Dartmouth College V. Woodward - Judgment

Judgment

The decision, handed down on February 2, 1819, ruled in favor of the College and invalidated the act of the New Hampshire Legislature, which in turn allowed Dartmouth to continue as a private institution and take back its buildings, seal, and charter. The majority opinion of the court was written by John Marshall. The opinion reaffirmed Marshall's belief in the sanctity of a contract (also seen in Fletcher v. Peck) as necessary to the functioning of a republic (in the absence of royal rule, contracts rule).

The Court ruled that the College's corporate charter qualified as a contract between private parties, the King and the trustees, with which the legislature could not interfere. Even though the United States are no longer royal colonies, the contract is still valid because the Constitution says that a state cannot pass laws to impair a contract. The fact that the government had commissioned the charter did not transform the school into a civil institution. Chief Justice Marshall's opinion emphasized that the term "contract" referred to transactions involving individual property rights, not to "the political relations between the government and its citizens.

The decision was not without precedent. Earlier the Court had invalidated a state act in Fletcher v. Peck, 10 U.S. 87 (1810), concluding that contracts, no matter how they were procured (in the case of Fletcher v. Peck, a land contract had been illegally obtained), cannot be invalidated by state legislation. Thus, the court, though working in an early era, was treading on Dartmouth. Fletcher was not a popular decision at the time, and a public outcry ensued. Thomas Jefferson's earlier commiseration with New Hampshire Governor William Plumer stated essentially that the earth belongs to the living. Popular opinion influenced some state courts and legislatures to declare that state governments had an absolute right to amend or repeal a corporate charter. The courts, however, have imposed limitations to this.

After the Dartmouth decision, many states wanted more control so they passed laws or constitutional amendments giving themselves the general right to alter or revoke at will, which the courts found to be a valid reservation. The courts have established, however, that the alteration or revocation of private charters or laws authorizing private charters must be reasonable and cannot cause harm to the members (founders, stockholders, and the like).

The traditional view holds that this case is one of the most important Supreme Court rulings, strengthening the Contract Clause and limiting the power of the States to interfere with private charters, including those of commercial enterprises.