution is, in its nature, a fundamental law, expressly intended to govern all laws that are, in their nature, temporary, or not fundamental. This fundamental law, like other laws, takes effect from the time of its adoption, and controls all other laws passed subsequently to it. The only question of time, therefore, (if any,) that can arise in the case, is, not whether the impairing law were passed prior or subsequently to the contract, on which it would operate, but whether it were passed subsequently to the adoption of the constitution.
6th. To say that the state legislatures have power to declare what the obligation of contracts shall be, or what contracts shall, and what shall not, have an obligation, is equivalent to saying that they have power to declare what the Constitution of the United States shallmean. And as this meaning would of course be arbitrary, the legislature of each state separately might declare that it should be something different from what it was in any of the other states—and we might consequently have, in every state in the union, a different constitution of the United States on this point. Not only this, but every state legislature might alter, at pleasure, the meaning, which it had itself given to the constitution of the United States. The constitution of the United States, therefore, might not only be different in every different state, but it might be altered in each state at every session of the legislature. Such is the necessary consequence of the doctrine, that the state legislatures have power to prescribe or determine what the obligation of contracts shall be, or what contracts shall be obligatory.
Another ground urged against the views here taken, is the commonly received doctrine, that the law makes a part of the contract. And it is said that a law, operating only upon future contracts, cannot impair their obligation, because it makes a part of them.
In the case of Ogden vs. Saunders (12 Wheaton), where this doctrine was examined more fully, probably, than it has ever been in this country, and combatted and maintained by the ablest counsel in the country, the judges were very much divided, holding no less than four different opinions, as to the relation which a law bore to a contract. A majority were of the opinion that the law did not make a part of the contract. Nevertheless a majority (consisting of four, out of seven, of the judges), was made up, that united in saying that a law passed prior to a contract, did not impair its obligation. This majority was made up in this way. Justice Washington (page 259) and Justice Thompson (page 298) held that the law made a part of the contract. Justice Johnson held that it did not make a part of the contract, but that parties were bound to submit to all “fair and candid” laws on the subject of contracts, whether made before or subsequently to the contract. Justice Trimble (page 317) held that the law did not make a part of the contract, but constituted its obligation. Thus a bare majority was obtained for the decision. But such a decision, by a bare majority, and that majority disagreeing as to the grounds on which it should rest, is of course good for nothing. Besides, one of them (Washington) expressed great doubts whether his opinion were correct, and said that he adopted it only because “he saw, or thought he saw, his way more clear on that side than on the other”—(page 256). The minority of the court, consisting of Chief Justice Marshall, Justices Duvall and Story, held that the law made no part of the contract—that men had a natural right to contract—that that right had never been surrendered to government—that the contract was solely the act of the parties—that its obligation was intrinsic—that the law was merely the remedy provided by government for the breach of contracts, and produced no effect upon a contract unless the contract were first broken—that parties, in making their contracts, could not legally be supposed to look at the law otherwise than as the remedy that would be enforced in case the contract were broken—and, finally, that a law passed prior to a contract, might impair its obligation, and therefore be unconstitutional, as well as one passed subsequently.*
So much for authority. Let us now look at the principle itself.
In the first place, then, the doctrine that any law is a part of a contract, of necessity assumes that the law is constitutional—because, if it be not constitutional, it clearly can make no part of a contract.
Now the legal definition of a contract, is simply an agreement, to do, or not to do, a particular thing. If the law strictly conforms to the intrinsic obligation of this agreement, it obviously has made no part of the agreement itself, because the agreement remains the same that it was before. The law has contributed nothing to it, and of course makes no part of it. On the other hand, if the law is different from the contract, varying its intrinsic obligation in any manner, or in any degree, it is unconstitutional, as impairing its obligation. And it consequently can make no part of the contract, for the reason that an unconstitutional law is void, and has no legal effect upon any thing.
Whether, therefore, a law agrees with a contract, or differs from it, it is no part of the contract itself. If it differs from the intrinsic obligation of the contract, it is unconstitutional, and has no effect whatever upon the contract. If it agree with the contract, it is still no part of it—it is only something subsidiary and remedial.
But it will be said that parties, who expect to have their contracts enforced, must be presumed to have intended to make them according to law. This is true. They must be presumed to have intended to make them according to all constitutional laws—but clearly they cannot be presumed to have intended to make them according to any unconstitutional law. Now, in order that a contract may be according to law, it is only necessary that it should have an intrinsic obligation. So far as any contract has this obligation, it is according to law, for it is according to the fundamental law—the constitution. And this fundamental law has also provided that the people shall not be required to make their contracts according to any other law.
Again. No one will pretend that the law can make entire contracts for parties, without their consent, and then presume their consent, and enforce the contracts as if the parties had actually agreed to them. No one, for instance, will pretend, if the legislature were to pass a law that A should pay B an hundred dollars for his horse, and that B should sell his horse to A for an hundred dollars, that courts would be bound to presume the assent of A or B to this contract, which the law had attempted to make for them. All admit, then, that the law cannot make an entire contract for parties, and then presume their consent. How, then, can it make any part of a contract, and presume their consent? If the law has a right to make the least part of a contract, it has the same right to make a whole one.
The idea that the law makes a part of the contract, cannot be sustained at all, except upon these suppositions, viz, that the natural right of individuals to make contracts, has either been entirely surrendered to government, or entirely usurped by the government—that government exercises the rights thus granted or usurped, so far as it chooses, and then gives back to individuals the privilege of exercising so much of the remainder of their original rights as government thinks it judicious to allow them to exercise. These, let it be particularly remarked, are the only grounds on which it can be pretended that government has power to make any part of a contract. Now, it is evident that, if these suppositions are correct, government has the same right to make entire contracts, that it has to make parts of contracts—and it may accordingly proceed to make bargains to any extent, between individuals—binding, obligatory contracts—to which the individuals themselves may never render any thing but a constructive assent. The government, for example, may compel A to sell his farm to B, at a price fixed by the government, and compel B to buy it, and pay for it, at that price, when neither A nor B consent to the contract. Is this the country, in which a principle, morally and politically so monstrous, is to exist and be recognized as law?
This whole doctrine, that the law is a part of the contract, is a mere fiction, invented or adopted by English courts to uphold the supremacy of their government over the natural rights of the people to make their own contracts. And it has been acted upon in this country only in obedience to arbitrary precedent, and in defiance of our fundamental law, which provides that the natural right of the people to make their own contracts, shall set limits to the power of their governments.
But suppose, for the sake of the argument, that the law were a part of the contract, the result would still be the same—for then the constitution would be a part of the contract—for that is the fundamental law. And the intrinsic obligation of the contract would still have to prevail over any law that was inconsistent with it.
Another ground assumed by those who oppose the view here attempted to be maintained, is, that the word “contract,” in the constitution, is used in a technical sense, borrowed from English precedents, and that therefore the phrase “obligation of contracts,” means only the legal obligation of contracts, or only such obligation as legislatures may please to allow contracts to possess.
But the supreme court of the United States have decided that the language of the constitution is not to be taken in any technical or limited sense, unless it be some parts of it that are plainly intended to be so understood—but that it is to be taken in its popular sense—in that sense, in which the people, for whom it was made, and who adopted it, and gave it all its vitality, may be supposed to have understood it.
If it be said that the word “contract,” in the phrase “obligation of contracts,” is to be understood in a technical sense, and to mean nothing more than legislatures may please to allow it to mean, it may just as well be said that the terms freedom of speech, free exercise of religion, right to keep and bear arms, right to acquire property, and right to enjoy life and liberty, are all to be taken in a technical and limited sense, and to mean nothing more than such a legal freedom of speech, such a legal free exercise of religion, such a legal right to keep and bear arms, such a legal right to acquire property, and such a legal right to enjoy life and liberty, as legislatures may see fit to establish. Such constructions would abolish every bill of rights in the union. It would take from the people all the security afforded by their constitutions for the enjoyment of their natural rights. It would abolish all restraints upon the legislative power, and place every right of the individual at its disposal.
Again. If there could be any doubt about the meaning of language so plain as that which declares that “No State shall pass any law impairing the obligation of contracts,” that doubt would have to be decided in favor of the natural rights of men to make their own contracts—because our institutions, state and national, profess to be founded on the acknowledgement of men’s natural rights, and to be designed to secure them. And the general principles of an instrument must always decide any doubts that may arise as to the meaning of particular parts.
Finally. It is obvious that all these arguments in favor of laws controlling the obligation of contracts, are mere quibbles, pretexts and fictions, resorted to, to evade, or circumvent a plain unambiguous provision of the constitution—a provision too, that seeks only to place men on their natural level with each other—to protect the natural rights of all against the despotic action of legislatures—and to establish the principles of natural justice as the basis of law—a provision, which all men, who do not wish to have their most important rights made the football of legislative faction, folly, ignorance, caprice and tyranny, ought to unite to uphold.
It is also obvious that these arguments are urged almost entirely by men who have been in the habit of regarding the legislative authority as being nearly absolute—and who cannot realize the idea that “the people” of this nation, acting in their primary capacity, should ordain it as a part of their fundamental law—the law that was to govern their government—that their natural right to contract with each other, and “the obligation of their contracts” when made, should not be subjects of legislative caprice or discretion.
If the principles thus attempted to be maintained, be correct, men may exercise at discretion their natural rights to enter into all contracts whatsoever that are in their nature obligatory; and it is the duty and the prerogative of the judiciary alone, to decide upon the obligation of all contracts that come before them for adjudication—and legislatures have no authority to interfere in the matter, further than to prescribe the means to be used for enforcing the obligation of contracts, and the extent to which these means shall be exerted.
Furthermore. If these principles be correct, they not only prohibit all laws restraining private banking, but also all laws restraining the rate of interest for money—all laws forbidding men to make contracts by auction without license, and all other laws in restraint of men’s natural right to contract. They also prohibit the legislature from impairing the obligation of marriage contracts. It is a judicial question whether a marriage contract have been broken by either party—and if it have not been broken, the legislature has no power to discharge the other party from its obligation.
Here let me say, that in order to maintain the unconstitutionality of these laws against banking, usury, &c, it is not necessary to suppose that the people, who adopted the constitution, actually foresaw that the principle they were establishing in regard to contracts, would, when carried out, produce this particular effect. This result, for aught that concerns the argument, may be admitted to be one of the details of its operation, which they never dreamed of. They did not know, and could not pretend to know, all the forms which the future contracts of an enterprising and commercial people might assume—and even if they had known them, no special note would have been taken of them separately, in the instrument they were adopting. The object of a constitution is to establish principles—not to follow out the operation of those principles in all their ramifications. That is the business of the legislative and judicial tribunals under the constitution. All, then, that it is necessary for us to suppose in the case, is, that “the people,” who established the constitution, recognized the inherent right of men to contract with each other—and the intrinsic rectitude of the principle that should maintain the inviolability of all their obligatory contracts. That they also saw that these principles were vital to the free commercial intercourse of the citizens of the different States with each other—and that they saw the danger to which these principles would be exposed, if left to the caprice of numerous rival, and, in many cases, illiberal, unwise and tyrannical local legislatures. That they, therefore, ordained that these principles should be recognized throughout the country, and govern the dealings and contracts of the people with each other—and that no local or subordinate government should “pass any law impairing the obligation” of any of their contracts.
The supreme court of the United States, in the case of Sturges and Crowningshield, (4 Wheaton 209), have expressed the comprehensive purpose of the constitution, on this point, as follows. The court say, “The principle, which the framers of the constitution intended to establish, was the inviolability of contracts. This principle was to be protected, in whatever form it might be assailed. To what purpose enumerate the particular modes of violation, when it was intended to forbid all. Had an enumeration of all the laws, which might violate contracts, been attempted, the provision must have been less complete, and involved in more perplexity than it now is.”
Viewing the purpose of the prohibition in this light, is there another clause in the whole instrument, that does more credit to those who framed, or to the people that adopted, the constitution, than this? Is there another clause, which more strongly discloses their love of personal liberty, their sense of justice, and their respect for the equal and natural rights of men? It in fact establishes a great principle of civil liberty. It embodies also the most wise, benevolent, and far-reaching principle of political economy—a principle, the natural and necessary operation of which is, to produce the greatest aggregate increase, and the most equal distribution of wealth, that can be accomplished, consistently with men’s personal rights—for it gives to each individual, what no other principle can, the full command, and the entire profit, of all his legitimate resources.*
[* ] If contracts had had no obligation of their own, there might have been some reason for supposing that the words of the constitution referred to some obligation, which the government might assume to create, and annex to contracts. But when contracts really have the obligation, which is so precisely and naturally described by the words of the constitution, and when this is the only obligation that is acknowledged or enforced among men, it is absurd to pretend, because this obligation has not always been enforced to the letter, that the constitution intended to pass it by in silence, and apply its language to some other obligation, thereafter to be created, and the nature of which could not be anticipated.
[* ] This minority, however, made one admission, that was inconsistent with their general doctrines. It was, that “acts against usury,” which “declared the contract (wholly) void from the beginning,” and “denied it all original obligation,” were valid. They thus held that the constitutional prohibition against “any law impairing the obligation of contracts,” might be forestalled by a law declaring that contracts should have no obligation to be impaired. But they might as well have held that a constitutional prohibition against impairing a man’s right to life and liberty, might be forestalled by a law declaring that no person, thereafter to be born, should be deemed to have any right to life and liberty; or that the constitutional prohibition against “any law abridging the freedom of speech,” might be forestalled by a law declaring that, from and after a certain time, there should be no freedom of speech to be abridged. Mr. Webster, in his argument of the cause, made the same inconsiderate admission. No reasons were given for it, by any of them, except the naked unsustained assertion, that the States had power to prohibit such contracts. This inconsistent and groundless admission was turned against them, at the time, and made to destroy the force of their otherwise able arguments.
Throughout the whole case, the court and counsel, on all sides, seemed to take it for granted that statute law was a guide in constitutional interpretation, and that it was more important to sustain certain statute laws of the states, than to support the constitution of the United States. How both could be sustained was an inexplicable matter. Some thought it could be done only in one way, and some only in another—and hence the irreconcilable difficulties and disagreements, in which they become involved. None of them had courage to come up to the mark of sustaining the constitution, and quashing outright every thing inconsistent with it.
[* ] The dissenting opinion of Marshall, Duvall and Story, in the case of Ogden and Saunders, (12 Wheaton,) although, as before mentioned, not a consistent one throughout, is yet a very admirable and conclusive argument in support of the intrinsic obligation of contracts, and of the right of individuals, under our constitution, to make their own contracts. The opinions of the majority of the court are also instructive, as showing how the minds of those composing our highest tribunal, bow to the authority of fictions and precedents designed merely to sustain monarchical and arbitrary power, and how incapable they are of appreciating the free principles of our own constitutions.