Early Supreme Court case that upheld the validity of contracts under the U.S. Constitution.
In 1769, King George III granted a charter to Dartmouth College in the colony of New Hampshire. The charter established that 12 trustees and their successors would direct the college “forever.” By the early nineteenth century, the trustees of Dartmouth College were well known as staunch supporters of the Federalist Party during a period involving a power struggle between the Federalists and the newly dominant Democratic-Republican Party—a fact that William Plumer, the newly elected Democratic-Republican governor of the state, decided to no longer tolerate. With the support of a Democratic-Republican majority in the legislature, Governor Plumer passed a series of laws in 1816 that changed Dartmouth from a private college to a public university. The new laws would allow the governor to appoint more trustees to the college, as well as a board of overseers. The college immediately sued the state of New Hampshire for impairing its original charter and hired Daniel Webster to argue its case before the Supreme Court.
Webster believed that New Hampshire had clearly violated the contract clause of the Constitution, which says that no state may pass a law “impairing the Obligation of Contracts.” Ruling for the Court in a 5-to-l decision, Chief Justice John Marshall agreed with Webster and went even further by extending the protection of the contract clause to all private corporations. Marshall first argued that Dartmouth College was a private and not a public corporation, since its founders were individuals who hoped to spread the Christian faith among the Indians. As a private corporation, Dartmouth College had the right to direct itself through its trustees in accordance with the original charter. The new laws passed by the state of New Hampshire had impaired the original charter and thus violated the Constitution. By extending the protection of the contract clause, Marshall helped to make private corporations the main tool of business expansion in America.
