Case Brief: Fletcher v. Peck (Marshall, 1810)
In 1795, the Georgia legislature is bribed to convey large parcels of its western territory to private interests at a bargain-basement price. Outrage produces a new majority in the legislature which, the very next year, rescinds the law. Much of the land has now been sold off by the corrupt parties to "innocent" out-of-state investors, including John Peck of Massachusetts. The question over whether he has title to the land - in spite of the recission - creates a federal case arising under diversity jurisdiction.
The Contract Clause (Art. I, §10, cl. 1) forbids states from passing any "Law impairing the Obligation of Contracts." Can the Georgia legislature divest the [innocent] property-holders of their titles, as "a grant [of land] is a contract executed" (BLBAS 142), in accordance with the Constitution? Could the legislature do so even if the Contract Clause did not exist, given the sanctity of contracts in common law and, more generally, sound political morality?
The Constitution implicitly and explicitly forbids state recission of existing contracts--- even contracts with the state itself.
(Chief Justice Marshall, for the court)
Sure, state legislatures can repeal their own laws. But to rescind contracts, and divest the contracting parties of vested rights, goes against "those rules of property which are common to all citizens of the United States, and those principles of equity which are acknowledged in all our courts..." (141). Property would never be truly secure if the state could expropriate it on a whim; this would frustrate the general ends of government.
What if I were to reject such abstract appeals to right? Marshall answers with a textual argument. The Constitution unequivocally prevents states from annulling its own contractual obligations. The language is broad enough to embrace the particular contract at issue--- e.g., the Clause makes no distinction between state contracts and private ones. In fact, from an originalist standpoint, the Clause applies exactly to instances like Georgia's recission, which is likened to pre-constitutional laws against creditors. The Constitution itself is an instrument designed to "shield the people and their property from the effects of those sudden and strong passions to which men are exposed" (142).
(Justice Johnson, Concurring)
Johnson goes further than Marshall, denying the very need to appeal to the positive language of Article I. When a state revokes its own grants, it is opposed by "a principle which will impose laws even on the Deity" (143). The state and subsequent parties alienated their ownership of the Yazoo Count lands; the lands are now within the bounded jurisdiction of those like Peck, and to expropriate them would be as grievous a wrong as chopping off their limbs.
The problem is that, in natural rights tradition, there is a role for some regulation of contracts and property. (That is, in accordance with Locke's maxim, salus populi suprema lex esto). The Contract Clause, taken literally, is too restrictive. A judge must appeal to natural law in order to apply the Clause as the Framers intended.
First, the Court establishes the Constitution as a bulwark in favor of the rights of property and contract against the mob rule of states. Towards this end, however, other constitutional provisions replace the Contract Clause in importance in later years: in particular, the Fifth and Fourteenth Amendments. The Supreme Court ends its broad interpretation (viz. maximally-protective of property rights) of all such provisions during the New Deal Era.
Second, both Court opinions endorse a natural-rights approach to Constitutional interpretation. The doctrine of "general constitutional law" - which judges state and national legislation according to a priori principles of free government, whatever the text of the relevant positive law - survives until roughly the Reconstruction Era.
Third, the Court argues against judicial inquiries into legislative intent. Whether or not Marshall establishes a Court "tradition" of refraining from such inquiries, Fletcher is still cited by Justice Scalia as the last word on the subject.