Freedom of Contract

2012-06-26 11:12:25

The right to liberty of contract is not found in the text of the Constitution but has its origins in Anglo- American common law and natural rights ideology. Beginning in the 1880s, American courts began to assert that a right to contract free from unreasonable government regulations is protected by the due process clause of the Fourteenth Amendment. The U.S. Supreme Court first invalidated a law as a violation of liberty of contract in the infamous 1905 case of Lochner vs. New York.

Lochner, however, was something of an anomaly until the 1920s, because the Court almost always deferred to the states’ assertion of their regulatory powers, the so-called police power. Between 1923 and 1934, however, the Court aggressively policed the boundaries of the states’ regulatory powers, invalidating a wide range of laws as violations of liberty of contract that had no valid police power rationale. For example, in 1923 in Adkins v. Children’s Hospital, the Court, in a controversial five-to-four decision, invalidated a law mandating minimum wages for women workers.

Ultimately, the doctrine of liberty of contract could not survive the Great Depression and of the pro regulatory sentiment that accompanied it. In the late 1930s, the Supreme Court announced that henceforth it would defer to government regulations of economic activity and the longer enforce the right to liberty of contract. Since then, Americans’ right to make and enforce contracts has largely been at the mercy of legislative majorities.


References and Further Reading

  • Bernstein, David E., Lochner Era Revisionism Revised: Lochner and the Origins of Fundamental Rights Constitutionalism, Georgetown Law Journal 92 (2003):1–67.
  • Gillman, Howard. The Constitution Besieged: The Rise and Demise of Lochner Era Police Powers Jurisprudence. Durham and London: Duke University Press, 1993.

Cases and Statutes Cited

  • Lochner v. New York, 198 U.S. 45 (1905)
  • Adkins v. Children’s Hospital, 261 U.S. 525 (1923)