In holding that only clear and explicit terms of contracts were legally binding, the Supreme Court increased the power of state legislatures to regulate private corporations.

Under Chief Justice John Marshall’s leadership, the Supreme Court had used a broad construction of the contract clause to protect vested rights in private property. Charles River Bridge v. Warren Bridge demonstrated that Chief Justice Roger Brooke Taney and his colleagues wanted to give state legislatures greater latitude in formulating economic policy.Contracts clause;Charles River Bridge v. Warren Bridge[Charles River Bridge v. Warren Bridge]Property rights;Charles River Bridge v. Warren Bridge[Charles River Bridge v. Warren Bridge]

In 1785 the Massachusetts legislature had granted the Charles River Bridge Company a charter to build and operate a toll bridge between Boston and Cambridge. In 1828 the legislature authorized the Warren River Bridge Company to erect a second bridge that would eventually become toll-free. The Charles River Bridge Company sought an injunction against construction of the new bridge on the grounds that the older charter implied the company’s exclusive right to operate a bridge at that location during the life of the charter. The issue was whether the Court would make a broad or a narrow interpretation of the charter under the contract clause.

By a 4-3 margin, the Court rejected the company’s claim. Writing for the Court, TaneyTaney, Roger Brooke;Charles River Bridge v. Warren Bridge[Charles River Bridge v. Warren Bridge] held that legislative charters must be interpreted literally and that charters did not convey any implied corporate privileges. Unless restrained by explicit language in a charter, state legislatures were free to make reasonable regulations and to authorize new projects for the public good. With his distrust of monopolistic power, Taney did not want vested property rights to get in the way of innovation and progress. However, he did not reject the idea that the contract clause required legislatures to honor the explicit terms of their charters. In a strongly worded dissent, Justice Joseph Story accused the majority of diminishing protection for property rights and contended that lawmakers should be required to respect implied promises in charters.

The Charles River Bridge decision reflected and encouraged a new emphasis on competition within the capitalistic system. Under Taney, however, the Court did not at all abandon the contract clause. In Bronson v. Kinzie[case]Bronson v. Kinzie[Bronson v. Kinzie] (1843), for instance, the Court overturned debtor-relief legislation as an unconstitutional abrogation of contracts.

Bronson v. Kinzie

Contracts clause

Ex post facto laws

Fletcher v. Peck

Home Building and Loan Association v. Blaisdell

Powell v. Alabama

Private corporation charters