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Landmark case involving the Contract
Clause of the Constitution. In 1769 King George had granted Dartmouth College a corporate charter.
The legislature of New Hampshire attempted to modify that charter by converting the charter from being a
Royal charter to a state charter. The United States Supreme Court overruled that attempt by stating that
a corporate charter was a constitutionally protected contract.
Chief Justice Marshall stated, “This is plainly a contract to which the donors, the trustees and
the crown (to whose rights and obligations New Hampshire succeeds) were the original parties. It is a
contract made on a valuable consideration. It is a contract for the security and disposition of
property. It is a contract, on the faith of which, real and personal estate has been conveyed to the
corporation. It is, then, a contract within the letter of the constitution, and within its spirit
also, unless the fact, that the property is invested by the donors in trustees, for the promotion of
religion and education, for the benefit of persons who are perpetually changing, though the objects
remain the same, shall create a particular exception, taking this case out of the prohibition
contained in the constitution.”
In that action, Justice Story intimated how states could circumvent the problem in the future. States
needed only embed in those charters specific clauses that reserved the right for the state to modify
charters at any future date.
Full text: Dartmouth College v.
Woodward, 17 U.S. (Wheaton) 518 (1819) |